The opinion of the court was delivered by: Oliver W. Wanger United States District Judge
ORDER GRANTING DEFENDANTS‟ MOTION TO DISMISS COMPLAINT (DOC. 5, 7 and 12)
Carmencita Dorado ("Plaintiff"), appearing in propria persona , asserts twenty-nine (29) causes of action arising out of an adjustable-rate home loan she entered into approximately four years ago. BAC Home Loans Servicing, L.P., Recontrust Company, Mortgage Electronic Registration Systems, Inc. ("BAC Defendants"), Shea Homes, LP ("Shea Homes"), and Chicago Title Company ("Chicago Title") (collectively "Defendants") move to dismiss all of Plaintiff‟s claims.
All Defendants allege that Plaintiff‟s Complaint is "incomprehensible," "conclusory" and most of what is pleaded is irrelevant. The Complaint, Defendants assert, fails to give fair notice of the claims asserted against Defendants; fails to state any valid cause of action; and most or all of Plaintiff‟s claims are barred by the applicable statutes of limitation.
BAC Defendants additionally assert that Plaintiff has a Chapter 13 bankruptcy case pending in the Northern District of California and lacks standing to file this action as the trustee and not Plaintiff is the "real party in interest." (Doc. 12 at 4.)
Shea Homes specifically asserts that it has been mistakenly named and has nothing to do with Plaintiff‟s mortgage. "Shea Homes, a California limited partnership, sold the home to Plaintiff, [and is an] entirely separate entity [from] Shea Mortgage Inc., a California corporation, [who] was Plaintiff‟s lender." (Doc. 5 at 1.)
Chicago Title adds that "it is not Plaintiff‟s lender, loan broker, or loan servicer, and Chicago [Title] has no role in the foreclosure process." (Doc. 7 at 9.)
Plaintiff filed this action in California state court on April 27, 2011. The case was removed to this court on June 17, 2011. (Doc. 1.) Defendants‟ filed motions to dismiss Plaintiff‟s Complaint on June 24, 2011, (doc. 5, 7), and July 11, 2011, (doc. 12). Plaintiff filed oppositions to Defendants‟ motions on July 29, 2011. (Doc. 14, 15, 16.)
Plaintiff is the owner of real property located at 209 Abelia Lane, Patterson, California 95363 (the "Property"). (Compl. ¶ 22.) Plaintiff obtained a loan for $421,650.00 on September 5, 2006 from Shea Mortgage, Inc. She executed a deed of trust ("Deed of Trust") against the Property, with MERS appointed as beneficiary and Chicago Title Company as the original Trustee. (Compl. ¶ 33; Chicago Tile RJN, Ex. A.)
Plaintiff‟s native language is Tagolog. (Compl. ¶ 38.) The terms of the loan were explained to Plaintiff in English. (Compl. ¶ 38.)
The loan contained an adjustable rate rider which Plaintiff executed on September 8, 2006. (Chicago Title RJN, Ex. A.) Plaintiff stopped paying her mortgage. As a result, Defendant Recontrust issued a Notice of Default, which was recorded in Stanislaus County on June 1, 2009. (Compl. ¶ 12; Chicago Title RJN, Ex. B, C.) It does not appear that a Notice of Trustee‟s
Sale was ever issued or recorded. Plaintiff alleges in her Complaint at paragraph 118 that unspecified Defendants "have completed a foreclosure action under the Note [sic] by way of non-judicial sale"; however, at paragraph 119, she seeks an injunction to prevent the same trustee‟s sale.
On May 25, 2011, Defendant MERS substituted Recontrust as trustee under the Deed of Trust, and assigned the Deed of Trust to Citibank, N.A., as Trustee for the Holders of Bear Stearns ALT-A Trust 2006-7 Mortgage Pass-Through Certificates, Series 2006-7. (See Chicago RJN, Ex. D, E.)
Plaintiff filed for bankruptcy in the Northern District of California on August 7, 2009, approximately one month after the Notice of Default was recorded. (BAC Defendants RJN, Ex. 3.) The Second Amended Chapter 13 Plan was filed by Plaintiff on June 6, 2011 and the bankruptcy court‟s docket reflects that confirmation of Plaintiff‟s bankruptcy plan is still pending. (BAC Defendants RJN, Ex. 3, 4.) This explains why a notice of sale was not recorded, absent lifting of the automatic stay.
A motion to dismiss brought under Federal Rule of Civil Procedure 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001). In deciding whether to grant a motion to dismiss, the court "accept[s] all factual allegations of the complaint as true and draw[s] all reasonable inferences" in the light most favorable to the nonmoving party. Rodriguez v. Panayiotou, 314 F.3d 979, 983 (9th Cir.2002). To survive a motion to dismiss, a complaint must "contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face.‟" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting 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. The plausibility standard "is not akin to a "probability requirement,‟ but it asks for more than a sheer possibility that defendant has acted unlawfully. 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.‟" Id. (citing Twombly, 550 U.S. 556-57).
Nevertheless, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While the standard does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 129 S. Ct. at 1949. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555; Iqbal, 129 S. Ct. at 1950 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").
In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988).
1. Creation of Bankruptcy Estate.
BAC Defendants contend that Plaintiff has a Chapter 13 bankruptcy case pending in the Northern District of California and lacks standing to file this action as the trustee and not Plaintiff is the "real party in interest" under Fed. Civ. Pro. R. 17(a) to prosecute this action Plaintiff does not address the bankruptcy issue.
In general, the court may not consider materials other than the facts alleged in the complaint when ruling on a motion to dismiss. Anderson v. Angelone , 86 F.3d 932, 934 (9th Cir.1996). "[A]mple authority exists," however, "which recognizes that matters of public record, including court records in related or underlying cases which have a direct relation to the matters at issue, may be looked to when ruling on a 12(b)(6) motion to dismiss." In re Am. Continental Corp./Lincoln Sav. & Loan Sec. Litig. , 102 F.3d 1524, 1537 (9th Cir.1996) (collecting cases), rev'd on other grounds by Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach , 523 U.S. 26 (1998). Here, Defendants have provided the court with Plaintiff's petition for Chapter 13 bankruptcy protection dated August 2, 2009. (BAC Defendants RJN, Ex. 4, Dorado Bankruptcy Case Summary.) Hearing no objection from Plaintiff the bankruptcy documents will be consider this document in deciding Defendants‟ motion to dismiss.
The filing of a bankruptcy petition creates an estate in bankruptcy. See 11 U.S.C. § 541(a); In re Raintree Healthcare Corp. , 431 F.3d 685, 688 (9th Cir.2005). A bankruptcy estate consists of "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). In a Chapter 13 case, the estate also includes property acquired by the debtor after the commencement of the case. 11 U.S.C. § 1306(a)(1). The property of the estate includes causes of action that arise after the commencement of the case and until the case is closed, dismissed or converted. Donato v. Metropolitan Life Ins. Co. , 230 B.R. 418, 421 (N.D.Cal. 1999) (citing In re Fleet , 53 B.R. 833, 838 (Bankr. E.D.Pa. 1985).*fn1
The Code expressly provides that Chapter 13 debtors retain possession of property in the bankruptcy estate. See 11 U.S.C. § 1306(b) ("[e]xcept as provided in a confirmed plan or order confirming a plan, the debtor shall remain in possession of ail property of the estate"); see also, e.g. , 11 U.S.C. § 1303 (providing that debtors under Chapter 13 shall have substantially the same powers as do trustees of the estate). The Bankruptcy Code provides that a debtor in possession, such as a debtor filing for the protections of Chapter 13, enjoys express authority to sue or to be sued on behalf of the bankruptcy estate:
With or without court approval, the trustee or debtor in possession may prosecute or may enter an appearance and defend any pending action or proceeding by or against the debtor, or commence and prosecute any action or proceeding in behalf of the estate before any tribunal.
Fed. R. Bankr.P. 6009 (emphasis supplied).
The Ninth Circuit has stated:
In [Chapter 7] liquidation proceedings, only the trustee has standing to prosecute or defend a claim belonging to the estate. The same cannot be said for trustees under the reorganization chapters. In those regimes, the debtor has express authority to sue and be sued. Bankruptcy Rule 6009, which applies to Chapters 7, 11 and 13, directs that "[w]ith or without court approval, the trustee or debtor in possession may prosecute or may enter an appearance and defend any pending action or proceeding by or against the debtor, or commence and prosecute any action or proceeding in behalf of the estate before any tribunal." Fed. R. Bankr.P. 6009 (emphasis added). [T]he Chapter 13 debtor has been considered analogous to Chapter 11, which grants the debtor full authority as representative of the estate typical of a trustee. See 11 U.S.C. § 1107.
In re DiSalvo , 219 F.3d 1035, 1039 (9th Cir. 2000) (emphasis in original) (quoting Cable v. Ivy Tech State College , 200 F.3d 467, 472 (7th Cir. 1999).
The Seventh Circuit is in accord. Cable v. Ivy Tech State College further explains:
Chapter 7 establishes a much more radical solution to indebtedness, requiring the liquidation of the debtor's property, to which end Congress granted the trustee broad powers without interference from the debtor. The trustee has sole authority to dispose of property, including managing litigation related to the estate. See 11 U.S.C. §§ 541(a)(1), 704(1). Chapter 13, on the other hand, encourages the debtor to pay his debts over time by establishing a court-approved payment plan but leaving the debtor in possession of the estate. See 11 U.S.C. § 1303 (debtor-in-possession has substantially same powers as the trustee in other chapters); § 1306(b) (debtor retains possession of estate except as limited by plan). The trustee acts as an adviser and administrator to facilitate the repayment of debts according to the plan. See id. § 1302. 200 F.3d at 472; see also Whitworth v. National Enterprise Systems, Inc. , 2009 WL 650357, *2 n.1 (D.Or. 2009) ("the Chapter 7 debtor, who has selected a severe remedy to the problem of indebtedness, is not permitted to interfere in the disposal of assets in which he or she no longer has any significant interest, but the Chapter 13 debtor, who contemplates resuming exclusive control of his or her assets after successfully repaying all creditors, is permitted to retain possession of and a part in managing the estate.")
The Second Circuit is also in accord that it would frustrate the purposes of Section 1306 to leave the debtor in possession of his causes of action and yet to prohibit him from prosecuting them in his own name. See Olick v. Parker & Parsley Petroleum Co. , 145 F.3d 513, 515, 515-516 (2d Cir.1998) (holding that "a Chapter 13 debtor ... has standing to litigate causes of action that are not part of a case under title 11" and deriving support from the legislative history of Chapter 13 for the proposition that Section 1303 was drafted to permit Chapter 13 debtors to sue and be sued on behalf of the bankruptcy estate); see also Donato v. Metropolitan Life Ins. Co. , 230 B.R. 418, 425 (N.D.Cal.1999) ("under 11 U.S.C. § 1303, a Chapter 13 debtor retains the capacity to sue on prepetition causes of action").
Although a Chapter 13 debtor has standing to sue in her own name, such standing is concurrent with that of the trustee in bankruptcy, and any such suit must necessarily be on behalf of the bankruptcy estate. See Fed. R. Bankr. P. 6009. In this case pursuant to Plaintiff‟s bankruptcy documents, Plaintiff‟s mortgage is "submitted to the supervision and control of the Trustee." (BAC Defendants RJN, Ex. 3.)*fn2 Plaintiff does not appear to be "a debtor in possession" and does not have standing to bring this suit.
B.Shea Homes Is Not A Proper Defendant.
Plaintiff alleges that Shea Homes was the original lender for the purchase of her home. (Compl. ¶¶ 8, 17, 33.) In reality, Shea Homes, a California limited partnership, sold the home to Plaintiff. (See Shea Home‟s RJN, Ex.3.) An entirely separate entity, Shea Mortgage Inc., a California corporation, was Plaintiff‟s lender. (See Shea Home‟s RJN, Ex. 1, 2, 4.) This is established in the recorded trust deeds for the Plaintiff‟s first and second mortgages. (See id . at Ex. 1, 2.) Because Shea Homes did not originate and does not now, and has not ever asserted any interest in Plaintiff‟s mortgage, Shea Homes is DISMISSED from this action and Shea Home‟s motion to dismiss is GRANTED.
1. Violation of Cal. Com. Code § 9313 (Third Claim). Plaintiff‟s third cause of action seeks to determine the nature, extent, and validity of the lien under Cal. Com. Code 9313. Plaintiff apparently alleges that since neither Shea Homes nor BAC Defendants possess the original promissory note, neither one has perfected its lien.
Defendants correctly contend that Cal. Com. Code 9313 is part of the codification of UCC Article 9, which deals with security interests in personal property and fixtures. See Cal. Com. Code 9109(d)(11) ("this division does not apply to. . . The creation or transfer of an interest in or lien on real property.") This section of law has no application to Plaintiff‟s loan.
Defendants further correctly contend that Plaintiff‟s "holder of the note theory" is not the law in California.
"Financing or refinancing of real property is generally accomplished in California through a deed of trust. The borrower (trustor) executes a promissory note and deed of trust, thereby transferring an interest in the property to the lender (beneficiary) as security for repayment of the loan." Bartold v. Glendale Federal Bank , 81 Cal.App.4th 816, 821 (2000). A deed of trust "entitles the lender to reach some asset of the debtor if the note is not paid." Alliance Mortgage Co. v. Rothwell , 10 Cal. 4th 1226, 1235 (1995).
The California Court of Appeal has explained non-judicial foreclosure under the applicable California Civil Code sections:
The comprehensive statutory framework established to govern non-judicial foreclosure sales is intended to be exhaustive.... It includes a myriad of rules relating to notice and right to cure. It would be inconsistent with the comprehensive and exhaustive statutory scheme regulating non-judicial foreclosures to incorporate another unrelated cure provision into statutory non-judicial foreclosure proceedings.
Moeller v. Lien , 25 Cal.App.4th 822, 834 (1994); see I.E. Assoc. v. Safeco Title Ins. Co. , 39 Cal.3d 281, 285 (1985) ("These provisions cover every aspect of exercise of the power of sale contained in a deed of trust.")
Under California Civil Code section 2924(a)(1), a "trustee, mortgagee or beneficiary or any of their authorized agents" may conduct the foreclosure process. Under Cal. Civ. Code section 2924b(4), a "person authorized to record the notice of default or the notice of sale" includes "an agent for the mortgagee or beneficiary, an agent of the named trustee, any person designated in an executed substitution of trustee, or an agent of that substituted trustee."
"Under Civil Code section 2924, no party needs to physically possess the promissory note." Sicairos v. NDEX West, LLC , 2009 WL 385855, *3 (S.D. Cal. 2009) (citing Cal. Civ. Code, § 2924(a)
(1)). Rather, "[t]he foreclosure process is commenced by the recording of a notice of default and election to sell by the trustee ." Moeller , 25 Cal. App. 4th at 830. An "allegation that the trustee did not have the original note or had not received it is insufficient to render the foreclosure proceeding invalid." Neal v. Juarez , 2007 WL 2140640, *8 (S.D. Cal. 2007).
Plaintiff offers no response.
A "purported holder" argument fails as a matter of law. Defendants‟ motion to dismiss Plaintiff‟s Cal. Com. Code 9313 is GRANTED.
2. Contract Claims Based on Origination of Loan.
a. Implied Covenant of Good Faith and Fair Dealing (Fourth Claim).
BAC Defendants correctly argue that Plaintiff‟s fourth cause of action for violation of the implied covenant of good faith and fair dealing is subject to the four year contract statute of limitation. Code Civ. Proc. § 337(1) (stating that a plaintiff must bring an action "[w]ithin four years. . . upon any contract, obligation or liability founded upon an instrument in writing.")
Plaintiff asserts that "[Defendants] willfully breached their implied covenant of good faith and fair dealing with [Plaintiff] when [Defendants]:
I.Willfully withheld numerous disclosures;
II.Willfully withheld notices in regard to Underwriting standards, the use of English as the only language within the written instruments of the loan while [Plaintiff‟s] native language is Tagalog, Disclosures of additional income due to interest rate increases, and failure to disclose when negative credit scores were disseminated;
III.Willfully placed [Plaintiff] in a loan that she did not qualify for, [and] could not afford. . .
IV.Requiring a minimal down payment, subjecting 95% of the loan to amortization and a detrimental if not dire financial situation for [Plaintiff].
Defendants contend these claims arise from the execution of the loan which took place in September 2006, well over four years ago. Plaintiff does not refute ...