The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
ORDER GRANTING DEFENDANTS' MOTION TO DISMISS
Presently before the Court is Defendants' motion to dismiss Plaintiffs' first amended complaint. [Doc. No. 13.] For the reasons stated below, the Court GRANTS Defendants' motion.
The following background is taken from the Plaintiffs' First Amended Complaint ("FAC") unless otherwise noted.
In late 2004, Plaintiffs purchased property located in San Diego County at 397 Camino Elevado, Bonita, CA 91902. The purchase was financed with two mortgages, and the mortgages were secured by deeds of trust (DOT 1 and DOT 2) that were executed and recorded.
Over the next two years, Plaintiffs engaged in a series of additional finance transactions.*fn1 By the end of 2007, Plaintiffs' property was secured by two deeds of trust, DOT 3 (with Washington Mutual Bank) and DOT 5 (with Bank of America); all other deeds of trusts had been terminated.
Sometime later, Plaintiffs were unable to make their mortgage payments under DOT 3 and DOT 5. In July 2009, California Reconveyance Company, an agent of Chase Home Finance (as successor-in-interest to Washington Mutual Bank) filed a Notice of Default (NOD) with the San Diego County Recorder, thus initiating the non-judicial foreclosure process under California Civil Code § 2924.
In October 2009, Plaintiffs entered into an agreement with a third party for a "short sale." Because the agreement was designed to alienate the property for less than the full amount owed on the property, it was contingent on the approval of the two lien holders, Chase Home Finance (as successor-in-interest to Washington Mutual Bank) and Bank of America. Plaintiffs obtained approval for the "short sale" from Chase Home Finance and Bank of America and then closed escrow on the "short sale." According to the terms of the approval, "[u]pon the bank's receipt of the $20,875.53 and a signed copy of the final Short Sale HUD-1 Form the bank will release the lien and charge off the remaining debt as a collectable balance." [FAC, Ex. E, at 5.] On March 25, 2010, Plaintiffs' closed escrow on their short sale. [FAC, ¶ 18 & Ex. A.]
On April 1, 2010, Bank of America filed a Substitution of Trustee and Full Reconveyance, releasing its lien on the property. The reconveyance deed states, in bold letters:
This Release of Lien does not constitute a satisfaction of the underlying debt secured by the Mortgage described above, which remains in full force and effect. It serves only to release the lien of the Mortgage upon the above described property.
[FAC, Ex. G (emphasis in original).] Plaintiffs then transferred ownership of the property to the new buyer.
In November 2010, Defendant SRA Associates, acting on behalf of Bank of America, sent a collection letter to Plaintiffs demanding payment of a $79,652.98 balance. Plaintiffs' obligation to pay the $79,652.98 balance is the subject of this action.
Plaintiffs filed suit in San Diego Superior Court, and Defendants removed the action to this Court on April 27, 2011. Shortly thereafter, Defendants moved to dismiss Plaintiffs' complaint. The Court granted Defendants' motion, dismissing the complaint with leave to amend. On July 27, 2011, Plaintiffs filed the FAC, alleging three causes of action: (1) for declaratory relief under the California Code of Civil Procedure § 580d; (2) for declaratory relief under the California Code of Civil Procedure § 580e; and (3) for declaratory relief under common law antideficiency protection. [Doc. No. 12.] Defendants now move to dismiss the FAC in its entirety. [Doc. No. 13.]
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. Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990) (citation omitted). Leave to amend should be ...