The opinion of the court was delivered by: Honorable Janis L. Sammartino United States District Judge
ORDER (1) GRANTING DEFENDANTS' MOTION TO DISMISS PLAINTIFF'S COMPLAINT; AND (2) DENYING AS MOOT DEFENDANTS' MOTION TO STRIKE OF PLAINTIFF'S COMPLAINT
Presently before the Court is Defendants' motion to dismiss Plaintiff's complaint and motion to strike portions of Plaintiff's complaint. (Mot. to Dismiss, ECF No. 2) Also before the Court is Plaintiff James D. Heald's ("Plaintiff") response in opposition, (Resp. in Opp'n, ECF No. 6),*fn1 and Defendants' reply in support, (Reply in Supp., ECF No. 7). Having considered the parties' arguments and the law, Defendants' motion to dismiss is GRANTED and Defendants' motion to strike is therefore DENIED AS MOOT.
In November 2007, Plaintiff obtained a loan from Defendants in the amount of $417,000.00 in connection with his purchase of a single family residence in San Diego County, California. (Compl. ¶¶ 13--15, ECF No. 1-1) Though Plaintiff was led to believe that he was merely executing loan documents, (id. ¶ 15), Plaintiff alleges that the documents he signed "contain[ed] small and hidden and/or disguised provisions which were not explained and do not show acknowledgment of understanding and acceptance from Plaintiff," (id. ¶ 21), and that in fact the Deed of Trust securing the loan acts as a cognovit note "to the sole detriment and subsequent depravation of Plaintiff and his rightful possession of property," (id.). At the time of entering into these agreements and throughout the entire life of the loan, Defendants allegedly made false and fraudulent representations to Plaintiff. (Id. ¶¶ 29--38)
Some time after these events, Plaintiff alleges that "a severance of the ownership and possession of the original Note and Deed of Trust . . . occurred," and therefore, because the true owner and holder are unknown, "defendants cannot legally foreclose." (Id. ¶ 24)
Plaintiff filed this action on March 22, 2011 in the San Diego County Superior Court of the State of California. (Compl., ECF No. 1-1) Soon thereafter, Defendants removed the case to this Court pursuant to 28 U.S.C. § 1441(b) because (1) the parties are completely diverse and the amount in controversy exceeds $75,000.00, or, alternatively (2) Plaintiff's complaint alleges a violation of federal law and as such this Court has federal question jurisdiction. (Not. Removal 2, ECF No. 1)
On May 6, 2011, Defendants filed the instant motion to dismiss and motion to strike. (Mot. to Dismiss, ECF No. 2). Plaintiff responded on June 3, 2011, (Resp. in Opp'n, ECF No. 6), and Defendants replied on June 6, 2011, (Reply in Supp., ECF No. 7). The hearing set for the motion was thereafter vacated, and the matter was taken under submission on the papers. (Order, June 20, 2011, ECF No. 8)
Federal Rule of Civil Procedure 12(b)(6) permits a party to raise by motion the defense that the complaint "fail[s] to state a claim upon which relief can be granted," generally referred to as a motion to dismiss. The Court evaluates whether a complaint states a cognizable legal theory and sufficient facts in light of Federal Rule of Civil Procedure 8(a), which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." Although Rule 8 "does not require 'detailed factual allegations,' . . . it [does] demand more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, - US - , 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In other words, "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 do." Twombly, 550 U.S. at 555 (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). "Nor does a complaint suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Iqbal, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 557).
"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.'" Id. (quoting Twombly, 550 U.S. at 570); see also Fed. R. Civ. P. 12(b)(6). A claim is facially plausible when the facts pled "allow the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). That is not to say that the claim must be probable, but there must be "more than a sheer possibility that a defendant has acted unlawfully." Id. Facts "'merely consistent with' a defendant's liability" fall short of a plausible entitlement to relief. Id. (quoting Twombly, 550 U.S. at 557). Further, the Court need not accept as true "legal conclusions" contained in the complaint. Id. This review requires context-specific analysis involving the Court's "judicial experience and common sense." Id. at 1950 (citation omitted). "[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.'" Id. Moreover, "for a complaint to be dismissed because the allegations give rise to an affirmative defense[,] the defense clearly must appear on the face of the pleading."
McCalden v. Ca. Library Ass'n, 955 F.2d 1214, 1219 (9th Cir. 1990).
Where a motion to dismiss is granted, "leave to amend should be granted 'unless the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.'" DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992) (quoting Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986)). In other words, where leave to amend would be futile, the Court may deny leave to amend. See Desoto, 957 F.2d at 658; Schreiber, 806 F.2d at 1401.
Plaintiff alleges five claims in his complaint: (1) misrepresentation and fraud; (2) wrongful foreclosure; (3) quiet title; (4) unfair business practices under California Business and Professions Code § 17200, et seq.; and (5) RICO statute violations, 18 U.S.C. § 1961. (Compl., ECF No. 1-1) Defendants move to dismiss each of these claims for failure to allege sufficient facts to state a claim, and also challenge "Plaintiff's foundational argument that the subject deed of trust is a cognovit." (Mot. to Dismiss 4, ECF No. 2) Finally, Defendants move to strike Plaintiff's claim for punitive damages, (id. at 10--11), Plaintiff's request for a preliminary injunction, (id. at 12), and Plaintiff's claim for rescission, (id. at 12--13). The Court considers each of Defendants' arguments in turn.
Plaintiff alleges that the Deed of Trust contained hidden provisions that were neither explained by Defendants nor acknowledged by Plaintiff, and that in reality the Deed of Trust is a cognovit note. (Compl. ¶ 21, ECF No. 1-1) Defendants argue that the Court should reject Plaintiff's contention that the Deed of Trust is a cognovit because it "includes nothing more than a power of sale clause." (Mot. to Dismiss 4, ECF No. 2)
"The cognovit is the ancient legal device by which the debtor consents in advance to the holder's obtaining a judgment without notice or hearing, and possibly even with the appearance, on the debtor's ...