The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS AND DENYING MORTGAGE MOTION TO STRIKE
Defendants Aurora Loan Services, LLC ("Aurora") and Mortgage Electronic Registration Systems, Inc. ("MERS"; collectively, "Defendants") seek dismissal of Plaintiff Van Chanthavong's Second Amended Complaint ("SAC"). Dismissal is sought under Federal Rule of Civil Procedure ("Rule") 12(b)(6), based on the argument that the SAC fails to state a viable claim. (ECF No. 28.) Defendants also seek to have striken Plaintiff's request for punitive damages under Rule 12(f). Id. Plaintiff filed an opposition brief. (ECF No. 29.) For the reasons stated below, Defendants' dismissal motion will be granted in part and denied in part and the motion to strike will be denied.
I. PLAINTIFF'S ALLEGATIONS IN SAC
The following factual allegations are from the SAC. On August 24, 2007 Plaintiff and Lehman Brothers "entered into a loan agreement for the refinancing of" Plaintiff's real property located at 1900 H Street, Sacramento, California (the "Property"). (SAC ¶¶ 1, 24.) Plaintiff executed an adjustable rate note (the "Note") and a deed of trust (the "Deed") for the Property. Id. ¶¶ 24-25, Exs. A-B. The Deed lists Lehman Brothers as the lender and MERS "as a nominee for Lender and Lender's successors and assigns." Id. ¶¶ 25, 29, Ex. B. "MERS is . . . the beneficiary under this Security Instrument." Id. ¶ 25. Plaintiff "default[ed] under the terms of the Note." Id. ¶ 35. On August 15, 2008, a Notice of Default was recorded that listed MERS as the contact to "find out the amount [Plaintiff had to] pay, or to arrange for payment to stop the foreclosure[.]" Id. ¶ 36, Ex. C. On October 16, 2008, MERS recorded a substitution of trustee in which MERS is the "'nominee for LEHMAN BROTHERS BANK, FSB,' . . . the original beneficiary." Id. ¶ 37. Plaintiff alleges "[u]pon information and belief, MERS is not, and never has been in possession of the Note." Id. ¶ 38.
Plaintiff filed for bankruptcy protection in the Eastern District of California on April 21, 2009. Id. ¶ 43. Plaintiff alleges Defendants violated the automatic bankruptcy stay on April 24, 2009 by causing "to be published a Notice of Trustee's Sale, and post[ing] it" at the Property. Id. ¶ 44. MERS, as nominee for Lehman Brothers, transferred all beneficial interest under the Deed to Aurora on June 8, 2009. Id. ¶ 45, Ex. E. Plaintiff alleges "[t]his [transfer] action was void because it violated the automatic stay" and "[t]here is no endorsement or allonge evidencing that LEHMAN BROTHERS, MERS, or AURORA LOAN SERVICES is or was the holder of the note." Id. ¶¶ 45-46.
The Bankruptcy Court filed an Order Discharging the Debtors on August 3, 2009, and Plaintiff's bankruptcy case was closed August 14, 2009. Id. ¶ 48. "Plaintiff alleges that since there is no evidence that LEHMAN BROTHERS, MERS, nor AURORA ever took actual possession of the note, its security interest was never perfected, [and was] not perfected at the time of filing the debtor's bankruptcy, and thus the underlying debt was discharged." Id. ¶ 49.
Plaintiff alleges that both before and after his bankruptcy filing, "Plaintiff's agent, Boomie Cotton, and AURORA Loan Services . . . engaged in discussions of loan modification." Id. ¶ 50. Plaintiff further alleges: "On September 7, 2009, plaintiff's agent contacted AURORA and was advised that the payment could not be made and was told that they would give a 10 day grace period. Payment was . . . credited to plaintiff's account on or about September 24, 2009." Id. ¶ 53. "On . . . September 11, 2009, Defendants caused to be published a Notice of Trustee's Sale set for September 30, 2009." Id. ¶ 54, Ex. G. Plaintiff alleges he was unaware that a Notice of Trustee's Sale was filed and never received notice. Id. ¶ 55.
Plaintiff received a Special Forbearance Agreement from Aurora, which he signed and returned on September 21, 2009. Id. ¶ 56, Ex. H. Plaintiff attaches to his SAC a copy of the Special Forbearance Agreement that he signed; however, it is not signed by Aurora. Id. Ex. H. Plaintiff alleges his agent contacted Aurora on September 24, 2009, to clarify the agreement "and was told that the agreement was a six month trial period[.]" Id. ¶ 57. "[P]laintiff's agent was told by representatives of AURORA that there was no sale date and that the property was not in foreclosure, but that the property was in an 'active loan mod.'" Id. ¶ 58. "Plaintiff's Agent contacted AURORA on a monthly basis and was repeatedly told that there was no foreclosure date set[.]" Id. ¶ 59.
Plaintiff alleges his agent mailed Plaintiff's October payment to Aurora on October 19, 2009, and again asked "if there was a sale date[; the agent] was told the loan was not in foreclosure and there was no sale date." Id. ¶ 64. Plaintiff alleges: "On or about October 30, 2009, defendants conducted a private foreclosure sale without notice to plaintiff or his agent of any default in the loan modification agreement." Id. ¶ 65. Plaintiff alleges the Notice of Trustee's Sale was never posted on the premises, mailed by certified mail, or received by the Plaintiff. Id. ¶¶ 66-67.
Plaintiff alleges he was advised that the Property was for sale on November 2, 2009, when a real estate agent came to the Property. Id. ¶ 70. Plaintiff alleges that same day "plaintiff's agent spoke with defendant AURORA and asked when the loan modification/forbearance agreement was canceled, and was told that it was canceled on October 20, 2009. Plaintiff [alleges he] never received a notice of cancellation." Id. 9:24-26.*fn1 Plaintiff alleges on November 3, 2009, his agent contacted the foreclosure trustee and discovered for the first time that the trustee's sale had been continued from month to month and also learned for the first time that a new notice of trustee's sale had been published and a new sale date set for October 30, 2009. AURORA advised that . . . the property was sold on October 30, 2009.
Id. 10:20-24. "[P]laintiff's agent . . . discovered that sales dates had been set on 2/2/09, 3/4/09, 5/12/09, 9/12/09, 7/15/09, 8/18/09, 9/30/09, and 10/30/09." Id. 10:7-9. Plaintiff alleges that he, "and his agent or representative had . . . numerous conversations with the loan servicing agent and was told there was no sale date set." Id. 10:27-28.
Plaintiff also alleges in the SAC that "[f]ollowing the filing of this case," the bankruptcy trustee "was advised of the possible claim of the estate and . . . the Trustee [was given] an opportunity to review the complaint [Plaintiff filed in this district court,] and [to] advise the [bankruptcy] court whether he wished to pursue the claim on behalf of the estate." Id. 11:12-16. Plaintiff further alleges in the SAC that the Bankruptcy Court did not reopen his bankruptcy case and "[a]s a result, the 'asset' was effectively abandoned back to the debtor by operation of law[.]" Id. 11: 17-19.
Defendants seek dismissal of Plaintiff's claims arguing, inter alia: "Plaintiff lacks standing to assert several of his . . . [claims] because he failed to include those claims as assets of his estate in his Chapter 7 Petition" and "each of Plaintiff's . . . claims fails because they do not meet the pleading requirements." (Defs.' Mem. of P. & A. ("Mot.") 1:19-21, 2:1-2.) Plaintiff's SAC is comprised of what is labeled as the following ten claims, three of which comprise more than a single claim: 1) injunctive relief, 2) declaratory relief, 3) breach of contract, 4) negligence/negligent misrepresentation, 5) demand to produce the note, 6) demand to set aside the trustee's sale, 7) demand to cancel the trustee's deed, 8) request to quiet title, 9) violation of statute, and 10) fraud and deceit. (SAC ¶¶ 71-159.)
Defendants argue Plaintiff's demand to cancel the trustee's deed and request to quiet title should be dismissed because Plaintiff included those claims in his SAC without receiving leave of court to allege these claims. (Mot. 4:23-5:4.) These claims were not alleged in Plaintiff's First Amended Complaint ("FAC") and were included in the SAC without leave of court to include the claims in a SAC. An Order filed March 18, 2011, decided Defendants' motion to dismiss Plaintiff's FAC and granted Plaintiff leave to "file a Second Amended Complaint in which he could "address the deficiencies discussed" in the Order. (Order 20:28-21:1, ECF No. 22.) Since the two challenged claims were not alleged in the FAC, this portion of Defendants' motion to dismiss is granted.
Defendants also argue Plaintiff lacks standing to prosecute the following claims because they "remain part of the bankruptcy estate": demand to produce the note, demand to set aside the trustee's sale, violation of statute, and fraud and deceit. (Mot. 7:1-24, 7:27-8:1.) Plaintiff only responds to the Defendants' standing challenge to his claim to set aside the trustee's sale, arguing since this claim "accrue[d] when the foreclosure occur[red]" he has standing to pursue this claim because it is not part of the bankruptcy estate. (Opp'n 9:24.)
Only the trustee has standing to prosecute the claims that are part of a bankruptcy estate, since "the bankruptcy trustee controls the bankruptcy estate, [and] is the real party in interest in the suits that belong to the estate." Griffin v. Allstate Ins. Co., 920 F. Supp. 127, 130 (C.D. Cal. 1996). The filing of a bankruptcy petition "creates an estate [which] is comprised 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). "11 U.S.C. § 541(a)(1) . . . defines property of the bankruptcy estate to include 'all legal or equitable interests of the debtor in property as of the commencement of the case.' The scope of section 541 is broad, and includes causes of action." Sierra Switchboard Co. v. Westinghouse Elec. Corp., 789 F.2d 705, 707 (9th Cir. 1986). "11 U.S.C. § 521(1) [of the bankruptcy code] provides that, '[t]he debtor shall file a list of creditors, and unless the court orders otherwise, a schedule of assets and liabilities, a schedule of current income and current expenditures, and a statement of the debtor's financial affairs.'" Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 784 (9th Cir. 2001).
"[A] debtor who fail[s] to disclose a pending claim as an asset in a bankruptcy proceeding where debts were permanently discharged [is] estopped from pursuing such claim in a subsequent proceeding." Id. Further "[t]he debtor's duty to disclose potential claims as assets does not end when the debtor files schedules, but instead continues for the duration of the bankruptcy proceeding." Id. at 784-85. "If [the debtor] fail[s] to properly schedule an asset, including a cause of action, that asset continues to belong to the bankruptcy estate and does not revert to [the debtor]." Cusano v. Klein, 264 F.3d 936, 945-46 (9th Cir. 2001) (citing Vreugdenhill v. Navistar Int'l Transp. Corp., 950 F.2d 524, 526 (8th Cir. 1991) (property is not abandoned by operation of law unless the debtor "formally schedule[s] the property before the close of the case")).
"Plaintiff did not list any claim sub judice in his bankruptcy filing." (Order 10:4-5, ECF No. 22.) "[G]enerally, a debtor has no duty to schedule a cause of action that did not accrue prior to bankruptcy." Cusano, 264 F.3d at 947. A claim accrues when an "action could have been brought[.]" Id.
Defendants argue "[b]ecause Plaintiff never scheduled the [subject SAC claims] . . . in his bankruptcy petition, . . . Plaintiff lacks standing to bring . . . [the subject claims because they] arose before August 14, 2009[,]" the date on which Plaintiff's bankruptcy case was closed. (Mot. 6:15-20.) Plaintiff alleges in his SAC that his unsuccessful attempt to reopen his bankruptcy case after filing this action, resulted in the "'asset[s]' [being] effectively abandoned back to the [Plaintiff] by operation of law." (SAC 11:19.)
A bankruptcy trustee may abandon assets; however, property that is not abandoned or administered by the trustee remains property of the estate. 11 U.S.C. §§ 554 (a), (d). "'Abandonment' is a term of art with special meaning in the bankruptcy context. It is the formal relinquishment of the property at issue from the bankruptcy estate." Catalano v. C.I.R., 279 F.3d 682, 685 (9th Cir. 2002). "In short, abandonment requires formal notice and a hearing." Id. at 686 (citation and internal quotation marks omitted). "The Bankruptcy Court's Order denying Plaintiff's motion to reopen his bankruptcy case did not state any property was abandoned by the trustee." (Order 10:26-28, ECF No. 22.) Therefore, any claim that accrued prior to the close of Plaintiff's bankruptcy case remains in the bankruptcy estate.
1. Demand to Produce the Note
Defendants argue Plaintiff's demand to produce the Note claim, in which he alleges "Defendants lacked possession of the Note and thus could not foreclose[,] accrued when the Notice of Default was recorded." (Mot. 7:1-3.) Plaintiff alleges in the SAC that the Notice of Default was recorded on August 15, 2008. (SAC ¶ 36, Ex. C.)
Plaintiff's demand to produce the Note claim accrued when MERS recorded the Notice of Default on August 15, 2008, since an "action could have been brought" to challenge the foreclosure proceedings and Defendants' right to foreclose once the Notice of Default was recorded. Cusano, 264 F.3d at 947. Therefore, Plaintiff's "demand to produce the Note" claim accrued prior to the close of Plaintiff's bankruptcy and should have been listed in Plaintiff's bankruptcy estate. Accordingly, this claim remains in the ...