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James M. Washington, et al v. Ronald Richards

December 14, 2011


The opinion of the court was delivered by: Hon. Dana M. Sabraw United States District Judge


In this mortgage foreclosure action, Defendant Ronald Richards filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(3) and (6). Defendant Soda Partners, LLC ("Soda") joined in Mr. Richards' motion. Plaintiffs did not file an opposition. For the reasons which follow, Defendants' motion to dismiss is GRANTED IN PART AND DENIED IN PART.

According to the allegations in the complaint and the documents attached to the motion,*fn1 on or about April 29, 2005, Plaintiffs borrowed $950,000 from a predecessor in interest to Defendant HSBC Bank USA N.A. ("HSBC"). The loan was secured by a deed of trust on their residence located at 301 S. Irving Blvd. in Los Angeles, California ("Residence"). Plaintiffs alleged the mortgage became a part of a mortgage-backed security. They claim that if proper accounting is done for various financial transactions in the securitization process, they do not owe anything on their loan.

On or about December 14, 2009, Defendant Quality Loan Service Corp. ("Quality") caused a Notice of Default and Election to Sell to be recorded on behalf of HSBC. On or about July 20, 2010, Quality issued a notice of intent to sell the Residence at a public auction on August 9, 2010. On or about August 9, 2010, Plaintiffs filed a bankruptcy petition under Chapter 13. The case was later converted to Chapter 7.

On or about January 19, 2011, the Residence was sold to Soda at a trustee's sale. Plaintiffs alleged that the note and deed of trust were never properly assigned to HSBC, and that HSBC therefore could not authorize the trustee's sale of the Residence. On January 23, 2011, Plaintiffs filed an adversary proceeding in their bankruptcy case seeking to set aside the trustee's sale, cancel the trustee's deed, quiet title and for injunctive relief. On Soda's motion, the adversary proceeding was dismissed with prejudice on March 28, 2011.

Soda, represented by Mr. Richards, filed an unlawful detainer action against Plaintiffs and obtained a judgment on March 3, 2011. On the same day, Soda filed an action for holdover damages, trespass and interference with prospective economic advantage against Plaintiffs. A default judgment, including $31,500 in damages, was entered against Plaintiffs on September 2, 2011.

On April 11, 2011, Plaintiffs filed the instant action against Mr. Richards, Soda, Quality, Select Portfolio Loan Servicing, Inc., HSBC and Remington Moving and Storage ("Remington Moving"). They alleged claims for violations of the Fair Debt Collection Practices Act ("FDCPA" or the "Act"), California Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act") and California Business and Professions Code § 17200, in addition to claims for accounting, abuse of process, trespass, and conversion, as well as claims to set aside the trustee's sale, cancel the trustee's deed and quiet title. Plaintiffs alleged federal subject matter jurisdiction pursuant to 28 U.S.C. Section 1331 based on the FDCPA claim, and supplemental jurisdiction over state law claims pursuant to 28 U.S.C. Section 1367. Based on the docket, it does not appear that any Defendants have been served with process.

Mr. Richards, joined by Soda, filed a motion to strike pursuant to California Code of Civil Procedure Section 425.16. On August 11, 2011, the motion was granted in part. The only claims remaining against Mr. Richards and Soda are for: (1) FDCPA violation against Mr. Richards; (2) quiet title against Soda; (3) trespass against Mr. Richards; and (4) conversion against Mr. Richards. Mr. Richards and Soda move to dismiss the action pursuant to Federal Rule of Civil Procedure 12(b)(3) for improper venue and Rule 12(b)(6) for failure to state a claim. No opposition was filed.

If an opposing party fails timely to file opposition papers as provided in Civil Local Rule 7.1(e)(2), "that failure may constitute a consent to the granting of a motion or other request for ruling by the court." S.D. Cal. Civ. Loc. R. 7.1(f)(3)(c). Plaintiffs' counsel was served with the instant motion, but has not filed an opposition.*fn2 Accordingly, the Court may grant the motion as unopposed. See Ghazali v. Moran, 46 F.3d 52, 53-54 (9th Cir. 1995).

Nevertheless, in the interests of justice, the Court considers the merits of Defendants' motion. Under Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is warranted where the complaint lacks a cognizable legal theory. Shroyer v. New Cingular Wireless Serv., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (internal quotation marks and citation omitted); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) ("Rule 12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law"). Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson v. Dean Witter Reynolds, Inc.,749 F.2d 530, 534 (9th Cir. 1984); see also Shroyer, 622 F.3d at 1041. In this regard, "to survive a motion to dismiss, a complaint must contain sufficient factual matter to state a facially plausible claim to relief." Shroyer, 622 F.3d at 1041, citing Ashcroft v. Iqbal, 556 U.S. 662, __, 129 S. Ct. 1937, 1949 (2009). "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." Iqbal, 129 S. Ct. at 1949, citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007).

Plaintiffs alleged Mr. Richards and other Defendants violated the FDCPA. The only alleged basis for liability against Mr. Richards is that he represented Soda in the unlawful detainer action against Plaintiffs. Mr. Richards argues this is insufficient for liability under the FDCPA. The Act "imposes civil liability on debt collectors for certain prohibited debt collection practices." Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich LPA, __ U.S. __, 130 S.Ct. 1605, 1608 (2010) (internal quotation marks and brackets omitted). It defines the term "debt collector" in pertinent part as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. § 1692a(6). The term "debt" is defined in pertinent part as a consumer obligation to "pay money." Id. § 1692a(5). Accordingly, to be subject to liability under the FDCPA, a defendant must be a debt collector seeking to collect money on consumer debt. Mr. Richards was involved as counsel in an unlawful detainer action, the object of which was to recover possession of the Residence rather than a money debt. Defendants' motion to dismiss the FDCPA claim as to Mr. Richards is therefore GRANTED. Because it does not appear that the claim could be saved by amendment, the dismissal is without leave to amend. See Foman v. Davis, 371 U.S. 178, 182 (1962).

Defendants next move to dismiss the quiet title claim against Soda. They argue the claim is barred by the res judicata. The identical claim was asserted against Soda in Plaintiffs' adversary proceeding in the bankruptcy court. The adversary complaint was dismissed with prejudice on Soda's motion. (See Defs' Ex. B.) "The preclusive effect of a federal-court judgment is determined by federal common law," when subject matter jurisdiction in the prior case is based on federal question rather than diversity. Taylor v. Sturgell, 553 U.S. 880, 891 & n.4 (2008). Under the federal doctrine of claim preclusion,*fn3 "a final judgment forecloses successive litigation of the very same claim, whether or not relitigation of the claim raises the same issues as the earlier suit." Id. at 892 (internal quotation marks and citation omitted). Accordingly, the present quiet title claim is barred by claim preclusion. See Hells Canyon Preservation Council v. U.S. Forest Serv., 403 F.3d 683, 686, 689 (9th Cir. 2004) (entering a separate document captioned as judgment not required if nothing else is left to be decided). Defendants' motion to dismiss the quiet title claim is GRANTED as to Soda without leave to amend.

Mr. Richards argues that the trespass and conversion claims are also barred by res judicata based on the dismissal of the adversary proceeding. Plaintiffs' complaint in the adversary proceeding did not include these claims. (See Defs' Ex. B.) However, in their request for injunctive relief, Plaintiffs alleged "they are the rightful holder of sole possession and interest" in the Residence and that Soda and its agents "wrongfully and unlawfully" asserted an interest in it. (See id. (Adversary Compl. at 7).) They requested the bankruptcy court to enjoin Soda and its agents from "attempting to obtain possession of the premises," and order Soda to restore title and ownership of the Residence to Plaintiffs. (Id. (Adversary Compl. at 8).) In the trespass and conversion claims in this case, Plaintiffs alleged Mr. Richards, along with Remington Moving, broke into the Residence "with no legal right to do so," and that they "looted" the Residence "and stole all of the personal property belonging to Plaintiffs including family pets." (Compl. ¶¶ 109 & 113.) The complaint provides no basis to infer that Mr. Richards was acting in any capacity other than as Soda's counsel.

The federal doctrine of issue preclusion "bars successive litigation of an issue of fact or law actually litigated and resolved in a valid court determination essential to the prior judgment, even if the issue recurs in the context of a different claim." Taylor, 553 U.S. at 892 (internal quotation marks and citation omitted). Plaintiffs' trespass claim against Mr. Richards in this action is premised on Plaintiffs' right to possession of the Residence. In the adversary proceeding, Plaintiffs requested the bankruptcy court to enjoin Soda from taking possession of the Residence and quiet title in Plaintiffs. Accordingly, the issue of Plaintiffs' ownership and possessory interest in the Residence was litigated and finally adjudicated in the adversary ...

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