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Michelle Renee Salcido v. Aurora Loan Services

January 17, 2012


The opinion of the court was delivered by: Present: The Honorable A. Howard Matz, U.S. District Judge


Stephen Montes Not Reported Deputy Clerk

Court Reporter / Recorder Tape No.

Attorneys NOT Present for Plaintiffs: Attorneys NOT Present for Defendants:

Proceedings: IN CHAMBERS (No Proceedings Held)

This case is before the Court on the motion to dismiss filed by defendants Aurora Loan Services, LLC ("Aurora"), Federal Home Loan Mortgage Corporation ("Freddie Mac"), and Mortgage Electronic Registration System, Inc. ("MERS") (collectively "Defendants"). Defendants removed this action to federal court on March 9, 2011, after plaintiff Michelle Renee Salcido ("Plaintiff") filed a first amended complaint ("FAC") naming Freddie Mac as a defendant.*fn1 Defendants now seek to dismiss the first amended complaint ("FAC") filed by plaintiff. For the reasons set forth below, the Court GRANTS the motion in part and DENIES it in part.*fn2


Unless otherwise indicated, the following "facts" are based on the FAC's allegations, which the Court must accept as true for purposes of this motion.

On October 6, 2006, Plaintiff entered into a mortgage agreement with Platinum Capital Group ("Platinum"), through which Plaintiff obtained a $350,000 loan secured by her home in La Puente, California. FAC ¶ 9. Platinum actually created two mortgages for Plaintiff: one in the amount of $280,000 and a second in the amount of $70,000. FAC ¶ 10. Plaintiff agreed to accept two mortgages only because she was told that she could not otherwise get the financing she sought. FAC ¶ 10. Soon after concluding this deal, Plaintiff was informed that the right to collect payment under the Note had been transferred to Aurora. FAC ¶ 11.

In March 2009, Aurora informed Plaintiff that her payments on the first mortgage were being increased from $1,839 per month to $2,400 per month. FAC ¶ 12. According to Aurora, a delinquency in Plaintiff's mortgage account caused this increase. FAC ¶ 12. Plaintiff claimed there was no such delinquency and offered to pay Aurora the regular monthly amount of $1,839. FAC ¶ 12. Aurora rejected this offer, leading to a dispute between Plaintiff and Aurora regarding the proper amount due under the first mortgage agreement. FAC ¶ 12.

In June 2009, Plaintiff and Aurora:

reached a written and oral agreement to resolve the . . . dispute between them and modify the original Deed of Trust, wherein it was agreed that if Plaintiff made a new monthly payment of $1,364 starting on or about September 2009 through December 2009, Defendant Aurora will cease any foreclosure action . . . and will offer Plaintiff a permanent modification of the mortgage loan under the Home Affordability Mortgage Program ("HAMP") loan workout plan . . .

FAC ¶ 13.

In reliance on her agreement with Aurora, Plaintiff made monthly payments of $1,364 and desisted from filing a planned bankruptcy action and from otherwise protecting her property from foreclosure. FAC ¶ 14. Also in reliance on the agreement, Plaintiff expended $25,000 "to renovate, repair and enhance the subject property." FAC ¶ 15. In accord with the agreement, Plaintiff believed that if she successfully made the trial period payments, then the first mortgage would be permanently modified to provide for $1,364 monthly payments. FAC ¶ 16. She made the agreed new monthly payments through July 2010. Id.

On July 19, 2010, after making the July 2010 payment of $1,364 to Aurora, Plaintiff received a letter from Aurora stating that the offer to modify Plaintiff's loan had been denied because Plaintiff had failed to submit certain requested documents. FAC ¶ 17. In fact, Plaintiff had submitted every document Aurora had requested. FAC ¶ 18. Plaintiff called Aurora to ask why Aurora had sent her the letter. FAC ¶ 18. During this call, "Aurora's agent informed Plaintiff that the modification was actually being denied because Plaintiff and her husband made too much income and could afford the original mortgage payments of $1,839 a month." FAC ¶ 18. Aurora's agent then told Plaintiff that she could qualify for another loan modification program, and that there was no pending foreclosure action on her property. FAC ¶ 18. At no time did Aurora tell Plaintiff or her husband that Plaintiff was in default under the original mortgage and that foreclosure on her property was imminent. FAC ¶ 20.

On July 30, 2010, an Aurora representative informed Plaintiff that her property had been foreclosed upon on July 28, 2010, and that Aurora had purchased the property at the foreclosure sale. FAC ¶ 21. Plaintiff never received any Notice of Default, Notice of Trustee's Sale, or any assignment of the Note or other transfer of rights under the Note. FAC ¶ 21. Under the original Deed of Trust, the lender is Platinum, the beneficiary is MERS, and the Trustee is Advantages Title, Inc.

Defendants have submitted a request for judicial notice of various public records (e.g., Deed of Trust, Notice of Default, and Trustee's Deed Upon Sale) related to Plaintiff's mortgage. The Court may take judicial notice of such documents without converting this motion to dismiss into a motion for summary judgment, but it cannot take judicial notice of facts within such documents that are reasonably subject to dispute. Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001) ("[T]he court did more than take judicial notice of undisputed matters of public record. The court took judicial notice of disputed facts stated in public records. . . . Accordingly, we hold that the district court erred in granting the . . . motion to dismiss . . . by relying on extrinsic evidence and by taking judicial notice of disputed matters of fact to support its ruling.").

For example, Defendants have submitted a recorded Loan Modification Agreement effective November 1, 2008. Request for Judicial Notice ("RJN") Exh. F. Defendants claim this document shows that Plaintiff defaulted on her first mortgage in 2008 and that Plaintiff and Aurora agreed to reduce Plaintiff's monthly payments to $1509.64. Plaintiff's allegations contradict the facts in the Loan Modification Agreement, at least insofar as Plaintiff alleges her monthly payment was $1839 through March 2009. FAC ¶

Defendants have also submitted a Notice of Default dated June 2009, which they claim demonstrates that Plaintiff defaulted on her loan by failing to make her January 2009 payment and failing to make any payments thereafter. RJN Exh. H. According to the Notice of Default, Plaintiff was in default in an amount of $10,341 by June 2009. RJN Exh. H. Plaintiff's allegations contradict the facts in the Notice of Default in numerous respects. As an example, she alleges that she was not delinquent in her payments as of March 2009, and that she reached an agreement with Aurora to modify her loan in June 2009. FAC ¶ 12. The Court cannot rely on such disputed facts within the documents submitted by Defendants. In reaching this conclusion, the Court notes that the First Amended Complaint is verified under penalty of perjury by Plaintiff.

Plaintiff alleges causes of action for: (1) breach of contract and (2) breach of the implied covenant of good faith and fair dealing against Aurora; (3) fraud against MERS; (4) fraud against Aurora; (5) wrongful foreclosure against MERS and Cal-Western Reconveyance Corporation ("Cal-Western")*fn3 ; and (5) quiet title against Freddie Mac and MERS. The Court addresses them in turn.


A complaint may be dismissed for failure to state a claim upon which relief can be granted. See Fed. R. Civ. P. 12(b)(6). "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.' 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." Ashcroft v. Iqbal, - U.S.-, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "[A] plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in

Twombly, 550 U.S. at 555 (internal quotation marks and ellipsis omitted).

The plausibility standard articulated in Twombly and Iqbal, requires that a complaint plead facts demonstrating "more than a sheer possibility that a 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." Iqbal, 129 S.Ct. at 1949 (internal quotation marks and citation omitted). Determining whether a complaint states a plausible claim for relief is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct," the complaint has not shown that the pleader is entitled to relief. Iqbal, 129 S.Ct. at 1950 (internal citation, alteration, and quotation marks omitted); see Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[F]or a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the pleader to relief.") (citing Iqbal, 129 S.Ct. at 1949).

To determine whether a complaint states a claim sufficient to withstand dismissal, a court considers the contents of the complaint and its attached exhibits, documents incorporated into the complaint by reference, and matters properly subject to judicial notice. Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322-23 (2007); Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). The court must accept as true all factual allegations contained in the complaint. That principle, however, "is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 129 S.Ct. at 1950. A complaint pro se, however, is "to ...

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