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Chan & Pao Tang v. Bank of America

March 19, 2012

CHAN & PAO TANG
v.
BANK OF AMERICA, N.A. & RECONTRUST CO.



The opinion of the court was delivered by: The Honorable David O. Carter, Judge

CIVIL MINUTES - GENERAL

Title:

Julie Barrera Not Present Courtroom Clerk Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS: NONE PRESENT NONE PRESENT PROCEEDING (IN CHAMBERS): ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION TO DISMISS

Before the Court is Defendants Bank of America, N.A. and Recontrust Co.'s Motion to Dismiss Pursuant to Federal Rule of Civil Procedure 12(b)(6). ("Mot.") (Dkt. 7). The Court finds this matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; Local Rule 7-15. The Court has considered the moving, opposing, and replying papers, and hereby GRANTS in part and DENIES in part Defendants' Motion to Dismiss.

I. BACKGROUND

At the outset it is important to properly characterize pro se Plaintiffs Chan and Pao Tang's (the "Tangs") Complaint. It is a difficult document to read, filled with grammatical errors that make comprehension a challenge, and it is suffused with palpable anger at what Plaintiffs seem to feel is a substantial injustice. This Court has a duty to interpret pro se pleadings liberally. See Hughes v. , 449 U.S. 5, 9 (1980), Bernhardt v. Los Angeles Cnty., 339 F.3d 920, 925 (9th Cir. 2003). As such, taken as true and in the light most favorable to Plaintiffs, the facts alleged by the Tangs are as

In December 2005, Plaintiffs refinanced their home in Corona, CA with a loan from Bank of America, N.A. ("BOA"); they borrowed $385,000. Compl. Ex. A ("Deed of Trust"), Notice of *fn1 This loan was secured by a Deed of Trust encumbering the property. Id. On the Deed of Trust the Tangs were identified as the borrowers and trustors, BOA was identified as the lender and beneficiary, and PRLAP, Inc. was identified as the trustee. Id.

On August 26, 2010, two documents crucial to the present proceedings were executed. The first was a Notice of Default and Election to Sell. It stated that the Tangs had fallen behind on their payments beginning in October of the previous year and now had arrears of $25,102.04. Compl. Ex. C ("Notice of Default"). The Notice of Default instructed the Tangs to contact BOA for information regarding the amount owed and payment options. Id. The Notice of Default was signed on August 26 by Betty Jo Livingston of Recontrust Co. ("Recontrust") "as agent for the Beneficiary." Id. The Notice of Default was recorded in the County of Riverside on August 30, 2010. Id. Attached to the Notice of Default was a "California Declaration" signed by Michael D. Link as an agent for BAC Home Loans Servicing, LP, a subsidiary of BOA, ("BAC") on August 6, 2010. Compl. Ex. D ("California Declaration"); Compl. ¶ 11. The California Declaration is a one-page document with six blank boxes to check next to various lines of text indicating particular circumstances. Id. By checking one such box, Link declared under penalty of perjury that BOA had "tried with due diligence to contact [the Tangs] in accordance with California Civil Code Section 2923.5." Id.

The second important document executed on August 26, 2010, was a Substitution of Trustee. Compl. Ex. E ("Substitution of Trustee"). In the Substitution of Trustee, BOA (acting as beneficiary under the Deed of Trust) substituted in Recontrust as the new trustee in place of PRLAP,

The Substitution of Trustee was signed on August 26, 2010, by T. Sevillano for BOA, acting as "Assistant Secretary." Id. The Substitution of Trustee was then notarized by Michelle Miller on September 3, 2010, declaring under penalty of perjury that T. Sevillano had personally appeared and proven that he/she had executed the Substitution of Trustee in his/her authorized capacity. Id. The Substitution of Trustee was eventually recorded in the County of Riverside on September 9, 2010 -- ten after the contemporaneously executed Notice of Default had been recorded. Id.

A Notice of Trustee's Sale was then executed on December 2, 2010 by Sunita Narayanah acting as a "Team Member" for Recontrust. Compl. Ex. F ("Notice of Trustee's Sale"). The Notice of Trustee's Sale was recorded on December 6, 2010 in the County of Riverside; it set a foreclosure sale date for December 29, 2010.*fn2 Id. Attached to the Notice of Trustee's Sale was a "Declaration of Exemption Pursuant to Cal. Civ. Code 2923.54." Compl. Ex. G ("2923.54 Exemption"). This Exemption was signed under penalty of perjury by Lisa Allinson as "Vice President" of BAC on July 12, 2010, stating that BAC had obtained a final order of exemption from the California Commissioner of Corporations pursuant to Section 2923.53, and that the timeframe for giving the Notice of Sale specified in Section 2923.52(a) did not apply.*fn3 Id.

On December 3, 2010 -- the day after the Notice of Trustee's Sale was executed -- Sunita*fn4 prepared another set of documents labeled "Affidavit of Mailing for Substitution of Trustee by Code;" these documents seem designed to comply with the notice requirements contained in Section 2934a, discussed below.*fn5 Compl. Ex. L ("Notice of Substitution of Trustee"). The cover page is a letter drafted by Sunita as a "Trustee Sale Officer" stating under penalty of perjury that she caused a copy of the Substitution of Trustee to be mailed to the Tangs on December 3, 2012. Id. There are at least two serious problems with this "Notice of Substitution of Trustee." First, the affidavit is unsigned.

Second, the copy of the Substitution of Trustee attached to the document is not a copy of the Substitution of Trustee that was earlier recorded on September 9, 2010. Compare Compl. Ex. E ("Substitution of Trustee") with Compl. Ex. L ("Notice of Substitution of Trustee"). The Substitution of Trustee attached to the Notice of Substitution of Trustee is unsigned, not notarized, does not mention

T. Sevillano or any other agent acting on behalf of BOA, and indicates a different notary public (Darlene R. Gomez, as opposed to Michelle Miller). Compl. Ex. L.

The Tangs submit several other documents in support of their allegations. They submit a letter they received in July 2011 that shows Plaintiffs' mortgage had been securitized and sold by BOA. Compl. Ex. B. That same letter also acknowledges the parent/subsidiary relationship between BOA and BAC, that BOA does not own the Tang's promissory note and is acting as the Tang's loan servicer, and that effective July 1, 2011, BAC would merge with BOA. Id. The Tangs also submit a Qualified Written Request ("QWR") they sent BOA on August 19, 2011 as well as Recontrust's response to the QWR, dated September 16, 2011. Compl. Ex. J ("QWR"); Compl. Ex. K. ("QWR Response").

Finally, the Tangs submit several documents in support of their allegations that T. Sevillano, Michelle Miller, and Lisa Allinson are "robo-signers" who sign documents without personal knowledge of the contents attested to therein and/or sign documents without the requisite authority to do so. Compl. Ex. H ("Sevillano & Miller Robo-Signing Documents"); Compl. Ex. I ("Allinson Robo-Signing Documents"). The documents submitted by the Tangs show Sevillano acting as "Assistant Secretary" of Mortgage Electronic Registration Systems, Inc. ("MERS") in March 2010 and Allinson acting as "Vice President" of MERS in March and May 2008. Compl. Ex. H & I.

The thrust of Plaintiffs' Complaint is that BOA and Recontrust do not have the authority to foreclose on Plaintiffs' home because Defendants do not own the note, have not followed proper foreclosure procedures, have not complied with certain statutory mandates, and use robo-signers. See, , Compl. ¶¶ 16-21, 26-28, 33-34, 37, 40, 45, 49, 61. Based on this alleged conduct, the Tangs bring nine causes of action: (1) wrongful foreclosure; (2) violation of Section 2923.5; (3) unjust enrichment; (4) Real Estate Settlement Procedures ("RESPA") and Truth In Lending Act ("TILA") violations; (5) fraud and concealment; (6) quiet title; (7) declaratory and injunctive relief; (8) slander to title; and (9) intentional infliction of emotional distress. Id. at 1.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to state a claim upon which relief can be granted. Dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove "no set of facts" in support of its claim that would entitle it to relief. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1968 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957)). In order for a complaint to survive a 12(b)(6) motion, it must state a claim for relief that is plausible on its face. Ashcroft v. , 129 S.Ct. 1937, 1950 (2009). A claim for relief is facially plausible when the plaintiff pleads enough facts, taken as true, to allow a court to draw a reasonable inference that the defendant is liable for the alleged conduct. Id. at 1949. If the facts only allow a court to draw a reasonable inference that the defendant is possibly liable, then the complaint must be dismissed. Id. Mere legal conclusions are not to be accepted as true and do not establish a plausible claim for relief. Id. at 1950.Determining whether a complaint states a plausible claim for relief will be a context-specific task requiring the court to draw on its judicial experience and common sense. Id.

In general, a court cannot consider materials outside the pleadings on a motion to dismiss for failure to state a claim. See Fed. R. Civ. P. 12(b). A court may, however, consider items of which it can take judicial notice without converting the motion to dismiss to one for summary judgment. Barron , 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts "not subject to reasonable dispute" because they are either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201. Additionally, a court may take judicial notice of "'matters of public record' without converting a motion to dismiss into a motion for summary Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) (quoting MGIC Indem. Corp. , 803 F.2d 500, 504 (9th Cir. 1986)). Under the incorporation by reference doctrine, courts may also consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading." In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994)) (alteration in original). Dismissal without leave to amend is appropriate only when the Court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003) (citing Chang v. Chen, 80 F.3d 1293, 1296 (9th Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).

As noted above, this Court has a duty to interpret pro se pleadings liberally. As such, for the purposes of a Rule 12(b)(6) motion to dismiss, the allegations made in pro se complaints are held to a less stringent standard than those made in formal pleadings drafted by professional attorneys. See , 449 U.S. at 9 (quoting Haines v. Kerner, 404 U.S. 519, 520 (1972)).

III. DISCUSSION

A. APPLICATION OF THE TENDER RULE WHEN A FORECLOSURE SALE IS PENDING

As an initial matter, Defendants seek to dismiss the majority of Plaintiffs' claims because Plaintiffs have not alleged a credible and unconditional offer of tender to satisfy the entirety of their outstanding debt. Mot. at 2. In California, the so-called "tender rule" is a prerequisite to any action seeking to set aside a foreclosure sale. See U.S. Cold Storage v. Great W. Sav. & Loan Ass'n, 165 Cal. App. 3d 1214, 1222 (1985). There has been some dispute as to whether the tender rule applies in situations where the foreclosure sale has not yet occurred. See Rodriguez v. Bank of America, No. C 11-3839-PSG, 2011 WL 5864108, at *3 (N.D. Cal. Nov. 22, 2011) ("There is some division in the district courts, however, as to whether the 'tender rule' precludes a claimant from seeking to prevent a pending non-judicial foreclosure, as opposed to attempting to 'unwind' a foreclosure that has taken place."). Many courts have applied the tender rule in situations where a sale is pending. See, e.g., Alcaraz v. Wachovia Mortg., FSB, 592 F. Supp. 2d 1296, 1304 (E.D. Cal. 2009); Alicea v. GE Money , No. C 09-00091 SBA, 2009 WL 2136969 (N.D. Cal. July 16, 2009). Others have chosen not to apply the tender rule in those situations. See, e.g., Hague v. Wells Fargo Bank, N.A., No. C11-02366 TEH, 2011 WL 6055759, at *5 (N.D. Cal. Dec. 6, 2011) ("Tender is not required in this case, as the foreclosure at issue has not yet occurred.").

Some courts -- and Defendants in the present action -- rely on Alicea for the proposition that the tender rule applies in situations where the foreclosure sale is pending. Alicea, 2009 WL 2136969, at *3. Defendants rely on language from Alicea that reads, "When a debtor is in default of a home mortgage loan, and a foreclosure is either pending or has taken place, the debtor must allege a credible tender of the amount of the secured debt to maintain any cause of action for wrongful

Id. Courts have also used this exact language for the proposition that the tender rule applies in cases where a foreclosure sale is pending. See, e.g., Ngoc Nguyen v. Wells Fargo Bank, N.A., 749 F. Supp. 2d 1022, 1034 (N.D. Cal. 2010); Stickler v. Wash. Mut. Bank. F.A., No. CV 11-02891 DDP (OPx), 2011 WL 4479200, at *2 (C.D. Cal. Sept. 27, 2011). This Court, however, is troubled by the broad assertion made by the Alicea court. First, the Alicea decision cites only two cases in its discussion of the tender rule: Karlsen v. Am. Sav. & Loan Ass'n, 15 Cal. App. 3d 112, 121 (1971), and FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal. App. 3d 1018, 1021 (1989). Both Karlsen and , however, only applied the tender rule to a post-sale situation, not a pending foreclosure. , 15 Cal. App. 3d at 121; FPCI RE-HAB 01, 207 Cal. App. 3d at 1020. Finally, as noted by Silva-Pearson v. BAC Home Loans Servicing, LP, No. C 11-01491 SI, 2011 WL 2633406, at *2 (N.D. Cal. July 5, 2011), and Howl v. Bank of America, N.A., No. C 11-0887 CW, 2011 WL 3610745, at *2 (N.D. Cal. Aug. 17, 2011), the facts in Alicea did not involve a situation where the sale was still pending; in Alicea itself the foreclosure sale had already occurred. See Silva-Pearson, 2011 WL 2633406, at *2 n.1; Howl, 2011 WL 3610745, at *2. Thus, this Court declines to follow Alicea's broad assertion; it was dicta and not grounded in any prior case law involving pending foreclosures.

This Court finds more persuasive the line of decisions in which courts have refused to extend the tender rule to cases where the foreclosure sale has not yet occurred. See Silva-Pearson, 2011 WL 2633406, at *2; Howl, 2011 WL 3610745, at *2; Dubin v. BAC Home Loans Servicing, No. C-10-05065 EDL, 2011 WL 794995, at *3 (N.D. Cal. Mar. 1, 2011); Hague, 2011 WL 6055759, at *5.

, for example, the foreclosure sale had not yet occurred and the plaintiff, in addition to alleging fraud, multitudinous statutory violations, and wrongful foreclosure, sought rescission. Howl, 2011 WL 3610745, at *1. The defendants sought to dismiss the plaintiff's complaint because he did not offer

Id. at *2. The Howl court refused to apply the tender rule because the foreclosure sale was pending, and the defendants had cited no authority justifying such an application. Id. As discussed above, the court found the defendants' reliance on Alicea particularly misplaced because that case involved a situation where the foreclosure sale had already occurred. Id.

Like the Howl defendants, Defendants here cite no authority supporting their contention that the tender rule applies in situations where a foreclosure sale is pending. See Karlsen, 15 Cal. App. 3d at 121 (applying the tender rule in a situation where the borrower sought to set aside a voidable foreclosure sale); U.S. Cold Storage, supra, 165 Cal. App. 3d at 1222 (deciding whether to require a junior lienholder to offer tender before setting aside a concluded foreclosure sale); Gaffney v. Downey Sav. & Loan Ass'n, 200 Cal. App. 3d 1154, 1165 (1988) (discussing what constitutes an offer of perfect

Nguyen v. Calhoun, 105 Cal. App. 4th 428, 439 (2003) (discussing what constitutes a proper offer and acceptance of tender); Alicea, 2009 WL 2136969, at *3 (applying the tender rule in a situation where the sale had already occurred). ...


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