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Lorna Delores Thompson v. Residential Credit Solutions

May 2, 2012

LORNA DELORES THOMPSON,
PLAINTIFF,
v.
RESIDENTIAL CREDIT SOLUTIONS, INC., A DELAWARE CORPORATION; AMERICAN BROKERS CONDUIT, A DIVISION OF AMERICAN HOME MORTGAGE INVESTMENT CORPORATION, A MARYLAND CORPORATION; MERSCORP, INC. DBA MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC. AS NOMINEE FOR AMERICAN BROKERS CONDUIT, AMERICAN HOME MORTGAGE SERVICING, INC., AND ALL PERSONS UNKNOWN, CLAIMING ANY LEGAL OR EQUITABLE RIGHT, TITLE, ESTATE, LIEN, OR INTEREST IN THE PROPERTY, DESCRIBED IN THE COMPLAINT ADVERSE TO PLAINTIFF'S TITLE, AND ANY CLOUD ON PLAINTIFF'S TITLE THERETO, AND DOES 1-100, INCLUSIVE, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO DISMISS THIRD AMENDED COMPLAINT

Plaintiff Lorna Delores Thompson brings this action against defendants Residential Credit Solutions, Inc. ("RCS"), American Brokers Conduit ("ABC"), a division of American Home Mortgage Investment Corporation ("AHMIC"), Merscorp, Inc. ("Merscorp"), dba Mortgage Electronic Registration System, Inc. ("MERS") as nominee for American Brokers Conduit, and American Home Mortgage Servicing, Inc. ("AHMSI"), arising from defendants' allegedly wrongful conduct related to a residential loan. RCS and Merscorp now move to dismiss the Third Amended Complaint ("TAC") for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket No. 23.)

I. Factual and Procedural Background

In July of 2007, plaintiff purchased her residence at 2220 Cobblestone Avenue in Fairfield, California ("the property"), with a loan she obtained from ABC. (TAC ¶ 1.) On June 8, 2009, a Notice of Default was filed against the property after plaintiff had accrued a total default of at least $17,654.25. (Req. for Judicial Notice ("RJN") Ex. 3 (Docket No. 26).) Beginning in June 2010, plaintiff was placed on a modified monthly trial program by AHMIC. (TAC ¶ 18.) Plaintiff alleges that under the modification agreement, AHMIC agreed to forbear from commencement of foreclosure proceedings as long as she was current on the payments. (Id. ¶ 20.) On October 18, 2010, a Notice of Rescission of Notice of Default was recorded. (RJN Ex. 4.) After plaintiff's delinquency increased to $62,437.88, a second and operative Notice of Default was recorded on April 4, 2011. (Id. Ex. 5.)

On July 5, 2011, the National Default Servicing Corp. ("NDSC") was substituted as trustee under the Deed of Trust. (Id. Ex. 7.) The same day, NDSC recorded a Notice of Trustee's Sale. (Id. Ex. 8.) The foreclosure sale took place on November 15, 2011, and a Trustee's Deed Upon Sale was recorded on November 28, 2011. (Id. Ex. 9.)

On July 18, 2011, plaintiff filed her First Amended Complaint ("FAC") in the Superior Court of California, County of Solano. On August 25, 2011, defendants removed the case to this court based on diversity of citizenship. (Notice of Removal at 2:20-25 (Docket No. 1).) On November 22, 1011, the court granted RCS and Merscorp's motion to dismiss the FAC. (Docket No. 12.) Plaintiff filed her Second Amended Complaint ("SAC") on November 28, 2011. (Docket No. 13.) On January 26, 2012, the court granted RCS and Merscorp's motion to dismiss the SAC. (Docket No. 22.) Plaintiff filed her TAC on February 14, 2012. The TAC alleges claims against defendants for: (1) wrongful foreclosure under California Civil Code section 2924; (2) promissory estoppel; (3) breach of contract; (4) quiet title; and (5) declaratory relief.*fn1

II. Judicial Notice

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. The court may take judicial notice of matters of public record or of documents whose contents are alleged in the complaint and whose authenticity is not questioned. Lee v. City of L.A., 250 F.3d 668, 688-89 (9th Cir. 2001).

RCS and Merscorp have filed a request for judicial notice in support of their motion to dismiss which contains nine exhibits: (1) a copy of the Grant Deed, recorded in Solano County on July 10, 2007; (2) a copy of the Deed of Trust, recorded in Solano County on July 10, 2007; (3) a copy of the Notice of Default and Election to Sell Under Deed of Trust, recorded in Solano County on June 8, 2009; (4) a copy of the Notice of Rescission, recorded in Solano County on October 18, 2010; (5) a copy of the Notice of Default and Election to Sell Under Deed of Trust, recorded in Solano County on April 4, 2011; (6) a copy of the Corporation Assignment of Deed of Trust, recorded in Solano County on May 3, 2011; (7) a copy of the Substitution of Trustee, recorded in Solano County on July 5, 2011; (8) a copy of the Notice of Trustee's Sale, recorded in Solano County on July 5, 2011; and (9) a copy of the Trustee's Deed Upon Sale, recorded in Solano County on November 28, 2011. (Docket No. 26.)

The court will take judicial notice of defendants' exhibits as they are matters of public record whose accuracy cannot be questioned. See Lee, 250 F.3d at 689.

III. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). "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.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and "[w]here 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.'" Id. (quoting Twombly, 550 U.S. at 556-57).

A. Wrongful Foreclosure Under California Civil Code Section 2924 California Civil Code section 2924 provides a "comprehensive statutory framework" that governs the non-judicial foreclosure process. Moeller v. Lien, 25 Cal. App. 4th 822, 834 (2d Dist. 1994); see Cal. Civ. Code § 2924 (listing, inter alia, the requirements for a properly filed notice of default and the timing and process for the foreclosure sale). Because of the exhaustive nature of this scheme, California appellate courts have refused to read any additional requirements into the non-judicial foreclosure statute. See I.E. Assocs. v. Safeco Title Ins. Co., 39 Cal. 3d 281, 288 (1985); Moeller, 25 Cal. App. 4th at 834. Plaintiff brings a claim for relief under section 2924, arguing that RCS is not a holder or beneficiary of the Note and is therefore unable to foreclose upon plaintiff's property.

Under California Civil Code section 2924(a)(1), a "trustee, mortgagee or beneficiary or any of their authorized agents" may conduct the foreclosure process. Under California Civil Code section 2924b(4), a "person authorized to record the notice of default or the notice of sale" includes "an agent for the mortgagee or beneficiary, an agent of the named trustee, any person designated in an executed substitution of trustee, or an agent of that substituted trustee." "Upon default by the trustor, the beneficiary may declare a default and proceed with a non-judicial foreclosure sale." Moeller, 25 Cal. App. 4th at 830. California's non-judicial foreclosure scheme does not explicitly require a beneficial interest in the Note to foreclose. Rather, the statute broadly allows a trustee, mortgagee, beneficiary, or any of their agents to initiate non-judicial foreclosure.

Plaintiff alleges that RCS was the servicer of the loan, (TAC ΒΆ 58), which would make it an agent of the Note owner authorized to conduct a non-judicial foreclosure under section 2924. See Caravantes v. Cal. Reconveyance Co., 2010 WL 4055560, at *9 (S.D. Cal. Oct. 9, 2010) (holding that defendant, as servicer of the loan, had the authority to record the Notice of Default and enforce the power of sale under the deed of trust). Additionally, the court has judicially noticed the May 3, 2011, Assignment of Deed of Trust, in which ABC assigned all interest in the Note and Deed of Trust to RCS. (RJN Ex. 6.) This assignment occurred prior to the July ...


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