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Michael Bowe v. American Mortgage Network


June 8, 2012


The opinion of the court was delivered by: United States District Judge Dean D. Pregerson



Presently before the court are the Motions to Dismiss Plaintiff's Complaint("Motion") filed by Defendants American Mortgage Network, Inc. ("AMN"); Mortgage Electronic Registration System, Inc. ("MERS"); California Reconveyance Company ("CRC"); JP Morgan Chase Bank, N.A. ("Chase"); and Bank of America, N.A. ("BANA") (collectively "Defendants"). Having considered the parties' moving papers, the court grants the motions and adopts the following order.

I. Background

On October 26, 2005, Plaintiff Michael Bowe obtained refinancing ("Loan" or "Note")from Defendant AMN that was secured by a Deed of Trust ("Deed") to the property located at 3958 Keeshen Drive, Los Angeles, California 90066 ("Subject Property" or "Property"). (Compl.¶¶ 8, 17, 19, 20, 21). Defendant MERS is identified as the beneficiary of the Deed and the nominee for the lender; non-party First American Title Insurance Company ("First American")is named as the trustee under the Deed. (Id. at ¶¶ 22, 24).

In order to obtain the refinancing, Plaintiff submitted a Uniform Residential Loan Application ("Application") to Foundational Financial, the broker for AMN. (Id. at 17). The Application was furnished to Bowe by Foundational Financial with all of the items already completed.*fn1 (Id.) Plaintiff expressed concern that his income as stated on the Application was inflated. (Id. at ¶ 18). Foundational Financial informed Plaintiff that his was "a stated income loan," and assured Plaintiff that his income would never be verified and that the numbers were chosen by Foundational Financial to satisfy their underwriting guidelines. (Id.).

Sometime between October 26, 2005, and March 17, 2011, AMN transferred the Note to an investment trust.*fn2 (Id. at 25). On March 18, 2011, MERS assigned the beneficial interest under the Deed to BANA. (Id. at 26). The Assignment was signed by Colleen Irby, who Plaintiff believes is not an officer, employee or agent of MERS. (Id. at ¶ 27). The same day, BANA executed a Substitution of Trustee ("Substitution"), identifying Defendant CRC as the new trustee under the Deed. (Id. at ¶¶ 30, 31, Ex. 5). Plaintiff alleges that CRC is a wholly owned subsidiary of Chase. (Id. at 33). The Substitution was also signed by Colleen Irby, who Plaintiff believes is not an officer, employee or agent of Chase. (Id. at ¶ 32). Additionally, on that same day, CRC, as the new trustee under the Deed, executed a Notice of Default ("NOD"), which stated that Plaintiff was $38,297.01 behind on his Loan payments. (Motion 2:14-16).

On June 20, 2011, CRC executed a Notice of Trustee's Sale ("NOTS"). (Id. at Ex. A). Plaintiff alleges that the NOTS was unsigned, but was said to be on the authority of Regina Cantrell, Assistant Secretary of CRC, as Trustee. (Id. at ¶ 43). A public auction of the Subject Property was set for October 12, 2011. (Id. at 49).

On October 11, 2011, Plaintiff filed a verified complaint alleging seven causes of action, including violations of California Civil Code § 2923.5 and California Civil Code § 2924f, against Defendants in connection with their attempt to foreclose upon Plaintiff's home. Also on October 11, 2011, Plaintiff filed an application for a Temporary Restraining Order ("TRO"), seeking to halt a foreclosure sale scheduled for October 12, 2011, which was granted. On October 20, 2011, a Preliminary Injunction Hearing was held. Defendants failed to oppose the Preliminary Injunction or appear at the Preliminary Injunction Hearing, and Plaintiff was granted a Preliminary Injunction against the foreclosure sale. Defendants MERS, CRC, Chase, and BANA filed their Motion to Dismiss on November 4, 2011. Defendant AMN filed its Motion to Dismiss on November 17, 2011.

II. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a complaint is subject to dismissal when the plaintiff's allegations fail to state a claim upon which relief can be granted. When considering a 12(b)(6) motion to dismiss for failure to state a claim, "all allegations of material fact are accepted as true and should be construed in the light most favorable to [the] plaintiff." Resnick v. Hayes, 213 F.3d 433, 447 (9th Cir. 2000).

In Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009), the Supreme Court explained that a court considering a 12(b)(6) motion should first "identify[] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth."

Id. Next, the court should identify the complaint's "well-pleaded factual allegations, . . . assume their veracity and then determine whether they plausibly give rise to an entitlement to relief."

Id.; see also Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) ("In sum, for 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 plaintiff to relief" (internal quotation marks omitted).

III. Discussion

A. Tender Defendants argue that all of Plaintiff's causes of action, except for the first cause of action for violation of California Civil Code § 2923.5, are barred because Plaintiff has failed to satisfy the tender rule. "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 foreclosure." Alicea v. GE Money Bank, 2009 WL 2136969 *3 (N.D. Cal. 2009). The tender requirement spares courts from being called upon to "order a useless act performed" in cases where plaintiffs would be unable, even under proper sale procedures, to redeem a property. FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal.App.3d 1018, 1021-22 (1989). An exception to the tender rule may apply, however, where it would be inequitable to require tender. Onofrio v. Rice, 55 Cal. App. 4th 413, 424 (1997). Courts have applied the equitable exception to the tender rule where plaintiffs contest the validity of a foreclosure prior to the foreclosure sale. See, e.g., Tamburri v. Suntrust Mortgage, Inc., 2011 WL 6294472 *3, 5 (N.D. Cal. December 15, 2011); Sacchi v. Mortgage Electronic Registration Systems, Inc., 2011 WL 2533029 *9-10 (C.D. Cal. June 24, 2011).

Plaintiff's opposition is internally inconsistent and logically convoluted, rendering it difficult for the court to ascertain whether an exception to the tender rule applies here. While a challenge to the validity of a foreclosure sale may warrant invocation of an exception, Plaintiff here asserts that tender is not required because the underlying contract note is void ab initio (Opp. at 3). To the extent that Plaintiff's arguments are premised upon his Fifth Cause of Action for "No Contract," the arguments are misplaced. As Plaintiff appears to implicitly concede, "No Contract" is an affirmative defense, not a cause of action, regardless of Plaintiff's assertion that "glaring deficiencies" in California's non-judicial foreclosure state leave him "no other way to assert this defense to the foreclosure." (Opp. at 10). Furthermore, to the extent that Plaintiff's assertion that "[t]he Note was separated from the deed of trust and atomized" can be understood to support his argument that the pending foreclosure sale is invalid, that assertion is itself contradicted by Plaintiff's later contention that he "is not challenging the securitization of the loan." (Opp. at 6,7 (emphasis added).)

To the extent that Plaintiff can allege a specific set of facts to support his claim that the pending foreclosure sale is void, an exception to the tender rule may apply and wrongfulforeclosure claims may survive. Tamburri, 2011 WL at *5; Sacchi, 2011 WL at *8. As currently pled, however, the complaint does not give rise to facts that warrant an exception to the tender rule and give rise to a plausible claim for relief.*fn3 Accordingly, Plaintiffs' Second, Third, Fourth, Fifth, Sixth, and Seventh Causes of action are DISMISSED, with leave to amend.*fn4

B. Violation of California Civil Code § 2923.5 Plaintiff's First Cause of Action for violation of California Civil Code § 2923.5 is founded upon the allegation that the declaration of compliance was not signed by someone with personal knowledge. (Compl. ¶¶ 41, 44). California does not require the declaration of compliance to be signed by a person with firsthand knowledge of the foreclosure proceedings. Mabry v. Superior Court, 185 Cal. App. 4th 208, 233 (2010)(stating that "too many people are necessarily involved in the process for one person to likely be in the position where he or she could swear that all three requirements of the declaration . . . were met."). Under Section 2923.5, a borrower must be contacted prior to foreclosure proceedings to discuss financial options to avoid foreclosure.

Cal. Civ. Code § 2923.5(a)(2)). Plaintiff has failed to plead that he was not properly contacted to discuss financial options. Acknowledging this deficiency, as well as the lack of any personal knowledge requirement, Plaintiff requests leave to amend the First Cause of Action. (Opp. at 6.) Accordingly, this cause of action is dismissed with leave to amend.

IV. Conclusion

For the reasons stated above, Defendant's Motion is GRANTED. Plaintiff's Fifth Cause of Action is DISMISSED with prejudice. All remaining claims are dismissed with leave to amend.*fn5 Any amended complaint shall be filed within 14 days of the date of this order.


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