MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS' MOTION TO DISMISS PURSUANT TO
F.R.C.P. 12(b)(6) Doc. # 6
This is an action, presumed to be in diversity, by plaintiffs Ralph and Ruby Beltran ("Plaintiffs") against Accubank Mortage Corporation, National Bank of Indiana, PNC, N.A. and Cal-western Reconveyance Corporation ("Defendants"). Presently before are motions by Defendants to dismiss Plaintiffs' complaint. On March 15, 2012, the court denied Plaintiffs' request for temporary restraining order on the ground the complaint failed to state any claim upon which relief could be granted (the "March 15 Order"). On March 26, 2012, Plaintiffs responded to the court's March 15 Order by way of a pleading titled "Response to Order Denying Plaintiffs' Request for TRO" and which the court construed as a motion for reconsideration (hereinafter, the "Response"). Doc. # 10. The court denied Plaintiff's Response to the extent it was intended as a motion to reconsider and noted that Defendants had filed the instant motion to dismiss at Doc. # 6.The court noted that, in the absence of any other pleading by Plaintiffs, it would construe the Response as an opposition to Defendants' motion to dismiss and that it would take the motion to dismiss under submission.
The court has received no further pleading by Plaintiffs since they filed their Reply on March 26, 2012, and their "Motion to Disqualify Judge" on March 27, 2012. Th court will therefore proceed to render its opinion and order on Defendants' motion to dismiss. For the most part, the court's opinion and order will simply reiterate the law and reasoning set forth in the court's March 15 Order and in the court's order denying reconsideration.
The court takes as true the facts set forth in the complaint and those facts that can reasonably be inferred therefrom. Plaintiffs allege they purchased the subject property on April 21, 2004. The court presumes for purposes of this decision that the April 21 date is also at or near the date of execution of the mortgage at issue in this action. Doc. #1 at ¶ 6. Plaintiffs allege their mortgage passed through a series of financial institutions in turn, ending with an entity called PNC, National Association. Plaintiffs' major factual contention with regard to the mortgage is that it was "sliced and diced into Mortgage Backed Securities (MBS) and sold on Wall Street to investors." Plaintiffs allege the "securitization" of their mortgage happened without their knowledge or consent. In the process, Plaintiffs contend the promissory note was separated from the mortgage. Plaintiffs also allege facts pertaining to the registration and tax status of various of the financial institutions through which their mortgage is alleged to have passed. Plaintiffs allege that defendant Cal-Western Reconveyance "recorded a Notice of Default with the Stanislaus County Recorder on November 23, 2011.
Plaintiffs allege two claims for relief. The first alleges "Broken Chain of Title" by which the court interprets Plaintiffs to mean that the promissory note was separated from, or not in physical possession of, the party now seeking to enforce the Deed of Trust. The court presumes the party seeking to enforce is Cal-Western Reconveyance. Plaintiffs second claim for relief alleges violation of the Truth In Lending Act ("TILA") 15 U.S.C. § 1635(a) and violation of Regulation Z, § 226.15(b).
A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure can be based on the failure to allege a cognizable legal theory or the failure to allege sufficient facts under a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.1984). To withstand a motion to dismiss pursuant to Rule 12(b)(6), a complaint must set forth factual allegations sufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) ("Twombly"). While a court considering a motion to dismiss must accept as true the allegations of the complaint in question, Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976), and must construe the pleading in the light most favorable to the party opposing the motion, and resolve factual disputes in the pleader's favor, Jenkins v. McKeithen, 395 U.S. 411, 421, reh'g denied, 396 U.S. 869 (1969), the allegations must be factual in nature. See Twombly, 550 U.S. at 555 ("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"). The pleading standard set by Rule 8 of the Federal Rules of Civil Procedure "does not require 'detailed factual allegations,' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) ("Iqbal").
The Ninth Circuit follows the methodological approach set forth in Iqbal for the assessment of a plaintiff's complaint:
"[A] court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth. While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief."
Moss v. U.S. Secret Service, 572 F.3d 962, 970 (9th Cir. 2009) (quoting Iqbal, 129 S.Ct. at 1950).
I. "Broken Chain of Title"
Plaintiffs' first claim for relief appears to be a variation of the "Show-me-the-note" type of claim that is familiar in this court but that is invariably defeated by the structure of California's non-judicial foreclosure statutes. Under well established California law, physical possession and legal status as holder of a note are distinct concepts. The holder of the note is the party entitled to enforce it. See In re Kang Jin Hwang, 393 B.R. 701, 707 (Bankr. C.D. Cal. 2008). Plaintiffs' complaint alleges the mortgage was "transferred to Mortgage Electronic Registration Systems, Inc.," a non-party to this action, and was thereafter "'sliced and diced' into Mortgage Backed Securities ("MBS") and on Wall Street to investors." Doc. # 1 at ¶ 6. Plaintiffs further allege "there was no assignment of the NOTE with the Deed of Trust, none of the Defendants are the holder of the NOTE in due course, and none of the Defendants were assigned the NOTE." Doc. # 1 at ¶7.
Under California law, physical possession of the promissory note is irrelevant. "Financing or refinancing of real property is generally accomplished in California through a deed of trust. The borrower (trustor) executes a promissory note and deed of trust, thereby transferring an interest in the property to the lender (beneficiary) as security for repayment of the loan. The deed of trust is recorded to give notice to future lenders and purchasers that the property is encumbered by an outstanding loan. Legal title to the property is ...