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Chris R. Longhurst v. Jp Morgan Chase Bank


July 13, 2012


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


Plaintiff Chris R. Longhurst ("Plaintiff") brings this action against Defendant JP Morgan Chase Bank ("Defendant") seeking to recover for injuries Plaintiff sustained in connection with Defendant's initiation of foreclosure proceedings as to Plaintiff's residence. Presently before the Court is Defendant's Motion to Dismiss Plaintiff's First Amended Complaint ("FAC") in its entirety. For the following reasons, Defendant's Motion is GRANTED in part and DENIED in part.*fn1


In early 2006, Plaintiff obtained a loan for approximately $286,700 to finance the purchase of a home. Defendant's Request for Judicial Notice("RJN"), Exh. 1.*fn2 The loan was secured by a Deed of Trust ("DOT"), which was recorded with the Shasta County Recorder's Office on March 15, 2006. Id. The DOT identifies Washington Mutual Bank, FA ("WAMU"), as the lender and beneficiary, California Reconveyance Company ("CRC") as the trustee, and Plaintiff as the borrower. Id.

Plaintiff alleges that later, in May of 2006, Plaintiff's loan was securitized into a pass-through trust, namely the WAMU Mortgage Pass Through Certificate Series 2006-PR3 ("Trust"). FAC, ¶ 46. Subsequently, in September of 2008, Defendant acquired certain assets and liabilities of WAMU from the Federal Deposit Insurance Corporation ("FDIC"), which was acting as receiver for WAMU, via a Purchase and Assumption Agreement ("Purchase Agreement"). RJN, Ex. 2. Defendant later assigned all beneficial interest in the DOT to Wells Fargo, N.A. ("Wells Fargo"), as Trustee for the Trust. FAC, Exhs. B, C. Defendant remained the servicer on the loan as well as agent to the beneficiary Wells Fargo.

Plaintiff eventually defaulted on his loan, and, on May 10, 2011, CRC, as trustee, issued a Notice of Default and Election to Sell Under Deed of Trust ("NOD"), which was later recorded in the Shasta County Recorder's Office. FAC, ¶ 43, Ex. A. The NOD indicated Defendant was the entity to contact to arrange payment to avoid foreclosure. Id. Attached to that NOD is a declaration by which Defendant swears "that the mortgagee, beneficiary, or authorized agent tried with due diligence but was unable to contact the borrower to discuss the borrower's financial situation and to explore options for the borrower to avoid foreclosure...." Id. According to Plaintiff, however, that declaration is false, and "[p]rior to 30 days before the NOD was filed, Plaintiff was not contacted in person or by telephone by anyone claiming to be a mortgagee, beneficiary, or authorized agent, in compliance with [California Civil Code § 2923.5], in order to: (a) Assess Plaintiff's financial situation; (b) Explore with Plaintiff options to avoid foreclosure; and (c) Provide the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency." Id., ¶ 21.

In August of 2011, and again the next month, "Notices of Trustee's Sales" were recorded and a trustee's sale as to Plaintiff's property was set for October 6th, 2011. Id., Ex. D. Accordingly, on October 3, 2011, Plaintiff filed his original Complaint in this action attempting to stay the impending sale. Plaintiff thereafter filed his operative FAC, in response to which Defendant filed its instant Motion. Defendant's Motion is now GRANTED in part and DENIED in part.


On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6),*fn3 all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) "requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the...claim is and the grounds upon which it rests.'" Bell. Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. Id. However, "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." Id. (internal citations and quotations omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). The Court also is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Sciences Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal citations and quotations omitted).

"Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.

Furthermore, "Rule 8(a)(2)...requires a 'showing,' rather than a blanket assertion, of entitlement to relief." Twombly, 550 U.S. at 556 n.3 (internal citations and quotations omitted). "Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only 'fair notice' of the nature of the claim, but also 'grounds' on which the claim rests." Id. (citation omitted). A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs...have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed."

Id. However, "a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'" Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

A court granting a motion to dismiss a complaint must then decide whether to grant a leave to amend. Leave to amend should be "freely given" where there is no "undue delay, bad faith or dilatory motive on the part of the movant,...undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment...." Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend). Dismissal without leave to amend is proper only if it is clear that "the complaint could not be saved by any amendment."

Intri-Plex Techs., Inc. v. Crest Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (internal citations and quotations omitted).


In his FAC, Plaintiff alleges three causes of action against Defendant: 1) violation of California Civil Code § 2923.5 for failure to properly contact or attempt with due diligence to contact the borrower prior to filing an NOD; 2) violation of Civil Code § 2924 for wrongful issuance of NOD and Notice of Trustee's Sale; and 3) declaratory and injunctive relief. Defendant moves to dismiss each of these claims. For the reasons that follow, Defendant's Motion is DENIED as to Plaintiff's first cause of action and GRANTED with leave to amend as to Plaintiff's second and third causes of action.

A. Defendant's Motion to Dismiss Plaintiff's First Cause 2923.5. of Action for Violation of California Civil Code § Defendant moves to dismiss Plaintiff's first cause of action for violation of California Civil Code § 2923.5 because, according to Defendant, the NOD itself demonstrates Defendant complied with that section. Pursuant to § 2923.5, "[a] mortgagee, beneficiary, or authorized agent [must] contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure." Cal. Civ. Code § 2923.5(a)(2). "Failure to comply with this subsection is excused if the borrower could not be reached despite 'due diligence,' as defined in the statute." Argueta v. J.P. Morgan Chase, 787 F. Supp. 2d 1099, 1107 (E.D. Cal. 2011) (citing Cal. Civ. Code § 2923.5(g)). "A mortgagee or beneficiary has satisfied the due diligence requirement if it was not able to contact the borrower after (1) mailing a letter containing certain information; (2) then calling the borrower 'by telephone at least three times at different hours and on different days'; (3) mailing a certified letter, with return receipt requested, if the borrower does not call back within two weeks; (4) providing a telephone number to a live representative during business hours; and (5) posting a link on the homepage of its Internet Web site with certain information." Id. (quoting Cal. Civ. Code § 2923.5(g)). "A notice of default may be filed only thirty days after the initial contact with the borrower or satisfying the due diligence requirements." Id. "A notice of default must be accompanied by a declaration stating that the buyer has been contacted or could not be reached despite due diligence." Id. Defendant thus argues that its declaration, which is attached to the NOD and by which Defendant attests to having complied with the statute, is sufficient to justify dismissal here. Defendant's argument is rejected.

More specifically, Defendant contends that its own declaration attesting to the fact that Defendant exercised due diligence in attempting to contact Plaintiff is sufficient to require dismissal of Plaintiff's instant claim.

Plaintiff's allegations to the contrary, however, "are sufficient to defeat a motion to dismiss." Id. Indeed, Plaintiff alleges that, among other things, neither Defendant nor an agent of Defendant contacted Plaintiff as required by § 2923.5, FAC, ¶ 21-24, 26-29, Defendant's declaration attached to the NOD is false, id., ¶ 25, and "[a]t all times, Plaintiff was available to be contacted either in person or telephonically in order to assess their [sic] financial situation and explore options to avoid foreclosure," but "Defendants...refused and failed to engage in such a meeting," id., ¶ 32. These allegations are, in fact, more than sufficient to survive Defendant's instant Motion. See Argueta, 787 F. Supp. 2d at 1107; Caravantes v. Cal. Reconveyance Co., 2010 WL 4055560, at *8 (S.D. Cal. Oct. 14, 2010). Defendant's Motion to Dismiss Plaintiff's first cause of action for violation of Civil Code § 2923.5 is thus DENIED.

B. Defendant's Motion to Dismiss Plaintiff's Second Cause and Notice of Trustee's Sale in Violation of Civil Code of Action for Wrongful Issuance of Notice of Default § 2924.

Defendant also seeks to dismiss Plaintiff's second cause of action for violation of California Civil Code § 2924. In a nutshell, Plaintiff contends that "[t]here is no document, recorded or otherwise that the agent of the current note holder, or agents [sic] of the true beneficiary of the [DOT], granting CRC the authority to, or directing CRC to, initiate foreclosure proceedings." FAC, ¶ 44.

In essence, Plaintiff contends that Defendant never acquired any interest in Plaintiff's loan entitling Defendant itself to act upon Plaintiff's default or to transfer any beneficial interest to Wells Fargo. The crux of Plaintiff's argument, then, is that when his loan was securitized in 2006, WAMU was divested of all interest therein such that WAMU had no interest to transfer to Defendant via the 2008 Purchase Agreement. However, "[t]he argument that parties lose interest in a loan when it is assigned to a trust pool has...been rejected by numerous district courts." Lane v. Vitek Real Estate Industries Group, 713 F. Supp. 2d 1092, 1099 (E.D. Cal 2010); see also Benham v. Aurora Loan Services, 2009 WL 2880232 at *3 (N.D. Cal.) (holding that "[o]ther courts in this district have summarily rejected the argument that companies like MERS [and loan servicers] lose their power of sale pursuant to the deed of trust when the original promissory note is assigned to a trust pool"). Plaintiff's attempt to attack the chain of title at the point his loan was securitized thus fails.

Plaintiff next argues that no recorded document indicates Defendant is authorized to act on behalf of the current mortgagee or beneficiary in foreclosing on Plaintiff's property. First and foremost, each of Plaintiff's conclusory allegations in this regard is based on Plaintiff's flawed theory that the securitization deprived WAMU of any interest it could transfer to Defendant. Accordingly, to the extent that argument failed above, so does Plaintiff's cursory attack on Defendant's status as servicer and agent to Wells Fargo. See Caravantes, 2010 WL 4055560, *9 (S.D. Cal.) (servicer has authority to record NOD and enforce power of sale under DOT).

Moreover, Plaintiff's allegations as to whether Defendant is authorized to foreclose on beneficiary Wells Fargo's behalf further fail because: nowhere does the [non-judicial foreclosure] statute provide for a judicial action to determine whether the person initiating the foreclosure process is indeed authorized, and we see no grounds for implying such an action. [...] The recognition of the right to bring a lawsuit to determine a nominee's authorization to proceed with the foreclosure on behalf of a noteholder would fundamentally undermine the non-judicial nature of the process and introduce the possibility of lawsuits filed solely for the purpose of delaying valid foreclosure.

Gomes v. Countrywide Home Loans, Inc., 192 Cal. App. 4th 1149, 1159 (2011). Under Gomes, Plaintiff has therefore failed to state a claim for violation of California Civil Code § 2924, and Defendant's Motion to Dismiss Plaintiff's second cause of action is GRANTED with leave to amend.

C. of Action for Declaratory Relief.

Defendant's Motion to Dismiss Plaintiff's Third Cause

In his third cause of action, Plaintiff seeks to "have the Court determine to whom Plaintiff owes an obligation." Opposition, 7:4-5. This cause of action is entirely derivative of Plaintiff's second claim. Given the Court's dismissal of that second cause of action, there remains no case or controversy in regards to which this Court can issue declaratory relief. See American States Ins. Co. v. Kearns, 15 F.3d 142, 143 (9th Cir. 1994). Defendant's Motion to Dismiss Plaintiff's third cause of action is thus GRANTED with leave to amend.


For the reasons just stated, Defendants Motion to Dismiss is DENIED as to Plaintiff's first cause of action and GRANTED with leave to amend as to Plaintiff's second and third causes of action. Not later than twenty (20) days following the date this Memorandum and Order is electronically filed, Plaintiff may (but is not required to) file an amended complaint. If no amended complaint is filed within said twenty (20) day period, without further notice to the parties, the causes of action dismissed by virtue of this Memorandum and Order will be dismissed with prejudice.


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