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Barrionuevo v. Chase Bank

August 6, 2012


The opinion of the court was delivered by: Edward M. Chen, District Judge.



Plaintiffs Jose and Flor Barrionuevo (collectively "the Barrionuevos") sued Defendants JP Morgan Chase Bank ("Chase") and California Reconveyance Corporation ("California Reconveyance") on February 3, 2012, after California Reconveyance attempted to foreclose on a Deed of Trust ("DOT") that the Barrionuevos executed for the purchase of a home in California. Pls.' Opp. to Mot. to Dismiss (Docket No. 25) at 1. Chase is the successor in interest to Washington Mutual Bank ("Washington Mutual"), who executed the DOT with the Barrionuevos and funded the loan for the purchase of the subject property. In their amended complaint, the Barrionuevos assert claims against Defendants for wrongful foreclosure, slander of title, violating California Civil Code § 2923.5, and violating California's Unfair Business Practices Act (Cal. Bus. Prof. Code § 17200). See Pls.' Am. Compl. (Docket No. 20). On February 23, 2012, the Barrionuevos moved ex parte for a temporary restraining order barring Defendants from completing California's nonjudicial foreclosure process, which this Court denied on February 29, 2012, after a hearing on the merits. See Pls.' Mot. for TRO (Docket No. 5); Min. Entry Den. TRO (Docket No. 13). California Reconveyance and Chase thereafter filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). See Defs.' Mot. to Dismiss (Docket No. 23). Having considered the papers filed in support of and in opposition to the instant Motion, the Court deems the matter appropriate for decision without oral argument. Fed.R.Civ.P. 78; Local Rule. 7–6. For the following reasons, Defendants' motion is DENIED.


On February 28, 2006, the Barrionuevos entered into a DOT with Washington Mutual and California Reconveyance for the purchase of a single family home in Dublin, California. Defs.' Mot. to Dismiss, Ex. A. The DOT was recorded in Alameda County on March 3, 2006, against the subject property (known as 5931 Annadele Way) to secure a promissory note in favor of Washington Mutual for a loan of $1,720,000. Pls.' Am. Compl. ¶ 9. The DOT conveys title and power of sale to California Reconveyance, and names Washington Mutual as both "Lender" and "Beneficiary." Defs.' Mot. to Dismiss, Ex. A at 1–3. In the event of default or breach by the borrower, and after first having been given an opportunity to cure, the DOT grants to the Lender the power "to require immediate payment in full of all sums secured by this security instrument without further demand," and "the power of sale and any other remedies permitted by Applicable law." Defs.' Mot. to Dismiss, Ex. A at 15.

In May of 2006, the Barrionuevos allege that Washington Mutual "securitized and sold Plaintiffs' Deed of Trust to the WMALT Series 2006–AR4 Trust," naming La Salle Bank as Trustee. Pls.' Am. Compl. ¶ 10. In support of this allegation they point to a report prepared by Certified Forensic Loan Auditors, which apparently reaches the same conclusion. See Pls.' Am. Compl., Ex. A—Property Securitization Analysis Report. In September of 2008, after the purported sale of the Barrionuevos' DOT, the U.S. Office of Thrift Supervision closed Washington Mutual and appointed the Federal Deposit Insurance Corporation ("FDIC") as receiver. See Pls.' Am. Compl. ¶ 11; Defs.' Mot. to Dismiss at 2. Shortly thereafter, Chase acquired certain assets of Washington Mutual from the FDIC. Id. Having been sold at an earlier point to the WMALT Series 2006–AR4 Trust, the Barrionuevos allege that any beneficial interest under their DOT could not have been purchased or obtained by Chase during this acquisition. See Pls.' Opp. to Mot. to Dismiss at 3.

About a year later, California Reconveyance initiated nonjudicial foreclosure proceedings against the Barrionuevos regarding the subject property by recording a "Notice of Default and Election to Sell Under Deed of Trust" with the County of Alameda on April 7, 2009. Pls.' Am. Compl., Ex. B—Notice of Default. The Notice of Default identified Washington Mutual as the beneficiary of record, and included a statement that "the beneficiary or its designated agent declares that it has contacted the borrower" or has "tried with due diligence to contact the borrower as required by California Civil Code 2923.5." Id. at 2. The Barrionuevos allege, contrary to this statement, that neither of the Defendants contacted Plaintiffs "at least 30 days prior to recording the Notice of Default" in violation of § 2923.5.*fn1 See Pls.' Am. Compl. ¶¶ 28, 32. Thereafter, California Reconveyance recorded three separate Notices of Trustee's Sales regarding the subject property with the County of Alameda, the most recent having been filed with the County on February 2, 2012. Pls.' Am. Compl. ¶¶ 13–14; see also Defs.' Mot. to Dismiss, Ex. C, D, and E.*fn2

The Barrionuevos initiated suit against Chase and California Reconveyance on February 3, 2012, with a complaint listing nine causes of action. Compl. (Docket No. 1). They have since filed an amended complaint listing only four causes of action, namely (1) Wrongful Foreclosure, (2) Slander of Title, (3) Violation of Cal. Civ.Code § 2923.5, and (4) Violation of the California Unfair Business Practices Act (Cal. Bus. Prof. Code § 17200). See Pls.' Am. Compl. Soon after Plaintiffs' amended their complaint, Defendants jointly moved to dismiss the amended complaint "pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, in its entirety, for failure to state a claim upon which relief can be granted." Defs.' Mot. to Dismiss at 1.


A. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. See Fed.R.Civ.P. 12(b)(6). A motion to dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir.1995). In considering such a motion, the Court may consider facts alleged in the complaint, materials incorporated into the complaint by reference, and matters of which the Court may take judicial notice.*fn3 Zucco Partners LLC v. Digimarc Corp., 552 F.3d 981, 989 (9th Cir.2009). A court must also take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party, although "conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal." Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir.2009). Thus, "a plaintiff's obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

At issue in a 12(b)(6) analysis is "not whether a plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims" advanced in his or her complaint. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). While "a complaint need not contain detailed factual allegations ... it must plead 'enough facts to state a claim to relief that is plausible on its face.' " Cousins, 568 F.3d at 1067 (9th Cir.2009). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. at 556, 127 S.Ct. 1955. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than sheer possibility that a defendant acted unlawfully." Id.

B. Tender Rule

Chase and California Reconveyance argue as a threshold matter that "this Motion should be granted and Plaintiffs' Complaint dismissed, in its entirety" because the Barrionuevos have failed to provide or allege a willingness to "tender the outstanding indebtedness owed under the promissory note and Deed of Trust." Defs.' Mot. to Dismiss at 8. They argue that, absent an offer to tender the obligation in full, California law deprives plaintiffs of standing to challenge nonjudicial foreclosure proceedings. See Id. at 7–8. As this Court explained in Tamburri v. Suntrust Mortgage, et. al., No. C–11–2899 EMC, 2011 WL 6294472 (N.D.Cal. Dec. 15, 2011), the exceptions and qualifications to California's 'tender rule' counsel against such a mechanical application of the rule at the pleading stage.

"The California Court of Appeal has held that the tender rule applies in an action to set aside a trustee's sale for irregularities in the sale notice or procedure and has stated that '[t]he rationale behind the rule is that if plaintiffs could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the plaintiffs.' " Cohn v. Bank of America, No. 2:10–cv–00865 MCE KJN PS, 2011 WL 98840, at *9 (E.D.Cal. Jan. 12, 2011) (quoting FPCI RE–HAB 01 v. E & G Invs., Ltd., 207 Cal.App.3d 1018, 1021, 255 Cal.Rptr. 157 (1989)). As Defendants rightly point out, it is a general rule that "an action to set aside a trustee's sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for which the property was security. This rule is premised upon the equitable maxim that a court of equity will not order that a useless act be performed." Arnolds Mgmt. Corp. v. Eischen, 158 Cal.App.3d 575, 578–79, 205 Cal.Rptr. 15 (1984).

However, as this Court discussed at length in Tamburri, "the tender rule is not without exceptions." Tamburri, 2011 WL 6294472 at *3. Several court have recognized a general equitable exception to applying the tender rule where "it would be inequitable to do so." Onofrio v. Rice, 55 Cal.App.4th 413, 424, 64 Cal.Rptr.2d 74 (1997) (internal citations and quotations omitted); see e.g. Humboldt Sav. Bank v. McCleverty, 161 Cal. 285, 291, 119 P. 82 (1911) (recognizing that there are "cases holding that, where a party has the right to avoid a sale, he is not bound to tender any payment in redemption;" adding that, "[w]hatever may be the correct rule, viewing the question generally, it is certainly not the law that an offer to pay the debt must be made, where it would be inequitable to exact such offer of the party complaining of the sale"); Robinson v. Bank of Am., 12–CV–00494–RMW, 2012 WL 1932842, at *3 (N.D.Cal. May 29, 2012) (inequitable to apply tender rule in certain circumstances); Bowe v. Am. Mortg. Network, Inc., CV 11–08381 DDP SHX, 2012 WL 2071759, at *2 (C.D.Cal. June 8, 2012) (same); Giannini v. American Home Mortg. Servicing, Inc., No. 11–04489 TEH, 2012 WL 298254, at *3 (N.D.Cal. Feb. 1, 2012) (same). In the instant case, the Barrionuevos have a fairly strong argument that tender—or at least full tender—should not be required because they are contesting not only irregularities in sale notice or procedure, but the validity of the foreclosure in the first place. Courts have declined to require tender in just such circumstances. See In re Salazar, 448 B.R. 814, 819 (S.D.Cal.2011) ("If U.S. Bank was not authorized to foreclose the [Deed of Trust] under ...

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