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Victor Burachek and Natalia v. Chase Home Finance

August 31, 2012

VICTOR BURACHEK AND NATALIA
BURACHEK, PLAINTIFFS,
v.
CHASE HOME FINANCE, LLC, NORTHWEST TRUSTEE SERVICES, INC., SETERUS, INC., FORMERLY KNOWN AS LENDER BUSINESS PROCESS SERVICES, INC., FREEDOM HOME MORTGAGE CORPORATION, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, FEDERAL NATIONAL MORTGAGE ASSOCIATION, AND DOES 1 THROUGH 100 INCLUSIVE, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO DISMISS AND SANCTIONS

Plaintiffs Victor Burachek and Natalia Burachek filed suit in state court against defendants Chase Home Finance, LLC ("Chase"), Northwest Trustee Services, Inc. ("Northwest"), Seterus, Inc., formerly known as Lender Business Process Services, Inc. ("Seterus"), Freedom Home Mortgage Corporation

("Freedom Home"), Mortgage Electronic Registration Systems ("MERS"), and Federal National Mortgage Association ("Fannie Mae"), bringing claims arising from defendants' allegedly wrongful conduct related to a residential loan. Plaintiffs filed a First Amended Complaint ("FAC"), which defendants JPMorgan Chase Bank, N.A., who appears on behalf of Chase as successor by merger to Chase Home Finance, LLC, and MERS removed to this court on the basis of federal question jurisdiction. (Docket No. 1.) Currently before the court are two motions to dismiss the FAC in its entirety for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket Nos. 5, 9.)

I. Factual and Procedural Background Plaintiffs obtained a loan of $409,500 in April 2008 from Freedom Home. (Not. of Removal Ex. 2 ("FAC") ¶ 19, Ex. 2.) The loan agreement between the parties was secured by a Deed of Trust on property located at 8120 Patton Avenue in Citrus Heights, California (the "Patton Avenue property"). (Id. ¶ 19, Ex. 2.)

A Notice of Default was recorded on February 27, 2009, listing the default as $16,288.70. (Id. ¶ 24, Ex. 4.) A Notice of Trustee's Sale was recorded in June of 2009, scheduling a sale for June 17, 2009. (Id. ¶ 26, Ex. 6.) That document listed the total amount of the unpaid balance as $428,015.31. (Id. Ex. 6.) Another Notice of Trustee's Sale was recorded in April 2011, listing the unpaid balance as $482,832.51 and setting the sale for April 26, 2011. (Defs.' Req. for Judicial Notice ("RJN") Ex. F (Docket No. 10).) Chase, who was assigned the Deed of Trust in February 2009, (FAC ¶ 25, Ex. 5), repurchased the Patton Avenue property at a foreclosure sale in February of 2012, (FAC ¶ 30; RJN Ex. G.) The property was then allegedly transferred to Fannie Mae. (FAC ¶¶ 30, 40.)

The FAC alleges a variety of problems with the foreclosure process, including that the Note and Deed of Trust were separated, (see, e.g., id. ¶¶ 4, 43-44), that no defendant had standing to foreclose because no defendant had a valid interest in the subject property (see, e.g., id. ¶¶ 4, 7, 41, 56), that the Deed of Trust was improperly securitized (see, e.g. ¶¶ 7, 46-49, 71-73), and that certain foreclosure documents were signed by a "robo-signer," (id. ¶¶ 23-25, 52). Additionally, plaintiffs allege that the Notice of Default is "facially inaccurate" because it does not identify the mortgagee or beneficiary as required by state law, and so they never received a valid Notice of Default, (id. ¶¶ 74-75), and suggest that MERS' role in the foreclosure process was improper because MERS was not registered to do business in California at the time the loan was memorialized, (id. ¶ 29).*fn1

The FAC also alleges that plaintiffs "entered into a Home Affordable Modification Program ('HAMP') with Defendant CHASE on or about December 1, 2009," and continued making the "'trial period payment' faithfully p and [sic] through the time Defendant CHASE sent Plaintiffs a letter . . . which informed Plaintiffs that the 'servicing of your home loan . . . will be transferred from CHASE HOME FINANCE to [SETERUS] on October 1, 2010." (Id. ¶¶ 62-63.) That same letter allegedly also informed plaintiffs that the transfer would "not affect any terms or condition of your mortgage documents, other than terms directly related to the servicing of your loan." (Id. ¶ 64, Ex. 7.) According to plaintiffs, they were in the HAMP trial period for fourteen months, but when Seterus took over servicing, it "refused to honor Plaintiffs' loan modification and implied contract between Defendant CHASE and Plaintiffs." (Id. ¶¶ 66, 92.)

Finally, plaintiffs additionally allege that they attempted to resolve the controversy that had arisen between the parties by "seeking Clarification of the specifics" of the loan agreement, but that no clarification was provided. (Id. ¶ 6.) The FAC does not articulate the issues plaintiffs were attempting to clarify or the terms of this alleged meeting of the minds.

Plaintiffs bring claims for (1) declaratory relief, (2) injunctive relief, (3) breach of the implied covenant of good faith and fair dealing, (4) rescission, (5) unfair and deceptive acts and practices, (6) cancellation, (7) breach of fiduciary duty, (8) unconscionability, (9) quiet title, (10) wrongful foreclosure, (11) slander of title, (12) securities fraud, (13) trespass on contract, (14) negligence, (15) violation of the Real Estate Settlement Procedures Act ("RESPA"), (16) violation of the California Unfair Competition Law ("UCL"), and (17) fraud. (Docket No. 1, Ex. 2.) Defendants Chase and MERS, jointly, and Freedom Home move to dismiss all claims for failure to state a claim pursuant to Rule 12(b). (Docket Nos. 5, 9.) Defendant Northwest joined the motion brought by Chase and MERs. (Docket No. 12.) Plaintiffs failed to file an opposition or statement of non-opposition as required by Local Rule 230(c).

II. Request for Judicial Notice In general, a court may not consider items outside the

pleadings when deciding a motion to dismiss, but it may consider items of which it can take judicial notice. Barron v. Reich, 13

F.3d 1370, 1377 (9th Cir. 1994). 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. Judicial notice may properly be taken of matters of public record outside the pleadings. See MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986).

Defendants request that the court judicially notice several recorded documents pertaining to the Patton Avenue property. (See RJN Exs. A-H.) The court will take judicial notice of these documents, since they are matters of public record whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

Defendants also request that the court judicially notice items filed in the underlying state court action. (RJN Exs. I-J.) Judicial notice may properly be taken of proceedings from other cases. See Bennett v. Medtronic, Inc., 285 F.3d 801, 803 n. 2 (9th Cir. 2002) ("[W]e may take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to matters at issue.") (quoting U.S. ex rel. Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992)) (internal quotation marks omitted). The court will grant defendants' request, but the court takes judicial notice of the fact of the proceedings only and not of any facts contained within the documents. See Lee, 250 F.3d at 690.

Finally, defendants submit a license to maintain and operate a residential care facility issued by the Department of Social Services of the State of California and the results of a search for "Golden Crest" on the State of California's Community Care Licensing Division's website. (RJN Exs. K-L.) Because the court does not rely on these documents, it declines to take judicial notice of them.

III. Discussion

To survive a motion to dismiss, a plaintiff must plead "only enough facts to state a claim to relief that is plausible on its face." 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," Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), 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 557). In deciding whether a plaintiff has stated a claim, 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).

A. Declaratory Relief

Under California law, a request for declaratory relief

"operates prospectively, and not merely for the redress of past wrongs." Britz Fertilizers, Inc. v. Bayer Corp., 665 F. Supp. 2d 1142, 1173 (E.D. Cal. 2009) (quoting Babb v. Superior Court, 3 Cal. 3d 841, 848 (1971)). This is because one of the purposes of declaratory relief is "to enable the parties to shape their conduct so as to avoid a breach." Id. When a litigant has "a fully matured cause of action for money," he must seek damages as his remedy and not declaratory relief. Canova v. Trs. of Imperial Irrigation Dist. Emp. Pension Plan, 150 Cal. App. 4th 1487, 1497 (4th Dist. 2007). He may not use a claim for declaratory relief as a "superfluous 'second cause of action for the determination of identical issues.'" Britz, 665 F. Supp. 2d at 1173 (quoting Hood v. Superior Court, 33 Cal. App. 4th 319, 324 (1995)).

Plaintiffs request that the court declare that defendants have no right to foreclose on the Patton Avenue property. A foreclosure sale, however, has already occurred and the remainder of their claims seek to challenge the validity of that sale. Because plaintiffs' claim for declaratory relief would only address past wrongs and would add nothing to the proceeding in terms of either issues addressed or relief sought, it is inappropriate. See Mangindin v. Wash. Mut. Bank, 637 F. Supp. 2d 700, 707 (N.D. Cal. 2009) (dismissing declaratory relief claim as duplicative and unnecessary where plaintiffs sought declaration that defendants did not have the right to foreclose in addition to bringing a variety of claims challenging foreclosure). Accordingly, the court will grant defendants' motion to dismiss this claim.

B. Injunctive Relief

Under California law, requests for injunctive relief

have been consistently classified as remedies and not valid causes of action in their own rights. See, e.g., Shell Oil Co. v. Richter, 52 Cal. App. 2d 164, 168 (4th Dist. 1942) ("Injunctive relief is a remedy and not, in itself, a cause of action."). Accordingly, the court will grant defendants' motion to dismiss plaintiffs' second cause of action.

C. Breach of the Implied Covenant of Good Faith and Fair Dealing "Every contract imposes upon each party a duty of good

faith and fair dealing in its performance and its enforcement." Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999) (quoting Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 371 (1992)). "A typical formulation of the burden imposed by the implied covenant of good faith and fair dealing is 'that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.'" Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (2005) (quoting Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 573 (1973)).

It appears that plaintiffs allege that all defendants owed them a duty of good faith and fair dealing on the basis of the trial loan modification and "implied contract" that Chase provided plaintiffs that was allegedly breached when Seterus did not offer plaintiffs a permanent modification and refused to accept the lower payments provided for under the trial period plan. However, nowhere in the FAC do plaintiffs explain why they were entitled to continue the trial payments indefinitely. The fact that plaintiffs refer to it as a trial period suggests that it was not a binding, permanent arrangement. Nor does Chase's alleged representation that the "transfer of servicing of [plaintiffs'] loan does not affect any terms or condition of your mortgage documents," (FAC ¶ 64), suggest that Seterus would indefinitely extend the trial period. The FAC has no indication as to why plaintiffs would have believed that they were entitled to be approved for a permanent modification.

The FAC's additional allegations that all defendants "enjoyed substantial discretionary power affecting" plaintiffs' rights and that they "willfully breached their implied covenant of good faith and fair dealing," causing plaintiffs "injury and . . . the threat of loss of [their] personal home," (id. ΒΆΒΆ 88, 96), are conclusory allegations that simply do not meet federal pleading standards. Accordingly, the court will grant ...


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