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Sanders v. Sutton Funding, LLC

United States District Court, S.D. California

June 26, 2014

DANIEL SANDERS, CO-TRUSTEE OF DS/KSL SANDERS FAMILY TRUST UDT DATED APRIL 28, 1998; and KAREN L. SANDERS, CO-TRUSTEE OF THE DS/KSL SANDERS TRUST UDT DATED APRIL 28, 1998, Plaintiffs,
v.
SUTTON FUNDING, LLC; THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS GRANTOR TRUSTEE OF THE PROTIUM MASTER GRANTOR TRUST; T.D. SERVICE COMPANY; and DOES 1-10, inclusive, Defendants.

ORDER: (1) GRANTING DEFENDANT BANK OF NEW YORK MELLON'S REQUEST FOR JUDICIAL NOTICE;(2) GRANTING DEFENDANT BANK OF NEW YORK MELLON'S MOTION TO DISMISS PLAINTIFFS' SECOND AMENDED COMPLAINT; AND (3) GRANTING PLAINTIFFS' INFORMAL REQUEST FOR LEAVE TO AMEND

JANIS L. SAMMARTINO, District Judge.

Presently before the Court is a Motion to Dismiss Plaintiffs' Second Amended Complaint ("MTD") filed by Defendant The Bank of New York Mellon Trust Company, N.A., as grantor trustee of the Protium Master Grantor Trust ("BNYM"). (ECF No. 66.) Also before the Court are Plaintiffs Daniel and Karen L. Sanders' ("Plaintiffs") Opposition to (ECF No. 69) and BNYM's Reply in Support of (ECF No. 71) the MTD, as well as BNYM's Request for Judicial Notice ("RJN") (ECF No. 67) and Plaintiffs' informal request for leave to amend (ECF No. 69). The Court vacated the hearing set for May 8, 2014, and took the matter under submission without oral argument pursuant to Civil Local Rule 7.1(d)(1). (ECF No. 72.) Having considered the parties' arguments and the law, the Court GRANTS BNYM's RJN, GRANTS BNYM's MTD, and GRANTS Plaintiffs' request for leave to amend.

BACKGROUND

I. Factual Background

This action concerns the disputed ownership and loan status of the property at 779 Marposa Drive, Vista, California 92081 (the "Property"). On July 2, 2007, Plaintiffs executed an adjustable rate Note (the "Note") and Deed of Trust (the "DOT") for the sum of $474, 400. (Verified 2d Am. Compl. ("VSAC") Ex. C, ECF No. 64.) The DOT identifies Countrywide Home Loans, Inc. ("Countrywide") as lender; Recontrust Company, N.A. as trustee; and Mortgage Electronic Registration Systems, Inc. ("MERS") as nominee and beneficiary. ( Id. at 2.)

On September 10, 2009, MERS assigned its interest under the DOT to Sutton. ( Id. Ex. D.) The assignment was notarized on October 1, 2009, and recorded on October 8, 2009. ( Id. ) On September 16, 2009, BNYM-acting through its attorney in fact Barclays Capital Real Estate, Inc., dba HomEq Servicing ("Barclays")-substituted TDSC as trustee. ( Id. Ex. E.) The substitution was notarized on December 14, 2009, and recorded on January 8, 2010. ( Id. ) Also on September 16, 2009, TDSC executed and served a Notice of Default ("NOD") on behalf of beneficiary Sutton. ( Id. Ex. F.) The NOD was recorded on October 1, 2009. ( Id. ) On January 5, 2010, TDSC executed and served a Notice of Trustee's Sale ("NOS"), which it recorded on January 8, 2010. ( Id. Ex. G.)

On March 25, 2011, MERS again assigned its interest under the DOT, this time to BNYM. ( Id. Ex. H.) The assignment was notarized the same day and recorded on April 1, 2011. ( Id. ) On November 16, 2011, Sutton then assigned its purported interest under the DOT to BNYM. ( Id. Ex. I.) The assignment was notarized the same day and recorded on November 30, 2011. ( Id. )

On October 24, 2012, BNYM executed a Substitution of Trustee ("SOT") substituting Cal-Western Reconveyance LLC ("CWR") as trustee. ( Id. Ex. J.) The SOT was notarized the same day and recorded on October 31, 2012. ( Id. ) On October 29, 2012, CWR executed an NOD. ( Id. Ex. K.) The NOD was also recorded on October 31, 2012. ( Id. )

On September 27, 2013, CWR executed a Notice of Trustee's Sale ("NOTS"). ( Id. Ex. L.) The NOTS was recorded and mailed to Plaintiffs on October 3, 2013. ( Id .; see also id. ΒΆ 15.) The sale was scheduled for October 23, 2013. ( Id. Ex. L.) On October 5, 2013, Plaintiffs had Certified Forensic Loan Auditors, LLC prepare a Property Securitization Analysis Report ("PSAR") for them. ( Id. Ex. M.)

II. Procedural Background

In or around 2010, Plaintiffs initiated this action in state court. ( See Notice of Removal 2, ECF No. 1.) On September 29, 2010, the San Diego Superior Court granted Plaintiffs' motion for a preliminary injunction ("PI"). (Pls.' Resp. in Opp'n 3, ECF No. 69.) Also on September 29, 2010, Plaintiffs filed their Verified First Amended Complaint ("VFAC"), which Defendants subsequently removed to federal court. ( See Notice of Removal, ECF No. 1.)

Defendants noticed a sale of the Property for November 4, 2010. (1st Mot. for TRO 2, ECF No. 5.) On October 29, 2010, Plaintiffs moved for a temporary restraining order ("TRO") in federal court. ( See generally id. ) On November 2, 2010, this Court issued an Order to Show Cause ("OSC") why a TRO should not issue. (ECF No. 7.) Also on November 2, 2010, however, Plaintiffs petitioned for bankruptcy. (ECF No. 8.) Accordingly, the proceedings in this Court were stayed ( id. ), and the motion for a TRO was denied as moot (ECF No. 9).

This Court lifted the bankruptcy stay on September 25, 2013. (ECF No. 18.) On October 15, 2013, Plaintiffs moved to continue the TRO requested in October 2010. (ECF No. 23.) On October 16, 2013, the Court denied the motion on the grounds that the TRO was previously denied as moot. (ECF No. 25.)

Plaintiffs subsequently filed a motion for TRO on October 18, 2013. (ECF No. 28.) That same day, this Court issued an Order staying the October 23, 2013 sale of the Property until a hearing could be heard on Plaintiffs' motion. (ECF No. 30.) A hearing was held on November 1, 2013, and the matter was taken under submission. (ECF No. 37.) On November 12, 2013, the Court issued an Order dissolving the TRO and denying a PI. (ECF No. 38.)

The next day, BNYM filed its first MTD. (ECF No. 39.) The Court took the MTD under submission and, on March 10, 2014, granted the motion. (ECF Nos. 57, 63.) The Court gave Plaintiffs fourteen days within which to file an amended complaint. (Order 14, ECF No. 63.) On March 21, 2014, ...


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