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Campos v. Federal Home Loan Services Corp.

United States District Court, E.D. California

October 16, 2014

IGNACIO CAMPOS, RAQUEL CAMPOS, Plaintiffs,
v.
FEDERAL HOME LOAN SERVICES CORP.; QUALITY HOME LOAN SERVICES; AND DOES 1-100, inclusive, Defendants.

FINDINGS AND RECOMMENDATIONS

EDMUND F. BRENNAN, Magistrate Judge.

This is an action by plaintiffs, proceeding in pro se, challenging the foreclosure of a trust deed as to certain real property.[1] Defendants Federal Home Loan Services ("Freddie Mac") and Quality Loan Services Corporation ("Quality"), erroneously sued as Quality Home Loan Services, move to dismiss the first amended complaint pursuant to Federal Rules of Civil Procedure 12(b)(6). ECF Nos. 36, 42. For the reasons explained below, defendants' motions must be granted.[2]

I. Factual Allegations

The first amended complaint alleges that on or about December 14, 1993, Donald M. Riedel borrowed $85, 000 under a promissory note and executed a deed of trust in favor of America's Wholesale Lender to secure the loan against property located at 106 H Street, Lincoln, California (the "subject property"). First Am. Compl., ECF No. 33 at ¶¶ 7, 11. On October 13, 2000, Donald Riedel transferred his interest in the property by way of what is referred to as an "Interspousal Transfer Grant Deed" to Ms. Sofia Campos-Riedel ("Ms. Campos-Riedel"). Id. at ¶ 12. On January 16, 2001, plaintiffs executed a Deed of Trust between plaintiffs and Ms. Campos-Riedel. Id. at ¶ 14. The Deed of Trust was recorded in the Placer County Recorder's Office as Instrument No. 2001-0004547. Id.

On December 11, 2008, defendant Quality, acting on behalf of defendant Freddie Mac, recorded a Notice of Default and Election to Sell under Deed of Trust in the Placer County Recorder's Office. Id. at ¶ 15. On March 13, 2009, Quality recorded a second Notice of Trustee's Sale with the Placer County Recorder's Officer. Id. at ¶ 17. On April 5, 2010, Quality recorded a Notice of trustee's Sale, which noticed the sale date for April 28, 2010. Id. at ¶ 19. On January 11, 2011, Quality recorded a third Notice of Trustee's Sale, this time noticing the sale date for February 22, 2011. Id. at ¶ 20. Plaintiffs allege that on January 19, 2012, at the direction of Freddie Mac, Quality held an unnoticed Trustee Sale. Id. at ¶ 21.

At the January 19 Trustee Sale, Freddie Mac acquired the subject property through a credit bid at a price far below market value. Id. at ¶ 22. On January 30, 2012, a Trustee's Deed Upon Sale ("Trustee's Deed") was recorded with the Placer County Recorder's Office. Id. ¶ 23. Plaintiffs allege that at the time of the sale they had a $50, 000 recorded lien against the property and that they therefore were entitled to receive notice by certified mail of the January 19, 2012 Trustee Sale pursuant to California Civil Code §§ 2924b(c)(1) and 2924b(c)(2). Id. at ¶ 25. Plaintiffs allege that no notice was received or given by Quality which prevented plaintiffs from protecting their interest in the property. Id. at ¶¶ 26, 27.

Plaintiffs' first amended complaint ("FAC") alleges the following claims for relief: (1) failure to provide adequate notice of sale; (2) negligence; (3) intentional interference with contractual relations, (4) intentional interference with prospective economic advantage, (5) unlawful business practices, and (6) financial elder abuse. Defendants now move to dismiss the first amended complaint pursuant to Rule 12(b)(6) for failure to state a claim.

II. Motions to Dismiss

A. Standard

To survive dismissal for failure to state a claim pursuant to Rule 12(b)(6), a complaint must contain more than a "formulaic recitation of the elements of a cause of action"; it must contain factual allegations sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "The pleading must contain something more... than... a statement of facts that merely creates a suspicion [of] a legally cognizable right of action." Id. (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004)). "[A] complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). "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." Id. Dismissal is appropriate based either on the lack of cognizable legal theories or the lack of pleading sufficient facts to support cognizable legal theories. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

In considering a motion to dismiss, the court must accept as true the allegations of the complaint in question, Hospital Bldg. Co. v. Rex Hosp. Trs., 425 U.S. 738, 740 (1976), construe the pleading in the light most favorable to the party opposing the motion, and resolve all doubts in the pleader's favor. Jenkins v. McKeithen, 395 U.S. 411, 421, reh'g denied, 396 U.S. 869 (1969).

The court is mindful of the plaintiffs' pro se status. Pro se pleadings are held to a less stringent standard than those drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520-21 (1972). Unless it is clear that no amendment can cure its defects, a pro se litigant is entitled to notice and an opportunity to amend the complaint before dismissal. Lopez v. Smith, 203 F.3d 1122, 1127-28 (9th Cir. 2000); Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987). However, although the court must construe the pleadings of a pro se litigant liberally, Bretz v. Kelman, 773 F.2d 1026, 1027 n. 1 (9th Cir. 1985), that liberal interpretation may not supply essential elements of a claim that are not plead. Pena v. Gardner, 976 F.2d 469, 471 (9th Cir. 1992); Ivey v. Bd. of Regents of Univ. of Alaska, 673 F.2d 266, 268 (9th Cir. 1982). Furthermore, "[t]he court is not required to accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). Neither need the court accept unreasonable inferences, or unwarranted deductions of fact. W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

In deciding a Rule 12(b)(6) motion to dismiss, the court may consider facts established by exhibits attached to the complaint. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987). The court may also consider facts which may be judicially noticed, Mullis v. U.S. Bankr.Ct., 828 F.2d at 1338, and matters of public record, including pleadings, orders, and other papers filed with the court. Mack v. South Bay Beer Distribs., 798 F.2d 1279, 1282 (9th Cir.1986).

B. Plaintiffs' Claims

1. Breach of Statutory Duties

Plaintiffs label their first cause of action "Professional Negligence and Breach of Statutory Duties."[3] They allege that defendants, by conducting an unnoticed sale of the subject property, violated California Civil Code section 2924f, 2924g(c)(2), 2924h(g). ECF No. 33 at 6, 8, 10.[4] While plaintiffs' first cause of action purports to allege claim for violations of various statutes, plaintiffs only allege that defendants violated California Civil Code § 2924h(g). ECF No. 33. Plaintiffs' allegations for violation of sections 2924f and 2924g(c)(2) are contained in other section of the first amended complaint. Id. at 8, 10.

Defendant Freddie Mac argues that plaintiffs have failed to allege sufficient facts to rebut California's presumption that the foreclosure was properly conducted, and therefore their claim fails. ECF No. 37 at 5-9. Defendant Quality argues that plaintiffs' claim must be dismissed because (1) its status as a trustee prohibits the imposition of liability, and (2) plaintiffs have failed to show that the foreclosure sale was improperly conduct. ECF No. 42-1.

One California Appellate Court has summarized California's non-judicial foreclosure proceedings as follows:

Upon default by the trustor, the beneficiary may declare a default and proceed with a nonjudicial foreclosure sale (Cal. Civ. Code § 2924). The foreclosure process is commenced by the recording of a Notice of Default and Election to Sell by the trustee (Cal. Civ. Code § 2924). After the notice of default is recorded, the trustee must wait three calendar months before proceeding with the sale (Cal. Civ. Code § 2924(b)). After the 3-month period has elapsed, a notice of sale must be published, posted and mailed 20 days before the sale and recorded 14 days before the sale (Cal. Civ. Code § 2924f). The trustee may postpone the sale at any time before the sale is completed (Cal. Civ. Code § 2924g(c)(1)). If the sale is postponed, the requisite notices must be given (Cal. Civ. Code § 2924g(d)). The conduct of the sale, including postponements, is governed by Civil Code section 2924g. The property must be sold at public auction to the highest bidder (Cal. Civ. Code § 2924g(a)).

Moeller v. Lien, 25 Cal.App.4th 822, 890 (2d Dist. 1994)

California Civil Code section 2924g(c)(1) provides that "[t]here may be a postponement or postponements of the sale proceedings... at any time prior to the completion of the sale for any time not to exceed a total of 365 days from the date set forth in the notice of sale." "The notice of each postponement and the reason therefor shall be given by public declaration by the trustee at the time and place last appointed for sale." Cal. Civ. Code § 2924g(d). In the event that the sale proceedings are continued for more than 365 days, a new notice of sale must be published in accordance with section 2924f. Cal. Civ. Code § 2924g(c)(2). California Civil Code § 2924f requires notice be provided by recording, posting, publishing, and mailing the notice of sale.

"As a general rule, there is a common law rebuttable presumption that a foreclosure sale has been conducted regularly and fairly." Royal Thrift and Loan Co. v. County Escrow, Inc., 123 Cal.App.4th 24, 32 (2nd Dist. 2004) (internal quotations omitted). "Aside from the common law presumption of validity..., Civil Code section 2924 contains a statutory presumption aris[ing] from the recital in the trustee's deed that all statutory requirements for notice of default and sale have been satisfied. This presumption is prima facie evidence of compliance and conclusive evidence of compliance in favor of a bona fide purchaser or encumbrancer.' [Citations.] Thus, once a deed reciting that all legal requirements have been satisfied has been transferred to a buyer at a foreclosure sale, the sale can be successfully attacked on the grounds of procedural irregularity only if the buyer is not a bona fide purchaser. [Citations.]" 6 Angels, Inc. v. Stuart-Wright Mortgage, Inc., 85 Cal.App.4th 1274, 1286 (2nd Dist. 2001).

Plaintiffs' first amended complaint rests mostly on conclusory allegations, and it is therefore difficult to decipher exactly why plaintiffs believe defendants failed to comply with California's comprehensive framework for conducting non-judicial foreclosure sales. For instance, although plaintiffs allege that three different Notices of Trustee Sale were recorded, they claim that defendants failed to perform their ministerial duties, including failing to provide plaintiffs with "the Notice of Trustee Sale." It is not clear whether "the" Notice of Trustee Sale references only one of the three notices, or whether plaintiffs contend they did not receive any of the notices. Further, after describing the various documents that were recorded, including the three Notices of Trustee Sale and Trustee's Deed Upon Sale, id. ¶¶ 15-23, plaintiffs allege that "[n]o other notice required by Cal. Civil Code § 2924f were [sic] given...." Id. ¶ 26. It is unclear, however, what additional notice plaintiffs believe defendants were required to provide.

While the complaint is unclear, plaintiffs attempt to clarify their position in their oppositions to defendants' motions. Plaintiffs explain that their "First Amended Complaint (FAC) is based primarily on the fact that the January 19, 2012 Trustee Sale did not comply with the notice requirements of California Code of Civil Procedure §2924f [sic]."). ECF No. 45 at 1. Plaintiffs also concede "that a notice of default (dated Dec. 11, 2008) and the NOTS for Mar. 13, 20009 [sic], April 5, 2010, and January 21, 2011, were sent to" their last known address." ECF No. 47.[5] Plaintiffs contend, however, that the January 11, 2011 Notice of Trustee's Sale, which noticed the sale of the subject property for February 22, 2011, did not constitute adequate notice for the January 19, 2012 sale. ECF No. 47 at 2-5. According to plaintiffs, because the original Notice of Trustee Sale noticed the sale date for April 1, 2009, each and every postponement that set the sale date more than 365 days after April 1, 2009, was required to comply with California Civil Code § 2924f.

Plaintiffs' argument ignores the plain language of § 2942g. See Royal Foods Co., Inc. v. RJR Holdings, Inc., 525 F.3d 1102, 1106 (9th Cir. 2001) (courts are to look at "the text of the statute to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.... If from the plain meaning of the statute congressional intent is clear, that is the end of the matter.") (internal quotations omitted). There is nothing in the text of § 2924g to suggest that once the original sale date has been postponed for more than 365 days, all subsequent postponement must be completed by recording a notice of trustee sale. To the contrary, the text of the statute provides that the sale proceedings may be postponed "at any time prior to completion of the sale for any period of time not to exceed a total of 365 days from the date set forth in the notice of sale. " Cal. Civ. Code § 2924g(c)(1). There is no mention of an original sale date. Where the sale is postponed for more than 365 days, the "sale proceedings shall be preceded by giving a new notice of sale in the manner prescribed in Section 2924f. Cal. Civ. Code § 2924g(c)(2) (emphasis added).

Thus, once a new notice of sale is given in the manner prescribed by section 2924f, pursuant to § 2924g(c)(1) the sale may be postponed for any period not to exceed 365 days. In the event the sale is postponed for more than "365 days from the date set forth in the notice of sale, " Cal. Civ. Code § 2924g(c)(1), the "sale proceedings shall be preceded by giving a new notice of sale in the manner prescribed in section 2924f."

Here, the Notice of Default was recorded on December 11, 2008, in the Placer County Recorder's Office. ECF No. 33 ¶ 15. On March 13, 2009, Quality recorded the first Notice of Trustee's Sale, which noticed the sale for April 1, 2009. Id. ¶ 17. Pursuant to section 2924g(c)(1), defendants could postpone the sale proceedings without written notice so long as the sale was completed within 365 days of April 1, 2009, the date set forth in the first Notice of Trustee's Sale. The sale did not occur within 365 days of the date set forth in that notice. Accordingly, a second Notice of Trustee's sale was recorded on April 5, 2010, which noticed the sale for April 28, 2010. Id. ¶ 19. However, no sale was completed within 365 days of the noticed sale date, and therefore any further postponement was required to comply with § 2924f. On January 11, 2011, defendants recorded a third Notice of Trustee's Sale, which noticed the sale for February 22, 2011. ECF No. 33 ¶ 20. Again, pursuant to section 2924g(c)(1), defendants could postpone the sale proceedings without providing written notice, so long as they did not seek to postpone the sale date more than 365 days from February 22, 2011, the date set forth in the third Notice of Trustee's Sale. On January 19, 2012, the property was sold at a Trustee's Sale. Id. ¶¶ 22, 23. Defendants were not required to record a new Notice of Sale pursuant to section 2924f because the January 19, 2012 sale date was within 365 days from February 22, 2011, the date set forth in the third notice of sale. See Cal. Civ. Code § 2924g(c)(1). Accordingly, plaintiffs' allegations that defendants held an unnoticed trustee sale because they postponed the February 22, 2011 sale date without providing notice in compliance with 2924f is without merit.

Plaintiffs also allege that defendants violated California Civil Code § 2924h(g). ECF No. 33, ¶ 34. That section provides in relevant part that "It shall be unlawful for any person, acting alone or in concert with others... (2) to fix or restrain bidding in any manner, at a sale of property conducted pursuant to a power of sale in a deed of trust of mortgage." Cal. Civ. Code § 2924h(g). Plaintiffs' contention that defendants violated this section is based on their allegation that defendants sold the subject property at an unnoticed trustee sale. ECF No. 33 at 6. As just explained, plaintiffs have failed to show that defendants failed to comply with the notice and postponement requirements. Accordingly, plaintiffs have failed to allege a claim for violation of California Civil Code § 2924h(g).

Lastly, plaintiffs claim that the foreclosure of the subject property was improper because in July 2009, defendant Freddie Mac allegedly "entered into a Trial Loan Modification on the Deed of Trust, rendering the underlying Notice of Default ineffective." ECF No. 33 ¶ 18. Plaintiffs rely on two cases to support their conclusion that a Trial Loan Modification renders a previously recorded Notice of Default ineffective. First, plaintiffs cite to West v. JPMorgan Chase Bank, N.A., 214 Cal.App.4th 780 (4th Dist. 2013). In that case, the plaintiff alleged, among other things, that the defendant bank breached a Trial Plan Agreement by denying the plaintiff a permanent loan modification. Id. at 796. The court found that the Trial Plan Agreement, which was a trial loan modification under the Home Affordable Mortgage Program ("HAMP"), was a valid enforceable contract. Id. at 796. The court held that under HAMP, "if the lender approves a [Trial Plan Agreement], and the borrower complies with all the terms of the [Trial Plan Agreement] and all of the borrower's representations remain true and correct, the lender must offer a permanent loan modification." Id. (emphasis in original). The court found that because plaintiff alleges that she had complied with the terms of the Trial Loan Agreement, but the defendant bank failed to offer her a permanent loan modification, the plaintiff sufficiently alleged a breach of contract claim. Id. at 799.

Plaintiffs also rely on Menan v. U.S. Bank Nat. Ass'n, 924 F.Supp.2d 1151 (E.D. Cal. 2013). There, the plaintiff alleged that it had reached a Forbearance Agreement with the defendant bank. Id. at 1154. Under the agreement, the plaintiff was required to make certain payments, and in exchange the defendant agreed to cancel the notice of default. Id. at 1154-1157. The court found that plaintiff stated a claim for breach of the Forbearance Agreement based on plaintiff's allegations that he made all the requisite payments, but defendant failed to cancel the notice of default. Id. at 1156-1158.

Neither case supports plaintiffs' position here that entering into a trial loan modification renders any previously filed notice of default invalid. Both cases involved a breach of contract claim, a claim not asserted in plaintiffs' amended complaint. Plaintiffs do not provide any allegations concerning the terms of the loan medication, nor do they allege that the borrower complied with the terms of the Trial Loan Modification. The complaint is also devoid of any explanation as to why a permanent loan modification was never reached.

Furthermore, even if plaintiffs had alleged that Freddie Mac agreed to cancel the notice of default based on compliance with the Trial Loan Modification, it appears that plaintiffs would lack standing to assert a claim based on the alleged breach of the Trial Loan Modification agreement. Under California law, "[a] third party beneficiary may enforce a contract made for its benefit." Hess v. Ford Motor Co., 27 Cal.4th 516, 524 (2002). However, "[a] third party should not be permitted to enforce covenants made not for his benefit, but rather for others. He is not a contracting party; his right to performance is predicated on the contracting parties' intent to benefit him...." Jones v. Aetna Casualty & Surety Co., 26 Cal.App.4th 1717, 1724 (1st Dist. 1994). "The circumstance that a literal contract interpretation would result in a benefit to the third party is not enough to entitle that party to demand enforcement. The contracting parties must have intended to confer a benefit on the third party." Neverkovec v. Fredericks, 74 Cal.App.4th 337, 348-49 (1st Dist. 1999). When interpreting a written contract, if possible a court is to ascertain the intentions of the parties from the writing alone. Cal. Civ. Code § 1639. Plaintiffs do not allege any facts demonstrating that the parties to the Trial Loan Modification intended to confer a benefit on plaintiffs. Indeed, such a scenario would be unlikely.

The amended complaint fails to allege that the foreclosure sale was improperly conducted. Accordingly, plaintiffs' first claim for relief must be dismissed.

2. Remaining Claims

The amended complaint also purports to assert state law claims for negligence, intentional interference with a contract, intentional interference with an economic advantage, violation of California Business and Professions Code § 17200, and financial elder abuse. ECF No. 33 at 7-12. However, each of these claims rests on plaintiffs' contention that defendants held an unnoticed trustee's sale in violation of 2924f and 2924g. See id. ¶¶ 42-48 (alleging that Freddie Mac breached its duty of care owed to plaintiffs by conducting the January 19 sale without lawfully required notice); ¶ 54 ("At the time the DEFENDANTS sold the subject property at the above indicated unnoticed, unauthorized Trustee Sale, DEFENDANTS intended to disrupt the performance of the contract between PLAINTIFFS and Sofia Campos-Riedel."); ¶ 62 ("DEFENDANTS' acts were wrongful and disruptive because PLAINTIFFS' security interest in the subject property was extinguished by an unauthorized foreclosure against real property at an unnoticed Trustee Sale."); ¶¶ 67-68 (alleging defendant violated California Business and Professions Code § 17200 by failing to comply with section 2924f in support of claim for); ¶¶ 77-80 (alleging that the "above-described conduct" amounted to elder abuse).

As plaintiffs have failed to allege that the foreclosure sale was improperly conducted, these remaining claims necessarily fail.

3. Leave to Amend

Plaintiffs' oppositions to defendants' motions to dismiss make clear that the instant dispute concerns whether defendants' complied with the notice requirements set forth in California Civil Code section 2924f. ECF Nos. 45-48. As explained above, plaintiffs' position is based on a misreading of sections 2924f and 2924g. While the court would normally provide pro se plaintiffs leave to amend, in this case plaintiffs would not be able to cure the deficiencies identified above through in an amended complaint. Accordingly, it is recommended that the first amended complaint be dismissed without leave to amend. Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987) (While the court ordinarily would permit a pro se plaintiff to amend, leave to amend should not be granted where amendment would be futile).

III. Conclusion

Accordingly, it is hereby RECOMMENDED that:

1. Defendants' motions to dismiss, ECF No. 36, 42, be granted;

2. Plaintiffs' first amended complaint, ECF No. 33, be dismissed without leave to amend; and

3. The Clerk be directed to close the case.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Failure to file objections within the specified time may waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).


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