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Herfurth v. Citimortgage, Inc.

United States District Court, Eastern District of California

November 6, 2014

GAYLEN HERFURTH and DOUGLAS HERFURTH, Plaintiffs,
v.
CITIMORTGAGE, INC.; U.S. BANK NATIONAL ASSOCIATION, AS INDENTURE TRUSTEE ON BEHALF OF THE HOLDERS OF THE CITIGROUP MORTGAGE LOAN TRUST 200 6-AR1, MORTGAGE-BACKED NOTES, SERIES 2006-AR1; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; CR TITLE SERVICES, INC.; and DOES 1 through 50, inclusive, Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

JOHN A. MENDEZ, J.

This matter is before the Court on Defendants CitiMortgage, Inc., et al.'s ("Defendants") Motion to Dismiss (Doc. #27) Plaintiffs Gaylen Herfurth and Douglas Herfurth's ("Plaintiffs") First Amended Complaint ("FAC") (Doc. #26). Plaintiffs oppose the motion (Doc. #30) and Defendants filed a reply (Doc. #31). For the following reasons, Defendants' motion is GRANTED.'[1]

I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND

On November 9, 2005, Plaintiffs obtained a $525, 000 loan ("Subject Loan") from American Home Mortgage Acceptance, Inc. ("AHMA") . FAC ¶ 16. This loan was secured by a Deed of Trust recorded against real property located at 12449 Larkspur Lane in Grass Valley, California ("Subject Property") . FAC ¶¶ 11, 16. In July 2008, Plaintiffs contacted Defendant CitiMortgage and sought a loan modification. FAC ¶ 17. Defendant CitiMortgage allegedly informed Plaintiffs that they would only be considered for a loan modification if they ceased making payments on the loan. FAC ¶ 17.

On December 1, 2008, Plaintiffs received a letter from Defendant CitiMortgage informing them that they were delinquent on the loan in the amount of $11, 640. FAC ¶ 19. On January 14, 2009, a Notice of Default against Plaintiffs was recorded with the Nevada County Recorder's Office claiming a delinquency in the amount of $17, 087.50. FAC ¶ 20. On that same date, an Assignment of Deed of Trust was recorded with the Nevada County Recorder's Office, transferring the beneficial interest under the Deed of Trust from Defendant MERS to Defendant CitiMortgage. FAC ¶ 21. Plaintiffs allege that this transfer was improper because an employee from Defendant CitiMortgage purported to make the assignment on behalf of Defendant MERS. FAC ¶ 21. Plaintiffs' efforts to work with Defendant CitiMortgage on a loan modification were unsuccessful and the Subject Property was sold at a non-judicial foreclosure sale in February 2010. FAC ¶ 26.

Plaintiffs further allege that, at some point between November 16, 2005 and January 14, 2009, the original lender -AHMA - "took steps to sell the Subject Loan (including the Note and/or Deed of Trust) to an entity that purportedly intended to pool the Subject Loan with other residential mortgage loans, securitize the pool, and sell the securities on the open market." FAC ¶¶ 27-28. Plaintiffs allege that AHMA's securitization of the Deed of Trust was improper, as it failed to conform to the statutorily and contractually required procedure. FAC ¶¶ 29-35.

Plaintiffs allege that "the first time [they] had any indication that an attempt to securitize their loan had been made" was in December 2013. FAC ¶ 51. After Plaintiffs' counsel determined that any potential fraud, negligence, or promissory estoppel claims were time-barred. Plaintiffs' counsel "requisitioned the services of a securitization auditor to perform an investigation into the history of the Subject Loan." FAC ¶¶ 49-50. The auditor determined that the "loan was purportedly securitized" into a beneficiary trust. FAC ¶ 50. Plaintiffs allege that they did not learn of this securitization until December 2013 because, throughout the course of its relationship with Plaintiffs, Defendant CitiMortgage had "held itself out to Plaintiffs as the sole owner and beneficiary of the Subject Loan." FAC ¶ 48.

On February 11, 2014, Plaintiffs filed a complaint in Nevada County Superior Court, which was removed by Defendants to this Court. On July 29, 2014, the Court dismissed Plaintiffs' original complaint, finding that Plaintiffs' conclusory allegations with regard to its delayed discovery of the alleged securitization of the loan were insufficient to overcome Defendants' statute of limitations, judicial estoppel, and standing arguments. However, the Court granted Plaintiffs leave to amend their complaint, in order to supplement these allegations. Three days later. Plaintiffs filed the FAC, which includes additional allegations concerning the delayed discovery and the following causes of action: (1) Wrongful Foreclosure; (2) Conversion; and (3) Violation of Business and Professions Code § 17200.

II. OPINION

A. Judicial Notice

Defendants request that the Court take judicial notice of seven documents: (1) a Deed of Trust recorded on November 16, 2005 in the Nevada County Recorder's Office; (2) a Substitution of Trustee recorded on September 14, 2009 in the Nevada County Recorder's Office; (3) a Voluntary Petition for Chapter 7 Bankruptcy, filed in the U.S. Bankruptcy Court for the Eastern District of California on May 1, 2009; (4) a Discharge Order dated August 19, 2009, entered in the U.S. Bankruptcy Court for the Eastern District of California; (5) the docket sheet for Plaintiffs' bankruptcy case; (6) a Trustee's Deed Upon Sale recorded on March 31, 2010 in the Nevada County Recorder's Office; and (7) the servicing agreement to the Citigroup Mortgage Loan Trust 2006-AR1 Mortgage-Backed Notes, Series 2006-AR1. Defs.' Request for Judicial Notice ("DRJN") (Doc. #28).

Generally, the Court may not consider material beyond the pleadings in ruling on a motion to dismiss. However, the Court may take judicial notice of matters of public record, provided that they are not subject to reasonable dispute. See, e.g., Sherman v. Stryker Corp., 2009 WL 2241664 at *2 (CD. Cal. 2009) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 {9th Cir. 2001) and Fed.R.Evid. 201).

The first six documents listed above are public records. Three of the documents were recorded in the Nevada County Recorder's Office, and three of the documents are public court filings. Furthermore, Plaintiffs have not opposed Defendants' request, and the documents are not subject to reasonable dispute. Therefore, they are the proper subject of judicial notice. See Fed. R. Evid. 201. With regard to the first six documents, Defendants' request is granted. The Court ...


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