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Schoenbart v. U.S. Bank National Association

United States District Court, N.D. California

July 15, 2016





         In this foreclosure dispute, defendants move to dismiss plaintiff’s first amended complaint, and a former defendant moves for entry of final judgment. Although the Court was at first inclined to sustain the complaint in part, the oral argument persuaded the Court to the contrary and defendants’ motion to dismiss is Granted. The former defendant’s motion for entry of final judgment is also Granted.


         Plaintiff Theresa Schoenbart owns real property located in Lafayette, California, and has lived rent-free in the house since 2008 without paying on her home loan. Here are the details. In December 2007, Schoenbart obtained a $1.2 million loan from Washington Mutual Bank, F.A. (WAMU) secured by a deed of trust in Schoenbart’s property. The deed of trust identified WAMU as the lender and beneficiary and California Reconveyance Company (CRC) as the trustee. Schoenbart alleges that WAMU transferred her loan to the WAMU Securitized Trust that month, which then sold the loan to an unidentified third-party investment trust. No specific facts have been alleged to back up this allegation. At the hearing on defendants’ motion to dismiss, Schoenbart’s counsel conceded that this allegation was based solely on WAMU’s “business model” of securitization.

         Once WAMU collapsed, several known convoluted transactions ensued. In September 2008, the Federal Deposit Insurance Company put WAMU into receivership. Although not alleged in the complaint, this order takes judicial notice of the fact that the FDIC immediately sold WAMU’s assets to former defendant JPMorgan Chase & Co., which assumed WAMU’s banking operations and loan portfolio. In May 2009, CRC purported to execute and record a notice of default. In August 2014, Chase, acting as attorney-in-fact for the FDIC, recorded an assignment of the deed of trust, thereby assigning Schoenbart’s loan to itself. Chase in turn recorded a second assignment of the deed of trust in May 2015, assigning the loan to defendant U.S. Bank, N.A., as Trustee for the LSF9 Master Participation Trust. In October 2015, defendant Caliber Home Loans, Inc., acting as attorney-in-fact for U.S. Bank, executed a substitution of trustee which purported to substitute defendant Quality Loan Service Corporation as trustee for Schoenbart’s deed of trust. Quality subsequently executed and recorded a notice of trustee’s sale, claiming Schoenbart owed $1.7 million.

         Schoenbart essentially speculates that because WAMU had a business model of securitization, WAMU must have securitized and sold her loan to a third-party investment trust in 2007 (à la “The Big Short”). Schoenbart claims, based solely on WAMU’s business model, that the FDIC could not have acquired her loan when it put WAMU into receivership nine months later. Thus, she argues, Chase could not have acquired her loan when it assumed WAMU’s loan portfolio. Rather, Schoenbart asserts that an unnamed and unknown third-party investment trust must own the beneficial interest in her loan (and, for reasons only known to itself, has taken no action all these years to collect on the loan). As such, she argues that Chase, as attorney-in-fact for the FDIC, had no interest in the deed of trust to assign to itself and that all documents stemming from that invalid assignment are void.

         Schoenbart initiated the instant action in state court in December 2015 against Chase, Quality, and Caliber, who jointly removed it to federal court here in San Francisco on the basis of diversity jurisdiction. Chase and Caliber moved to dismiss. A prior order granted Chase’s motion to dismiss and ordered Schoenbart to amend her complaint to add U.S. Bank as a defendant (Dkt. No. 37). Caliber was ordered to re-notice its motion to dismiss and did so (Dkt. Nos. 38, 47). Schoenbart filed a first amended complaint alleging claims for: (1) breach of contract; (2) cancellation of instruments; (3) violation of California Business and Professions Code Section 17200; (4) violations of the California Homeowner Bill of Rights; and (5) declaratory relief (Dkt. No. 43). Defendants U.S. Bank and Caliber now move to dismiss the complaint for failure to state a claim. Former defendant Chase moves for entry of final judgment as to the claims initially brought against it. This order follows full briefing and oral argument.


         1. U.S. Bank and Caliber’s Motion to Dismiss.

         To survive a motion to dismiss a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is facially plausible when there are sufficient factual allegations to draw a reasonable inference that the defendants are liable for the misconduct alleged. While a court “must take all of the factual allegations in the complaint as true, ” it is “not bound to accept as true a legal conclusion couched as a factual allegation.” A complaint offering “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Ibid. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

         At the hearing, the undersigned judge initially stated a view that some of Schoenbart’s claims should survive while others should not. Schoenbart’s counsel admitted at the hearing, however, that the allegation regarding the 2007 sale of Schoenbart’s loan was based on nothing more than a business model, which counsel attributed to WAMU - a circumstance that had not been clear from the complaint. This is too speculative and is insufficient to state a claim for relief.

         In Gomes v. Countrywide Home Loans, Inc., 192 Cal.App.4th 1149 (2011), the plaintiff alleged based on information and belief that the foreclosing entity did not have authority to foreclose. He did not assert any specific factual basis for his allegations. Gomes held that “[n]o case law or statute authorizes such a speculative suit.” Id. at 1156.

         So too here. Counsel conceded at the hearing that the allegation that WAMU sold Schoenbart’s loan in 2007 is based on nothing more than mere conjecture. WAMU’s business model of securitization involved the bundling of home loans into securities, which it then sold on the secondary mortgage market. Based on this general business model and nothing more, Schoenbart alleges that her specific loan was bundled and sold in December 2007. Schoenbart offers no specific factual basis for the ...

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