United States District Court, N.D. California, San Jose Division
ORDER GRANTING MOTIONS TO DISMISS AND DENYING MOTION
TO STAY FORECLOSURE
LAB SON FREEMAN, United States District Judge
Jose and Marta Carnero (the “Carneros”) filed
this action in June 2016 alleging causes of action based on
violations of the Truth in Lending Act, quiet title, and
other claims. Compl., ECF 1; First Am. Compl.
(“FAC”), ECF 25. Before the Court are motions to
dismiss filed separately by Defendant Elk Grove Financial,
LLC (“Elk Grove”) and Defendant Special Default
Services, Inc. (“SDS”). ECF 28, 38, 49, 56. The
Carneros have also filed a noticed motion to stay a
foreclosure sale. ECF 57. Pursuant to Civ. L.R. 7-1(b), the
Court finds the parties' motions suitable for submission
without oral argument and hereby VACATES the hearings
scheduled for June 8 and September 7, 2017. For reasons set
forth below, the Court GRANTS Defendants' motions and
DENIES the Carneros' motion.
2007, the Carneros obtained a mortgage loan from non-party
Bear Stearns Residential Mortgage Company which was secured
by a deed of trust on a property located at 1558 Minnesota
Avenue, San Jose, CA 95125 (the “Property”). Deed
of Trust (“DOT”), Ex. A to FAC, ECF 25-1; FAC 6.
The Carneros allege that at the time of financing, an
associate named Randy Miguel made promises on the amount of
monthly mortgage payments and did not provide any disclosures
prior to the signing of loan documents. Id. at 6-17.
deed of trust ultimately was assigned to Elk Grove, and Elk
Grove substituted SDS as the trustee. Assignments of Deed of
Trust, Exs. 2-4 to FAC, ECF 25-2; Substitution of Trustee,
Ex. 5 to FAC, ECF 25-2. On February 29, 2016, SDS recorded a
Notice of Default and Election to Sell under Deed of Trust,
stating that the Carneros were approximately $87, 000 in
arrears on their mortgage. Notice of Default, Ex. 6 to FAC,
March 30, 2016, the Carneros sent SDS a Notice of Rescission,
purporting to rescind the 2007 mortgage loan transaction.
Notice of Rescission, Ex. 10 to FAC, ECF 25-3. They filed
this action on June 27, 2016 against Elk Grove and SDS, as
well as the loan servicer, Land Home Financial Services.
Compl., ECF 1. The Carneros also filed an application for a
temporary restraining order (“TRO”) seeking to
enjoin the nonjudicial foreclosure sale, which had been
scheduled for July 6, 2016. TRO Appl., ECF 6; Notice of
Trustee's Sale, Ex. 14 to FAC, ECF 25-5. This Court
denied the TRO application, concluding that diversity
jurisdiction did not lie; the Carneros' only substantive
federal claim, asserted under the Truth in Lending Act
(“TILA”), was inadequate; and there was no basis
for the Court to exercise supplemental jurisdiction over the
remaining state law claims absent a viable federal claim.
See Order Denying Plaintiffs' Appl. for TRO, ECF
Carneros nonetheless staved off foreclosure by filing a
Chapter 7 bankruptcy petition on July 5, 2016, the day before
the scheduled sale. See Ch. 7 Petition, Dkt. No. 1,
No. 16-br-51967-SLJ (Bankr. N.D. Cal. 2016). They filed a
notice of the automatic bankruptcy stay in this action on
July 11, 2016. Notice of Stay of Proceedings, ECF 17. The
bankruptcy was discharged on October 12, 2016, and the
foreclosure sale was rescheduled for November 28, 2016.
Discharge of Debtor and Final Decree, Dkt. No. 20, No.
16-br-51967-SLJ; Second TRO Appl. 6, ECF 31. The bankruptcy
case was reopened on November 17, 2016 for the purpose of
permitting the Carneros to file an adversary proceeding to
determine the dischargeability of student loan debts. Order
Granting Motion to Reopen Case, Dkt. No. 26, No.
16-br-51967-SLJ. The Carneros once again sought a TRO to
enjoin the foreclosure sale and requested a notice of lis
pendens on November 21, 2016, both of which the Court
subsequently denied. ECF 36.
October 7, 2016, the Carneros filed the operative first
amended complaint (“FAC”), again alleging a
single substantive federal claim under TILA and numerous
state law claims. FAC. SDS moved to dismiss the FAC and
served its motion papers on the Carneros via overnight mail
on November 4, 2016. SDS Mot., ECF 28. Elk Grove separately
filed a motion to dismiss the FAC and also served its motion
papers on the Carneros via overnight mail on November 23,
2016. EG Mot., ECF 38. However, the Carneros stated in a
letter to the Court filed on January 5, 2017, that they had
not received the motions to dismiss, thus no opposition was
filed. ECF 45. SDS then re-noticed its motion to dismiss on
January 26, 2017, ECF 49, and Elk Grove re-noticed its motion
on March 1, 2017, ECF 56. The Carneros then filed an
opposition to SDS's re-noticed motion to dismiss but did
not oppose Elk Grove's re-noticed motion to dismiss.
Opp'n, ECF 52. The Court has considered the Carneros'
opposition in relation to both motions to dismiss. On March
21, 2017, the Carneros filed a noticed motion to stay
foreclosure, allegedly scheduled for March 22, 2017. ECF 57.
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim upon which relief can
be granted ‘tests the legal sufficiency of a
claim.'” Conservation Force v. Salazar,
646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro
v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When
determining whether a claim has been stated, the Court
accepts as true all well-pled factual allegations and
construes them in the light most favorable to the plaintiff.
Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681,
690 (9th Cir. 2011). However, the Court need not
“accept as true allegations that contradict matters
properly subject to judicial notice” or
“allegations that are merely conclusory, unwarranted
deductions of fact, or unreasonable inferences.” In
re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th
Cir. 2008) (internal quotation marks and citations omitted).
While a complaint need not contain detailed factual
allegations, it “must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is
facially plausible when it “allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Id.
turning to the merits of these arguments, the Court addresses
SDS and Elk Grove's requests for judicial notice.
requested judicial notice of seven documents, attached to the
request as Exhibits A through G: (A) Deed of Trust
(“DOT”); (B) Assignment of DOT from Mortgage
Electronic Registration System, Inc. to Bayview Loan
Servicing, LLC recorded on May 21, 2012; (C) Assignment of
Mortgage/DOT from Bayview Loan Servicing, LLC to Bucks
Financial V, LLC recorded on April 10, 2014; (D) Assignment
of Mortgage/DOT from Bucks Financial V, LLC to Elk Grove
Financial, LLC recorded on January 20, 2016; (E) Substitution
of Trustee recorded on February 29, 2016, in which Elk Grove
substituted SDS as trustee; (F) Notice of Default recorded on
February 29, 2016; and (G) Notice of Trustee's Sale