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Stromberg v. Ocwen Loan Servicing, LLC

United States District Court, N.D. California

June 22, 2017

BONNIE LYNNE STROMBERG, Plaintiff,
v.
OCWEN LOAN SERVICING, LLC, et al., Defendants.

          ORDER REGARDING MOTIONS TO DISMISS AND MOTION TO STRIKE RE: ECF NOS. 60, 61, 62

          JON S. TIGAR, United States District Judge

         Before the Court are the Defendants' motions to dismiss and to strike portions of the Plaintiff's second amended complaint. ECF Nos. 60, 61, 62. The Court grants the motion to dismiss Plaintiff's claim for injunctive relief, but denies the motions to dismiss and motion to strike in all other respects.

         I. BACKGROUND

         In this putative class action, Plaintiff Bonnie Lynne Stromberg asserts a California state law claim against two mortgage lenders and a mortgage loan servicing company for failing to reconvey a deed of trust on real property within thirty days after repayment of her home loan. Second Amended Complaint (“SAC”), ECF No. 58.

         Plaintiff owns property at 2405 Ric Drive, Gilroy, California that was encumbered by a ten-year home equity line of credit (“the loan”) in the amount of $150, 000. Id. ¶¶ 9, 18. Plaintiff obtained the loan from Morgan Stanley Dean Witter Credit Corporation on March 2, 2005. Id. The loan was secured by a deed of trust on her property, which Plaintiff executed in favor of Morgan Stanley Dean Witter Credit Corporation as the beneficiary. Id. ¶¶ 4, 18. The deed of trust was recorded in the Santa Clara County Clerk-Recorder's Office on April 11, 2005. Id.; ECF No. 61˗2 at 5.[1]

         Morgan Stanley Home Loans serviced the loan from its inception in March 2005 until April 30, 2012. Id. ¶ 21. Effective May 1, 2012, Ocwen Loan Servicing, LLC (“Ocwen”) became the loan servicer pursuant to a pooling and servicing agreement. Id. ¶ 22. Ocwen notified Plaintiff that it was the new loan servicer, but “the notice did not identify the owner of the loan or the beneficiary or assignee of the Deed of Trust.” Id. ¶ 22.

         “On December 12, 2014, pursuant to Plaintiff's request, Ocwen provided a payoff statement for the loan, which stated that the total amount then due was $19, 085.43, and that such payoff needed to be made on or before January 9, 2015.” Id. ¶ 23; see also ECF No. 58˗1, Ex. 1. The payoff statement provides that, “[u]pon receipt of the entire payoff amount, Ocwen will execute a release and discharge for the Deed of Trust/Mortgage . . . ” Id. at 3.

         On January 5, 2015, Plaintiff paid Ocwen the total amount due via wire transfer, thus satisfying all of her remaining obligations under the loan. SAC, ECF No. 58 ¶ 26. On January 7, 2015, Ocwen acknowledged that it received the wire transfer on January 5, 2015, and informed Plaintiff that her “account now reflects a principal balance of $0.00.” Id. ¶ 27; ECF No. 58˗2, Ex. 2. Ocwen instructed Plaintiff to sign, notarize, and return an attached form if she wished to close the account. ECF No. 58˗2, Ex. 2 at 2. On January 14, 2015, Plaintiff executed and notarized the written request to close the account. ECF No. 58˗3, Ex. 3.

         Ocwen sent Plaintiff another letter on February 18, 2015 in which it again “acknowledged that Plaintiff's Loan had been fully paid.” Id. ¶ 29; ECF No. 58˗4, Ex. 4. In the same letter, Ocwen stated the following: “Ocwen will send the lien release document to the county courthouse in which your property resides. Once we receive confirmation that the release document has been recorded, we will forward you that information for your records. Depending on the state and county involved, this final step can take up to six (6) months.” ECF No. 58˗4, Ex. 4 at 2. Ocwen informed Plaintiff that the recordation of a “lien release document” would “make[] it a matter of public record that Ocwen no longer claims any interest in the above property with respect to this loan.” Id.

         None of the Defendants delivered the original note, deed of trust, request for full reconveyance, or other necessary documents for reconveyance to the trustee within thirty days of loan satisfaction as required by California Civil Code § 2941(b). SAC, ECF No. 58 ¶¶ 33˗34. The trustee did not execute a full reconveyance of the deed of trust to Plaintiff until June 25, 2015, and this reconveyance was not recorded by the Santa Clara County Recorder until July 1, 2015. ECF No. 61˗2 at 21. Plaintiff alleges that this delay caused her to “suffer[] injury in the form of slander of title, incurred costs, impaired credit and incomplete and inaccurate public records respecting her financial obligations and credit worthiness.” SAC, ECF No. 58 ¶ 43.[2]

         Plaintiff alleges that “the ownership status of Defendants vis-à-vis the Loan and Deed of Trust as of the date on which the obligations arose under Cal. Civ. Code § 2941(b) is not easily ascertained” because the Defendants “fail[ed] . . . to properly maintain a record of transactions affecting the ownership of Plaintiff's Loan and the Deed of Trust securing the Loan.” Id. ¶ 36. Plaintiff alleges that Defendant Morgan Stanley Private Bank, N.A. (“Morgan Stanley”) acquired Plaintiff's loan in 2011 from its predecessor, Morgan Stanley Credit Corporation, after a corporate merger. Id. ¶¶ 11, 19˗20. And Morgan Stanley was listed as the beneficiary on the deed of trust at the time the Plaintiff satisfied her loan in January 2015. Id. ¶ 38. However, both Morgan Stanley and its Co-Defendant RBS Citizens, N.A. (“Citizens”) “maintain that, at some point after the origination of the Loan, Citizens acquired ‘Investor Rights' in the Loan . . . pursuant to a [purchase agreement] between [Morgan Stanley Credit Corporation] and Citizens dated March 1, 2006.” Id. ¶ 37. Accordingly, Plaintiff alleges “that Citizens in fact acquired an ownership interest in the Loan prior to the date on which the Loan was satisfied, although no assignment of the Deed of Trust was executed or recorded in connection with the Purchase Agreement until many years later and more than 30 days after the Loan was satisfied.” Id. In fact, Morgan Stanley did not execute an assignment of the deed of trust to Citizens until June 2, 2015, and that assignment was not recorded with the Santa Clara County Clerk Recorder until July 1, 2015. Id. ¶ 38; ECF No. 61˗2 at 15.

         Plaintiff also alleges that, “[a]lthough Defendant Ocwen was not the lender on Plaintiff's Loan or an investor to whom the Deed of Trust was formally assigned, . . . Ocwen acquired an interest in the Loan at some point, which it continued to possess at the time that the obligations under [California law] arose and as to which it thereafter acted for its own advantage or benefit.” SAC, ECF No. 58 ¶ 40. Plaintiff further alleges that, “even if it was not the beneficiary or assignee of the Loan or Deed of Trust, Ocwen had and has an independent responsibility for complying with Section 2941(b) . . .” Id. ¶ 41.

         Plaintiff filed her complaint in California state court on September 4, 2015. ECF No. 1-1. She asserts a single cause of action under California Civil Code § 2941(b) against all three Defendants. SAC, ECF No. 58 ¶¶ 60˗63. She seeks declaratory and injunctive relief, statutory damages in the amount of $500 per violation, and reasonable attorney's fees. SAC, ECF No. 58 at 17˗18. Ocwen subsequently removed the action federal court. ECF No. 1˗1.

         II. JURISDICTION

         This Court has jurisdiction over the action under the Class Action Fairness Act of 2005 (“CAFA”) because Plaintiff asserts this action on behalf of more than one hundred putative class members; the parties are diverse; and the aggregate amount in controversy exceeds $5 million. 28 U.S.C. § 1332(d)(2).

         III. ANALYSIS

         All three Defendants move to dismiss Plaintiff's second amended complaint under Rule 12(b)(1) and/or Rule 12(b)(6). ECF No. 60, 61, 62. In the event the Court does not dismiss Plaintiff's complaint in its entirety, Ocwen moves to strike Plaintiff's request for attorneys' fees, costs, pre- and post-judgment interest, and injunctive relief under Rule 12(f). ECF No. 61.

         A. Request for Judicial Notice

         Pursuant to Federal Rule of Evidence 201(b), “[t]he court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the trial court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” The Court may also “consider materials incorporated into the complaint, ” where “the complaint necessarily relies upon a document or the contents of the document are alleged in a complaint, the document's authenticity is not in question and there are no disputed issues as to the document's relevance.” Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010). The Court “must take judicial notice if a party requests it and the court is supplied with the necessary information.” Fed.R.Evid. 201(c)(2).

         Pursuant to Ocwen's request, the Court takes judicial notice of the following documents associated with Plaintiffs loan and deed of trust:

• April 11, 2005 deed of trust identifying Morgan Stanley Dean Witter Credit Corporation as beneficiary
• July 1, 2015 corporate assignment of deed of trust from Morgan Stanley to Citizens
• July 1, 2015 substitution of T.D. Service Company as trustee
• July 1, 2015 full reconveyance of the deed of trust to Plaintiff

ECF No. 61˗2. Each of these documents was publicly recorded by the Santa Clara County Record's Office. As such, they are public records that are properly subject to judicial notice. Allen v. United Fin. Mortg. Corp., 660 F.Supp.2d 1089, 1093 (N.D. Cal. 2009) (taking judicial notice of recorded instruments that affect the parties' property interests). Plaintiff does not object to the accuracy of these documents, which are incorporated into her complaint. The Court may take judicial notice of these documents without converting the motions to dismiss into motions for summary judgment. Thomas v. Walt Disney Co., 337 F. App'x 694, 695 (9th Cir. 2009) (quoting Mack v. South Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986)).

         B. Motion to Dismiss for Lack of Subject Matter Jurisdiction

         Ocwen moves to dismiss Plaintiffs second amended complaint under Rule 12(b)(1) for lack of subject matter jurisdiction on standing and mootness grounds. ECF ...


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