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L.P. v. Deutche Bank National Trust Co.

United States District Court, S.D. California

August 30, 2017

CRESCENZO 1, L.P., Plaintiff,


          Hon. Cathy Ann Bencivengo United States District Judge.

         On May 17, 2017, Defendants removed this case from state court based on federal question jurisdiction because of two claims under the federal Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1962 (“RICO”). In response to a motion to dismiss, Plaintiff filed its first amended complaint (“FAC”) in this Court. Defendants now move to dismiss the FAC in its entirety. The motion has been fully briefed and the Court deems it suitable for submission without oral argument. Because the FAC fails state a RICO claim, and because any amendment to the RICO claim would be futile, the motion to dismiss is granted with prejudice as to the two RICO claims. The Court declines to exercise supplemental jurisdiction over the remaining state law claims and therefore remands this case to state court.

         I. Allegations in the FAC

         Louis A. Crescenzo (“LAC”) executed a promissory note and deed of trust[1](collectively, the “Loan”) with Metrocities Mortgage LLC (“Metrocities”) in 2004 for a property located at 842 Felspar Street, San Diego, California (the “Property”). LAC then transferred his interest in the property to Louis A. Crescenzo Trust (the “Trust”) subject to the deed of trust and promissory note with Metrocities. Initially, IndyMac Mortgage Services (“Indymac”) serviced the Loan on behalf of Metrocities. During this period, neither Indymac nor Metrocities required LAC to contribute to an escrow account for property taxes, insurance and other property-related expenses. Instead, LAC paid property taxes directly to the San Diego County Treasurer and insurance directly to Farmer's Insurance.

         In 2011, LAC died. Pursuant to the Trust, LAC's ownership interest in the Property passed to Plaintiff, Crescenzo 1, L.P. The Trustee of the Trust notified Metrocities and Indymac that Plaintiff was the new owner of the Property. At this point, Plaintiff continued to make payments on the Loan with Metrocities and to pay the property taxes and insurance directly to the County and Farmer's Insurance, respectively. Plaintiff used the Property for commercial purposes, renting multiple units thereon to tenants.

         At some point after Plaintiff became the owner of the Property, the Loan was transferred to Defendant Deutsche Bank National Trust Company (“DBNTC”). In October 2013, Defendant Ocwen Loan Servicing, LLC (“Ocwen”) took over servicing the Loan from Indymac. Ocwen began requiring Plaintiff[2] to pay into an escrow account for property taxes and insurance payments.[3] From October 2013 to May 2014, these escrow payments equaled $498.93 per month, and from June 2014 to May 2015, the payments equaled $96.26 per month. Plaintiff paid these escrow payments with the Loan principal and interest payments until May 2015. However, according to the FAC, Ocwen never made any property tax or insurance payments from the escrow account. Instead, Plaintiff continued to pay property taxes and insurance directly to the County Treasurer and Farmer's Insurance, respectively.

         Beginning in June 2015, the escrow portion of the Loan payment increased to $1, 193.37 per month. Plaintiff disputed this escrow payment and the existence of the escrow account itself with Ocwen, arguing that the account and escrow payments were not authorized because Plaintiff had already paid the property taxes and insurance for 2015 directly. At this point, Plaintiff continued to make payments equal to the principal and interest owed on the Loan, but did not pay the escrow amount. Ocwen then began assessing late fees and interest. While this was happening, Ocwen refused to communicate with Plaintiff concerning the Loan or the escrow account until Plaintiff provided evidence that it owned the Property. Ocwen demanded LAC's will and probate court documents reflecting the transfer of the Property from LAC to Plaintiff, but because the Property was conveyed through the Trust, no such documents existed. Plaintiff provided Ocwen with the Trust documents, but Ocwen continued in its refusal to communicate with Plaintiff about the dispute over the escrow payment and late fees.

         Plaintiff continued making monthly principal and interest payments, but not escrow payments, on the Loan through May 2016. Ocwen continued to issue monthly delinquency notices and notices of default on the Loan. In May 2016, Ocwen again required escrow payments for property taxes and insurance, and Plaintiff again disputed these payments because it had already paid the 2016 property taxes and insurance on the Property directly. Plaintiff continued to make payments equal to the principal and interest due on the Loan from June 2016 through April 2017, but Ocwen returned these payments without depositing them. Plaintiff made another property tax payment to the County Treasurer on November 3, 2016. At no point did Ocwen make any property tax or insurance payments on the Property.

         On October 18, 2016, Defendant Western Progressive, LLC (“Western”) recorded a Notice of Default (“NOD”). The NOD stated that Ocwen had “exercised due diligence to contact the borrower pursuant to California Civil Code 2923.55(f) to ‘assess the borrower's financial situation and explore options for the borrower to avoid foreclosure.' Thirty (30) days, or more, have passed since these due diligence requirements were satisfied.” [Doc. No. 5-2 at 25.]

         In January 2017, Plaintiff received a notice of trustee's sale from Western, listing a sale date of March 7, 2017. On March 1, 2017, Plaintiff filed the original complaint in state court. The complaint asserted two RICO claims along with state law claims for wrongful foreclosure, violation of California Civil Code § 2923.5, slander of title, breach of contract, and unfair competition in violation of California Civil Code § 17200. On May 17, 2017, Defendants removed the complaint to this Court and subsequently filed a motion to dismiss. In response, Plaintiff filed the FAC asserting the same claims. Defendants then filed the instant motion to dismiss the FAC.

         II. Legal Standards

         In most cases, to survive a motion to dismiss under Rule 12(b)(6), “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, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Thus, the Court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). On the other hand, the Court is “not bound to accept as true a legal conclusion couched as a factual allegation.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 555). Nor is the Court “required to accept as true allegations that contradict exhibits attached to the Complaint or . . . allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). “In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotation marks omitted).

         Plaintiff, however, argues that its RICO claims are based on predicate acts of mail fraud. Therefore, the RICO claims are subject to the heightened pleading standard under Rule 9(b), which requires plaintiffs to “state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b); Edwards v. Marin Park, Inc., 356 F.3d 1058, 1065-66 (9th Cir. 2004) (“Rule 9(b)'s requirement that ‘[i]n all averments of fraud or mistake, the circumstances constituting fraud or mistake shall be stated with particularity' applies to civil RICO fraud claims.”). “Rule 9(b) demands that the circumstances constituting the alleged fraud be specific enough to give defendants notice of the particular misconduct so that they can defend against the charge and not just deny that they have done anything wrong.” Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (internal quotation marks and ellipses omitted). “Averments of fraud must be accompanied by the who, what, when, where, and how of the misconduct charged.” Id. (quoting Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003)) (emphasis added; internal quotation marks omitted). Thus, when a plaintiff claims that a statement is false or misleading, “[t]he plaintiff must set forth what is false or misleading about a statement, and why it is false.” Vess, 317 F.3d at 1106 (emphasis added; internal quotation marks omitted).

         III. ...

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