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Rocha v. CIT Bank, N.A.

United States District Court, N.D. California, San Jose Division

April 3, 2018

JORGE ROCHA, ET AL., Plaintiffs,
CIT BANK, N.A., et al., Defendants.



         Plaintiffs Jorge Rocha and Anna Rocha bring this action against CIT Bank, N.A., fka OneWest Bank FSB, NBS Default Services, LLC, IndyMac Bank FSB, and OneWest Bank FSB. The action was initiated in state court and removed to this District based on diversity jurisdiction. Notice of Removal, ECF 1.[1] On September 22, 2017, Plaintiffs voluntarily filed a First Amended Complaint (“FAC”). FAC, ECF 24. Before the Court is Defendant CIT Bank, N.A.'s (“CIT Bank”) motion to dismiss the FAC. Mot., ECF 30.

         The Court attempted to hold a hearing on CIT Bank's motion to dismiss on February 8, 2018. Counsel for CIT Bank appeared but counsel for Plaintiffs failed to appear and did not inform the Court why an appearance was not possible. See ECF 45. The Court issued an Order to Show Cause why Attorney Patricia Renee Rodriguez should not be sanctioned for her failure to appear at the hearing. ECF 47. Ms. Rodriguez timely filed a declaration stating that she had experienced a medical emergency and had instructed her associate to set up an appearance attorney to appear at the hearing. ECF 50. However, her associate miscommunicated the location of the hearing to the appearance attorney. Id. Thus, no one appeared on behalf of Plaintiffs. In light of Ms. Rodriguez's statements, the Court hereby DISSOLVES the Order to Show Cause. The Court reminds the parties that it does not allow “appearance attorneys” not associated with lead counsel to make a substitute appearance.

         Pursuant to Civil Local Rule 7-1(b), the Court takes this matter under submission without oral argument. Upon consideration of the briefing, and for the reasons set forth below, the Court GRANTS CIT Bank's motion to dismiss without leave to amend.

         I. BACKGROUND

         Plaintiffs purchased a home in 2007 by taking out a loan from IndyMac Bank FSB (“IndyMac”). FAC ¶ 11. The Deed of Trust was recorded in the Official Records of Santa Clara County on June 18, 2007. Id. ¶ 12; Ex. A to Request for Judicial Notice (“RJN”), ECF 40.[2]Thereafter, a Corporate Assignment of Deed of Trust was recorded on June 21, 2010, under which the FDIC as receiver for IndyMac assigned all interest under the Deed of Trust to OneWest Bank FSB (“OneWest Bank”). Ex. B to RJN, ECF 40. OneWest Bank later became CIT Bank. See FAC ¶ 4. As for the chain of substitution for trustees, IndyMac substituted Quality Loan Service Corp. as the trustee on June 9, 2009. Ex. C to RJN, ECF 40. Thereafter, on December 21, 2016, OneWest Bank substituted NBS Default Services, LLC (“NBS”), which remains as the trustee. Ex. D to RJN, ECF 40.

         Plaintiffs filed this action in state court around April 25, 2017 alleging that Defendants attempted to wrongfully foreclose Plaintiffs' property. Notice of Removal 1. CIT Bank was served with the summons and complaint on August 2, 2017. Id. On August 25, 2017, Plaintiffs sought an ex parte temporary restraining order (“TRO”) against the foreclosure sale of Plaintiffs' property. Id. The state court issued the TRO and an order to show cause (“OSC”) why a preliminary injunction should not be issued. Id. at 1-2. On August 31, 2017, CIT Bank removed this action to this District with NBS' consent. Id. at 1; ECF 4. On October 3, 2017, Plaintiffs filed a declaration to withdraw the OSC for preliminary injunction. Rodriguez Decl., ECF 26. The declaration provides that CIT Bank sent a letter stating that it had received a complete loan modification application and would “review the application for mortgage assistance.” Id.

         After this action was removed, Plaintiffs filed their FAC on September 22, 2017. The FAC alleges the following. Plaintiffs' deed of trust was securitized and a pooling and servicing (“PSA”) agreement for the trust was filed with the SEC. FAC ¶¶ 18-21, 63. The purported securitization of the loan caused a splitting of the interest in Plaintiffs' note and deed of trust. Id. ¶ 30. Due to this splitting of interest, the transfer of the deed of trust to Defendants did not occur and thus Defendants have no right to take any action against Plaintiffs' property. Id. ¶¶ 25-30, 67, 69-75. Although Defendants have no interest in the deed of trust, they unlawfully attempted to foreclose Plaintiffs' property. Id. ¶¶ 17, 75-77.

         The FAC further alleges that Plaintiffs “applied for a loan modification on August 2, 2017, by submitting a complete application to [CIT Bank].” Id. ¶ 119. According to the FAC, CIT Bank sent a letter dated August 22, 2017 denying Plaintiffs' August 2, 2017 application due to an “imminent foreclosure sale” scheduled on August 28, 2017 and engaged in dual tracking. See id. ¶¶ 115-26.

         Based on the above allegations, the FAC asserts six causes of action: (1) wrongful foreclosure; (2) violation of California Civil Code § 2924(a)(6); (3) declaratory relief; (4) violation of California Business and Professions Code § 17200, (5) breach of the covenant of good faith and fair dealing; (6) violation of California Civil Code § 2923.6. Id. ¶¶ 62-126.


         A. Rule 12(b)(6)

         To survive a Rule 12(b)(6) motion to dismiss, 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)). When considering a motion to dismiss, 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). However, the Court need not accept as true “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).

         B. Request for Judicial Notice

         In connection with its motion to dismiss, CIT Bank filed a Request for Judicial Notice (“RJN”) of a (1) Deed of Trust for the property at issue recorded on June 18, 2007; (2) Corporate Assignment of Deed of Trust recorded on June 11, 2010; (3) Substitution of Trustee recorded on June 9, 2009; (4) Substitution of Trustee recorded on December 21, 2016; (5) Modification Agreement executed on December 10, 2011 and recorded on January 27, 2011; and (6) Notice of Default and Election to Sell Under Deed of Trust recorded on March 10, 2017. See ECF 30-1; ECF 40. All of these documents are recorded in the Official Records of Santa Clara County. ECF 30-1. These documents are properly subject to judicial notice because they are either incorporated by reference into the FAC or they are official public records. See Fed. R. Evid. 201(b)(2); see also Gamboa v. Trustee Corps & Cent. Mortgage Loan Servicing Co., 2009 WL 656285, at *3 (N.D. Cal. Mar. 12, 2009) (taking judicial notice of recorded documents related to a foreclosure sale, including grant deed and deed of trust because “[t]hese documents are central to Plaintiffs' allegations that Defendants were not entitled to initiate a foreclosure sale of their property. These documents are also part of the public record and are easily verifiable.”) Accordingly, CIT Bank's RJN is GRANTED.


         The Court now turns to CIT Bank's motion to dismiss each claim asserted in the FAC under Rule 12(b)(6). For the reasons that follow, CIT Bank's motion to dismiss the FAC is GRANTED without leave to amend.

         A. First Cause of Action: Wrongful Foreclosure

         Under the first cause of action, Plaintiffs allege that Defendants' attempt to foreclose the property at issue was unlawful because the interest in Plaintiffs' loan was not transferred to Defendants due to securitization of the loan. FAC ¶¶ 62-77. CIT Bank argues that Plaintiffs lack standing to challenge the purported securitization of their loan because no foreclosure has occurred. Mot. 6. Plaintiffs respond that they have a proper cause of action in light of Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919 (2016). Opp'n 5-7, ECF 36.

         In Yvanova, the California Supreme Court held that “a home loan borrower has standing to claim a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void, depriving the foreclosing party of any legitimate authority to order a trustee's sale.” Yvanova, 62 Cal.4th at 942-43. That holding is of no help to Plaintiffs, as they failed to allege that a nonjudicial foreclosure sale took place. Under California law, a borrower lacks standing to file a lawsuit to preempt a nonjudicial foreclosure. Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal.App.4th 808, 814-15 (Ct. App. 2016). Nothing in Yvanova suggests that a borrower may bring a preemptive claim for wrongful foreclosure. To the contrary, the California Supreme Court expressly limited the reach of its holding: “We do not hold or suggest that a borrower may attempt to preempt a threatened nonjudicial foreclosure by a suit questioning the foreclosing party's right to proceed.” Yvanova, 62 Cal.4th at 924. In fact, Keshtgar v. U.S. Bank, N.A., a case cited by Plaintiffs, expressly holds that Yvanova did not change California law that prohibits a borrower from filing an action to preempt foreclosure. 2016 Cal.App. Unpub. LEXIS 5822, *7-8 (August 8, 2016).

         Accordingly, Plaintiffs lack standing to pursue the first cause of action as they do not plead that a foreclosure sale took place. CIT Bank represents that no foreclosure occurred and that it has been postponed, Mot. 2, and Plaintiffs do not argue otherwise in their opposition. Plaintiffs' lack of standing cannot be cured by an amendment. In re Turner, 859 F.3d 1145, 1151 (9th Cir. 2017) (affirming the district court's dismissal of the wrongful foreclosure claim because any amendment would have been futile). The Court therefore GRANTS CIT Bank's motion to dismiss the first cause of action without leave to amend.

         B. Second Cause of Action: Violation of California Civil ...

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