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Thomas v. Quality Loan Service Corp.

United States District Court, S.D. California

July 10, 2019

RUDIE THOMAS, Plaintiff,



         Plaintiff Rudie Thomas is a litigant familiar to this Court. In 2014, he was declared a vexatious litigant with respect to the repeated lawsuits he filed against Bank of America following foreclosure of his property located at 5048 Crescent Bay. (See 13-cv-1576-LAB-JLB, ECF No. 24.) In that case, Chief Judge Burns enjoined Mr. Thomas from filing any further civil actions against Bank of America with respect to foreclosure of his home without approval of the court.

         Astonishingly, in 2016, Mr. Thomas was issued another mortgage on a property located at 3771 Coleman Avenue. When Wells Fargo Bank foreclosed on this property, Mr. Thomas commenced legal proceedings against Wells Fargo Bank in San Diego Superior Court. Upon losing his case in state court, he now files this case against Quality Loan Service Corp. (“QLS”), the trustee on the Wells Fargo Bank foreclosure sale.

         In the Superior Court case Mr. Thomas alleged: (1) Wells Fargo Bank did not have the right to foreclose on his Coleman Avenue property because the note was forged, (2) Wells Fargo Bank was not properly assigned the Deed of Trust, and (3) Wells Fargo Bank did not properly substitute Quality Loan Service Corp. as the trustee under the Deed of Trust. The San Diego Superior Court found all of these claims lacked merit, ruling:

It is undisputed that plaintiff entered into the subject loan transaction, accepted the loan funds and purchased the property, moved into the property and made payments to Wells Fargo. The undisputed evidence demonstrates that Wells Fargo was properly assigned the Deed of Trust and properly substituted in Quality Loan Service Corp. as the foreclosure trustee.

Thomas v. Wells Fargo Home, Cas No. 37-2016-00019344-CU-OR-CTL. (See ECF No. 7-2, at 39.)

         Plaintiff now files this federal case against QLS alleging various causes of action, including violations of the Fair Debt Collections Practices Act and the Racketeer Influenced and Corrupt Organizations Act. Plaintiff also alleges civil rights violations and various conspiracies, claiming that Wells Fargo and QLS unlawfully extorted money from him when they sent duplicitous and false invoices resulting in the foreclosure of the property on Coleman Avenue.[1] In sum, Plaintiff's 123-page complaint alleges sixteen causes of action and Plaintiff requests $40, 230, 029.40 in damages.

         Defendant QLS moves to dismiss the Complaint, (“Mot., ” ECF No. 7). Plaintiff opposes the motion. (ECF No. 10.)[2] The Court finds this Motion suitable for determination on the papers and without oral argument. Civ. L. R. 7.1(d)(1). For the reasons stated below, the Court GRANTS Defendant's Motion.


         Plaintiff alleges he is the owner of a property located at 3771 Coleman Avenue in San Diego. (“Compl., ” ECF No. 1, at ¶ 1.) A deed of trust dated August 26, 2014 indicates Plaintiff obtained a loan of $356, 385 secured by a Deed of Trust against the property located at 3771 Coleman Avenue. The deed of trust lists Mortgage Electronic Registration Systems, Inc. (“MERS”) as the nominal beneficiary for Moria Development, Inc. (ECF No. 1, at 53-54.)[3] On December 29, 2015, a Substitution of Trustee was recorded, and Defendant QLS was named as trustee. (Id. at 88.) The document is signed by Mr. Andrew Basom, counsel for Wells Fargo Bank. (Id. at 89.) Plaintiff alleges QLS and Mr. Basom “had no legal authority” to allow the substitution of trustee because Ginnie Mae did not grant permission, and Plaintiff alleges Ginnie Mae is the principal of the loan. (Compl. ¶¶ 18, 32, 33.) Plaintiff alleges the substitution is void and has a created a “cloud” on his title. (Compl. ¶¶ 32, 33.)

         On December 31, 2015, Defendant recorded a notice of default. (ECF No. 1, at 91.) On April 4, 2016, Defendant recorded a notice of trustee's sale due to Plaintiff's unpaid balance. (Id. at 96.) On May 13, 2016, Defendant recorded a trustee's deed upon sale. (Id. at 99.) Text at the end of these notices states that Defendant “may be considered a debt collector attempting to collect a debt.” (Id. at 97, 100.) Plaintiff alleges Defendant is not and cannot be a debt collector. (Compl. ¶ 45.) Plaintiff states Defendant continues to “harass” him with the improper “amounts & instruments.” (Id. ¶ 46.) Plaintiff alleges Defendant sent him financial information that contained false and misleading information, which incorrectly said Plaintiff owed a debt. (Id. ¶ 33.) Plaintiff also appears to allege Defendant charged “unauthorized charges . . . to an account purporting to be plaintiffs [sic] account.” (Id. ¶ 47.)


         A complaint must plead sufficient factual allegations to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citations omitted). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed.R.Civ.P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pleaded in the complaint as true and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A Rule 12(b)(6) dismissal may be based on either a ‘lack of a cognizable legal theory' or ‘the absence of sufficient facts alleged under a cognizable legal theory.'” Johnson v. Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990)).

         III. ANALYSIS

         Defendant moves to dismiss each of Plaintiff's causes of action but first argues it is protected by privilege.

         A. Litigation Privilege

         Defendant was the trustee of Plaintiff's loan and argues it is protected by the litigation privilege. Defendant argues its “advancement of the nonjudicial foreclosure is statutorily protected under Cal. Civ. Code § 47 and accordingly, this conduct cannot form the basis of any tort cause of action.” (Mot. at 4.)

         Under a deed of trust containing a power of sale, the borrower, or “trustor” (here, Plaintiff), conveys nominal title to property to an intermediary, the “trustee” (at the time, First American Title Company), who holds that title as security for repayment of the loan to the lender, or “beneficiary” (at the time, Moria Development Inc.). (ECF No. 1 at 52-53); see Kachlon v. Markowitz, 168 Cal.App.4th 316, 334 (2008) (citations omitted). Mortgage Electronic Registration Systems, Inc. (“MERS”) was listed as the nominal beneficiary for Moria. (ECF No. 1 at 52-53.)

         The beneficiary may make a substitution of trustee. Cal. Civil Code § 2924a; Kachlon, 168 Cal.App.4th at 334 (citations omitted). This occurred here, and the recorded substitution of trustee document provides that the beneficiary, Wells Fargo, substituted in a new trustee, QLS. (ECF No. 1, at 88.) Plaintiff appears to be confused why Wells Fargo has the ability to do so. Plaintiff failed to include an important document, where MERS assigned the deed of trust to Wells Fargo Bank, N.A. Defendant attached a recorded copy of this document to its Motion. (ECF No. 7-2, at 21.)[4] Thus, Wells Fargo was the beneficiary at the time of the substitution. Wells Fargo then substituted the trustee and recorded the substitution in San Diego County, the County where the property is located. (ECF No. 1, at 88); see 4 Miller & Starr § 13:9 (4th ed. 2019). After considering Plaintiff's complaint, documents incorporated by reference, and “matters properly subject to judicial notice, ” Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007), the Court finds that Wells Fargo was the beneficiary at the time of the substitution and validly substituted QLS as the trustee. Plaintiff makes strong allegations to the contrary, but in the face of the properly introduced public records, of which the Court takes judicial notice, Plaintiff's allegations to the contrary are not well-pled; they are merely legal conclusions couched as factual allegations and they do not suffice to survive the motion to dismiss. Further, as noted above, the state court found that QLS was the properly substituted trustee under the Deed of Trust. (See ECF No. 7-2, at 39.)

         Next, if the trustor defaults on the debt secured by the deed of trust, “the beneficiary may declare a default and make a demand on the trustee to commence foreclosure.” Kachlon, 168 Cal.App.4th at 334 (citing Miller & Starr, at § 10:181). Here, Plaintiff does not seem to dispute that he defaulted on the debt; his Complaint merely lays out the events that occurred without disputing the reason for the default. (Compl. ¶¶ 37-40.)[5] Defendant then followed the steps laid out in the Civil Code. The trustee sends a notice of default, then after at least three months, the trustee must publish, post, and mail a notice of sale at least 20 days before the sale, and must also record the notice of sale at least 14 days before the sale. Kachlon, 168 Cal.App.4th at 334-35 (citing Cal. Civil Code § 2924(a).) This was done here.

         Therefore, Defendant argues it is protected by the litigation privilege. The Court agrees. The Civil Code provides “[t]he mailing, publication, and delivery of notices as required” in the code constitute privileged communications pursuant to Civil Code section 47. Cal. Civil Code § 2924(d). Section 47 provides a qualified privilege for communications made by an interested person without malice to another interested person. Id. § 47(c)(1). Malice means “that the publication was motivated by hatred or ill will towards the plaintiff or by a showing that the defendant lacked reasonable grounds for belief in the truth of the publication and therefore acted in reckless disregard of the plaintiff's rights.” Kachlon, 168 Cal.App.4th at 336 (quotation and citations omitted).

         Here, Plaintiff does not allege that Defendant acted with malice because he does not allege Defendant was acting out of hatred or that it had no grounds for believing in the truth of the documents it recorded. On the contrary, Defendant was the trustee and was simply following the code when Plaintiff failed to pay his debt. This does not show malice, and Defendant's communication is privileged. See Schep v. Capital One, N.A., 12 Cal.App. 5th 1331, 1336 (2017) (finding the trustee's actions of recording a notice of sale, notice of default, and trustee's deed upon sale are privileged). “This privilege is a natural fit for nonjudicial foreclosure. The trustee's statutory duties in effectuating the foreclosure are designed, in major part, to communicate relevant information about the foreclosure to other interested persons.” Kachlon, 168 Cal.App.4th at 339.

         The privilege bars any tort action based on a protected communication made without malice. Rubin v. Green, 4 Cal.4th 1187, 1193-94 (1993). The privilege does not, however, defeat federal causes of action. Hinrichsen v. Bank of Am. N.A., No. 17-cv-219 DMS (RBB), 2017 WL 2992662, at *2 n.3 (S.D. Cal. July 14, 2017) (citing cases); OEI v. N Star Capital Acquisitions, LLC, 486 F.Supp.2d 1089 (C.D. Cal. 2006) (holding that ...

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