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Miller v. Select Portfolio Servicing Inc.

United States District Court, E.D. California

July 12, 2019

ROBERT MILLER, JUNE MILLER, Plaintiffs,
v.
SELECT PORTFOLIO SERVICING INC., et al., Defendants.

          ORDER

         Plaintiffs Robert Miller and June Miller allege defendants improperly sold their property in a November 18, 2016 non-judicial foreclosure sale. Defendants Select Portfolio Servicing, Inc. and DLJ Mortgage Capital, Inc. move to dismiss plaintiffs' complaint. As explained below, the court GRANTS the motion.

         I. BACKGROUND

         A. Factual Background

         On January 19, 2010, plaintiffs borrowed $244, 356.00 to purchase real property at 2180 Calder Place in Fairfield, California. First Am. Compl. (“FAC”), ECF No. 17, ¶¶ II.a-b. The loan was secured by a deed of trust recorded on January 19, 2010, which named Executive Trustee Services as trustee for beneficiary Mortgage Electronic Registration Systems, Inc. (“MERS”) on behalf of lender Ally Bank Corp. f/k/a GMAC Bank. Id. ¶ II.b.; see Defs.' Req. Judicial Notice (“RJN”), [1] ECF No. 19-1, Ex. A (deed of trust recorded Jan. 19, 2010). On May 14, 2012, MERS assigned all beneficial interest under the deed of trust to GMAC Mortgage, LLC (“GMAC”). RJN Ex. B (assignment of deed of trust recorded May 22, 2012). In April 2016, GMAC, by its attorney in fact Select Portfolio Servicing, Inc. (“SPS”), assigned its interest under the deed of trust to DLJ Mortgage Capital, Inc. (“DLJ”). RJN Ex. C (assignment of deed of trust recorded April 21, 2016); see FAC ¶ II.b (alleging DLJ held the mortgage and SPS “processed the collection of funds” at the time of the foreclosure sale).

         On June 10, 2016, a notice of default and election to sell under deed of trust was recorded, indicating plaintiffs were $21, 230.80 in arrears as of June 8, 2016. RJN Ex. D. DLJ's declaration of compliance with California Civil Code section 2923.55(c) was attached to this notice. Id. The declaration was signed by an SPS “Document Control Officer” on April 19, 2016 and indicated that on March 21, 2016, SPS contacted “the borrower to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure as required by California Civil Code § 2923.55(b)(2).” Id.

         On an unspecified date, plaintiffs entered into loan modification discussions with SPS. FAC ¶ II.c. On June 17, 2016, plaintiffs submitted a loan modification package to SPS and submitted a package again[2] on September 17, 2016. Id. On September 21, 2016, a notice of trustee's sale was recorded, indicating plaintiffs' property would be sold on October 13, 2016. RJN Ex. E. SPS sent plaintiffs a letter dated October 14, 2016, indicating plaintiffs' loan modification application was incomplete and requesting additional documentation. Mot., Ex. 1. Plaintiffs timely complied with SPS's requests for forms and documents in support of their modification application. FAC ¶ II.e.

         On November 18, 2016, while the modification process was ongoing, without notice to plaintiffs, and despite their timely responses to SPS's requests for documents, SPS conducted a foreclosure sale of plaintiffs' property. FAC ¶¶ II.d-e. The trustee's deed upon sale was executed on November 23, 2016 and recorded on November 28, 2016. Id. ¶ d; RJN Ex. F (trustee's deed upon sale indicating property sold Nov. 18, 2016 in public auction). Despite having sold plaintiffs' property, SPS continued to communicate with plaintiffs about the status of their loan modification application, informing plaintiffs in a November 21, 2016 letter that SPS required additional documentation. FAC ¶ II.e; Mot. Ex. 2 (Nov. 21, 2016 SPS request for additional information supporting plaintiffs' modification application, noting, “[t]ime is of the essence!”). Plaintiffs learned their home had been sold in a foreclosure sale only when the new owner notified them of the sale. FAC ¶ II.f.

         B. Procedural Background

         Plaintiffs filed this suit on October 30, 2018, alleging conversion, breach of contract, fraud, “material intentional reckless [sic] violation of Claifornia [sic] civil code” and negligence. Compl., ECF No. 1, ¶¶ V-VIII. Defendants moved to dismiss the complaint, ECF No. 5, plaintiffs opposed, ECF No. 11, and defendants filed a reply, ECF No. 14. After hearing argument on defendants' motion, the court advised it would issue a written order granting the motion in full and indicating the extent to which plaintiffs would be permitted to amend. ECF No. 16 (Mar. 8, 2019 hearing minutes). On March 25, 2019, without leave and before the court issued an order on defendants' motion to dismiss, plaintiffs filed a first amended complaint. See FAC. Plaintiffs added certain factual allegations not included in their original complaint and abandoned their conversion claim. See Id. Defendants then moved to dismiss plaintiffs' first amended complaint, which plaintiffs did not oppose. Mot., ECF No. 18. Because plaintiffs' amended complaint responds, at least in part, to defendants' prior motion to dismiss, and in the absence of any objection from defendants, the court DENIES defendants' earlier motion to dismiss as MOOT, treats plaintiffs' first amended complaint as the operative complaint and resolves defendants' second motion to dismiss. See Fed. R. Civ. P. 1 (“[The Federal Rules of Civil Procedure] should be construed, administered, and employed by the court and the parties to secure the just, speedy, and inexpensive determination of every action and proceeding.”). Accordingly, after submitting defendants' motion without oral argument, ECF No. 21, the court resolves it here.

         II. LEGAL STANDARD

         Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” A court may dismiss “based on the lack of cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990) (citing Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.1984)).

         Although a complaint need contain only “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), in order to survive a motion to dismiss this short and plain statement “must contain sufficient factual matter . . . 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 complaint must include something more than “an unadorned, the-defendant-unlawfully-harmed-me accusation” or “‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action.'” Id. (quoting Twombly, 550 U.S. at 555). Determining whether a complaint will survive a motion to dismiss for failure to state a claim is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. Ultimately, the inquiry focuses on the interplay between the factual allegations of the complaint and the dispositive issues of law in the action. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

         In making this context-specific evaluation, this court must construe the complaint in the light most favorable to the plaintiff and accept as true the factual allegations of the complaint. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). This rule does not apply to “‘a legal conclusion couched as a factual allegation, '” Papasan v. Allain, 478 U.S. 265, 286 (1986) quoted in Twombly, 550 U.S. at 555, nor to “allegations that contradict matters properly subject to judicial notice” or to material attached to or incorporated by reference into the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). A court's consideration of documents attached to a complaint or incorporated by reference or matter of judicial notice will not convert a motion to dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 ...


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