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Akins v. Seterus, Inc.

United States District Court, E.D. California

September 5, 2019

SETERUS, INC., and BANK OF AMERICA, N.A., Defendants.


          Troy L. Nunley, United States District Judge.

         This matter is before the Court pursuant to Defendant Seterus, Inc.'s (“Defendant”) Motion to Dismiss. (ECF No. 30.) Plaintiffs Kenneth and Bonnie Akins (‘Plaintiffs”) oppose Defendant's motion. (ECF No. 31.) Defendant filed a Reply. (ECF No. 32.) Having carefully considered the briefing filed by both parties, the Court hereby GRANTS in part and DENIES in part Defendant's Motion to Dismiss.

         I. Factual and Procedural Background

         The following allegations are taken from Plaintiffs' Second Amended Complaint (“SAC”). (ECF No. 29.) In September 2007, Plaintiffs obtained a mortgage to purchase their home in Elk Grove, California. (See ECF No. 29 ¶ 19.) In June 2009, Plaintiffs refinanced their mortgage with Sierra Pacific Mortgage Company, Inc. (ECF No. 29 ¶ 20.) The promissory note (“Note”) detailed the terms of Plaintiffs' refinanced mortgage, including the interest rate for monthly payments, late fees, and other related terms. (ECF No. 31 at 28-29.)

         Generally, Plaintiffs state their monthly payments were between $2600 and $3000 a month. (ECF No. 29 ¶ 21.) On September 16, 2013, Plaintiffs made a mortgage payment in the amount of $5, 646.63 to Bank of America, N.A. (“BANA”). (See ECF No. 29 ¶ 22.) Plaintiffs did not specify that any of the $5, 646.63 payment in excess of their September payment due was to be applied as principle, and their September 2013 payment due was $2, 764.94. (See ECF No. 29 ¶¶ 23, 29.) Plaintiffs believed that the additional monies would go toward their October mortgage payment. (See ECF No. 29 ¶ 23.) BANA, however, allocated the first half of the payment to the balance due for September 2013 and allocated the rest to the total balance of principal owed. (See ECF No. 29 ¶ 29.) Section 4 of the Note on Plaintiffs' mortgage includes terms on how prepayments are to be applied. (ECF No. 29 ¶ 20; See also ECF No. 30 at 21.) Plaintiffs argue that Section 4 requires that their monthly payments be applied to their mortgage payments unless otherwise directed. (See ECF No. 29 ¶¶ 20, 23, 29.) Because of the way BANA allocated the funds, the October 2013 payment was never processed. (See ECF No. 29 ¶¶ 23, 25, 29.) Thus, Plaintiffs' loan was labeled as overdue when Plaintiffs did not make any additional payments for October 2013. (See ECF No. 29 ¶¶ 27-29, 31.)

         BANA transferred Plaintiffs' loan to Defendant on December 1, 2013. (ECF No. 29 ¶ 24.) In January 2014, Plaintiffs began paying Defendant as their new loan servicer. (ECF No. 29 ¶ 26.) Defendant began charging Plaintiffs late fees and other charges due to BANA's allocation of money for October. (ECF No. 29 ¶¶ 27-29.) Defendant informed Plaintiffs they were behind on their mortgage payments. (See ECF No. 29 ¶ 28.) Plaintiffs inquired as to how they were behind on their payments. (ECF No. 29 ¶ 28.) In response, Defendant sent a letter on June 16, 2014, explaining that the loan was considered delinquent and Defendant was applying Plaintiffs' more recent payments to what Defendant considered to be prior outstanding payments. (ECF No. 29 ¶¶ 28- 29.)

         On June 23, 2015, Defendant sent Plaintiffs another letter explaining that the latter half of the September payment had been applied to the balance of principle due and not to the October monthly payment. (See ECF No. 29 ¶ 29.) Plaintiffs maintain that Defendant failed to review the terms of Section 4 to ensure that their payments were properly applied. (See ECF No. 29 ¶ 30.) Plaintiffs also maintain that Defendant did not make any effort to remedy the misapplied payment to help bring the account current. (ECF No. 29 ¶ 30.)

         Plaintiffs allege that in the Fall of 2015, Defendant stopped taking Plaintiffs' mortgage checks and did not credit payments to their account. (ECF No. 29 ¶ 32.) Plaintiffs also maintain that Defendant reported Plaintiffs to credit reporting agencies which damaged their credit rating. (ECF No. 29 ¶ 33.) Because Defendant had reported late and missing payments, including payments they refused to accept, Plaintiffs' credit scores dropped significantly. (See ECF No. 29 ¶ 35.) Plaintiffs were denied a car loan entirely when they attempted to purchase a new vehicle; Plaintiffs allege they were forced to instead select a used car on a loan with an interest rate significantly above market. (See ECF No. 29 ¶ 36.)

         Plaintiffs filed suit against Defendant on July 15, 2016, and filed the instant SAC on January 5, 2018. (ECF Nos. 1, 29.) Plaintiffs seek damages, attorneys' fees, and injunctive relief preventing Defendant from selling or otherwise transferring title to Plaintiffs' home. (See ECF No. 29 at 10-11.)

         II. Request for Judicial Notice

         In conjunction with Defendant's motion to dismiss, Defendant requests that the Court take judicial notice of the following: (1) Plaintiffs' Deed of Trust; (2) the Corporation Assignment of the Deed of Trust; (3) the Substitution of Trustee; (4) a Notice of Default and Election to Sell under Deed of Trust; (5) a Notice of Utility Lien, and (6) an Order Granting in Part Defendant's Motion to Dismiss. (See ECF No. 30-1 at 2-3.) The first five of these documents were publicly recorded in the Official Records of Sacramento County. (See ECF No. 30-1 at 2-3.) The sixth document, the Order Granting in Part Defendant's Motion to Dismiss, was issued by this Court. (ECF No. 30-1 at 3.)

         A court shall take judicial notice if requested by a party and supplied with the necessary information. See Fed. R. Evid. 201(c). “The 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.” Fed.R.Evid. 201(b).

         Five of the documents Defendant requests be judicially noticed are capable of accurate and ready determination because the documents have been filed in the Official Records of Sacramento County; the sixth document, the Order Granting in Part Defendant's Motion to Dismiss, is capable of accurate and ready determination because it was issued by this Court. See, e.g., W. Fed. Sav. & Loan Ass'n v. Heflin Corp., 797 F.Supp. 790, 792 (N.D. Cal. 1992) (judicially noticing certain documents contained in the public records of the Santa Clara County Recorder). Accordingly, Defendant's requests for judicial notice are GRANTED.

         III. Standard of Law

         A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Federal Rule of Civil Procedure 8(a) requires that a pleading contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009). Under notice pleading in federal court, the complaint must “give the defendant fair notice of what the claim . . . is and the grounds upon which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). “This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.” Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

         On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). A court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the “well-pleaded” allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege “"specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief.” Twombly, 550 U.S. at 570. “A claim has facial plausibility when the plaintiff pleads factual content that allows the ...

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