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Singh v. Indymac Bank, F.S.B.

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

November 15, 2019

TEJINDAR P. SINGH, RAJINDER K. SINGH, and THE SINGH FAMILY PROPERTIES, L.P., Plaintiffs,
v.
INDYMAC BANK, F.S.B., SPECIALIZED LOAN SERVICING, LLC, and AFFINIA DEFAULT SERVICES, LLC., Defendants.

          ORDER DISMISSING CASE Re: ECF No. 7

          Laurel Beeler United States Magistrate Judge.

         INTRODUCTION

         In this lawsuit, the plaintiffs ask to enjoin IndyMac Bank and Specialized Loan Servicing from foreclosing on their real property, in part on the ground that the defendants waived their right to foreclose by not filing a compulsory cross-complaint in the plaintiffs' 2015 lawsuit in state court to quiet title to the property.[1] The defendants move to dismiss the complaint on two main grounds:

(1) the compulsory cross-complaint rule does not apply to the pending nonjudicial foreclosure, and
(2) the plaintiffs are essentially challenging the assignment of the loan, and they lack standing to do so.[2] The court grants the motion to dismiss.

         STATEMENT

         1. The Loan and Assignment of the Deed of Trust

         The plaintiffs bought the subject property (located in Concord, California) and obtained the loan at issue in the litigation from IndyMac.[3] Tejinder P. Singh and Rajinder K. Singh signed the loan agreement on December 23, 2005, and it was recorded that day.[4] The Singh Family Properties was not a party to the loan agreement.[5] IndyMac assigned the deed of trust to Deutsche Bank on December 28, 2005.[6] It was recorded on April 13, 2018.[7]

         2. The Earlier Lawsuit to Quiet Title

         In August 2015, the plaintiffs sued the defendants to quiet title based on the “previously unknown encumbrance [of the mortgage reflected on the Deed of Trust that they signed in December 2005], and no entity would respond to Plaintiffs' inquiries with a Pay Off Demand despite Plaintiffs['] repeated requests to the address listed on the INDYMAC Deed of Trust.”[8] The plaintiffs then sued the defendants in state court to quiet title to remove the mortgage encumbrance on the property.[9] The defendants answered the complaint but did not file a cross-complaint.[10] The plaintiffs ultimately requested dismissal of the complaint without prejudice, [11] and the court apparently dismissed the case.[12] The defendants apparently moved for their fees, and Rajinder Singh submitted a declaration in opposition to that fees motion and explained why he dismissed the case without prejudice (generally, he said, because the defendants could not reconvey the property).[13]

         3. The Notice of Default and the Complaint Here

         On February 26, 2019, Affinia Default Services, as successor trustee, recorded a substitution of trustee and a Notice of Default and Election to Sell the plaintiffs' property.[14]

         On June 27, 2019, the plaintiffs filed this lawsuit in Contra Costa County Superior Court to enjoin the sale and obtain declaratory relief.[15] In addition to their allegations (described above) that they did not know about the deed of trust and asked for a pay-off demand, they “considered the INDYMAC Deed of Trust and CREDIT Line to have been obtained by embezzlement and noted that the address for billing was routed to one of their gas stations and not to their billing address, and that the name of the property was misspelled as ‘Galcier court' on the loan instruments, and that no one had initialed any part of the INDYMAC DEED OF TRUST.”[16]Nonetheless, they sought a pay-off demand.[17] As to the alleged fraud:

[a]t all times prior to filing Plaintiffs' prior Complaint, Plaintiffs were unaware of the nature and amount of the CREDIT LINE, which had been obtained by embezzlement and falsification of documents, by Plaintiffs' employees. Plaintiffs had not knowingly made payments on any debt secured by the INDYMAC Deed of Trust nor were Plaintiffs aware of said encumbrance.”[18]

         IndyMac “received no payment since July of 2011, and had frozen said CREDIT LINE as of 2008 . . . .”[19] The defendants' answers in the quiet-title action were a “fraud on the court” because Deutsche Bank charged off the credit line, but IndyMac never assigned the Deed of Trust to Deutsche Bank and retained it.[20]

         They also allege that the defendants did not dispute Mr. Singh's declaration that the defendants could not reconvey the deed because Deutsch Bank had charged off the line of credit (the loan at issue) and “[y]et said Defendants could have sought authorization from Deutsche Bank but presumably failed to request any demand from Deutsch Bank in order to receive funds and subtract servicing fees.”[21] Moreover, they allege, the defendants cannot seek judicial foreclosure because they did not file compulsory cross-claims in the earlier quiet-title action.[22]

         The plaintiffs thus seek declaratory and injunctive relief “based on the preclusive effect and collateral estoppel of the prior court ruling in favor of Plaintiffs, and based on said Defendants' deliberate failure to file compulsory cross complaints, ” ask to bar “any enforcement of the Credit Line by nonjudicial foreclosure based on the INDYMAC Deed of Trust, ” and ask for “quiet title relief . . . to remove the cloud of title” on their property by “nullifying the INDYMAC Deed of Trust.”[23] They allege that the credit line is not enforceable because the statute of limitations expired (since the last payment in 2011), because they tendered payment full payment under “Civil Codes 1511 and 1512, ” and because the defendants prevented performance by not responding to the plaintiffs' pay off demands and “later refusal to reconvey the INDYMAC Deed of Trust despite Plaintiffs' tender of full payment.”[24]

         The complaint has three claims: (1) a claim for temporary and permanent injunction relief to prevent foreclosure because the defendants failed to make compulsory cross-claims in the 2015 quiet-title lawsuit “and further reasons set forth in paragraph 24;” (2) a claim for injunctive relief on the same grounds and based on the defendants' fraud by “demanding full payment without the ability to reconvey the security instrument known as the INDYMAC Deed of Trust;” and (3) a claim for declaratory relief and quiet title based on (a) “Select Loan Servicing's”[25] demanding full payment of the note from the plaintiffs without tendering a reconveyance of the deed of trust, (b) the defendants' failure to file compulsory crossclaims in the 2015 lawsuit, and (c) the defendants' representation during the 2015 lawsuit that they represented the servicer and the note holder but actually “WERE ONLY SERVICERS, and could not reconvey the INDYMAC Deed of Trust.”[26]

         Paragraph 24 reads in full:

At the time Plaintiffs filed Plaintiffs['] prior complaint, August 6, 2015, Defendant INDYMAC had admittedly received no payment since July of 2011, and had frozen said CREDIT LINE as of 2008, and Plaintiffs denied knowing of said CREDIT LINE or the INDYMAC Deed of Trust until a title search in June of 2015 revealed the INDYMAC Deed of Trust. The full amount of the CREDIT LINE was due in full at the time Plaintiffs filed their prior Complaint.[27]

         On September 13, 2019, the defendants removed the suit here based on diversity jurisdiction.[28]The defendants then moved to dismiss the complaint for failure to state a claim and (for the plaintiffs' challenge to the assignment to Deutsche Bank) for lack of standing.[29] The court held a hearing on November 14, 2019.

         STANDARD OF REVIEW

         1. Rule 12(b)(1)

         A complaint must contain a short and plain statement of the ground for the court's jurisdiction. Fed.R.Civ.P. 8(a)(1). The plaintiff has the burden of establishing jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994); Farmers Ins. ...


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