ORDER DENYING DEFENDANTS JP MORGAN CHASE BANK, N.A. AND CALIFORNIA RECONVEYANCE CO.’S MOTION TO DISMISS (Dоcket No. 23)
I. INTRODUCTION
Plaintiffs Jose and Flor Barrionuevo (collectively “the Barrionuevos”) sued Defendants JP Morgan Chase Bank (“Chase”) and California Reconveyance Corporation (“California Reconveyance”) on February 3, 2012, after California Re-conveyance attempted to foreclose on a Deed of Trust (“DOT”) that the Barrionuevos executed for the purchase of a home in California. Pis.’ Opp. to Mot. to Dismiss (Docket No. 25) at 1. Chase is the successor in interest to Washington Mutual Bank (“Washington Mutual”), who executed the DOT with the Barrionuevos and funded the loan for the purchase of the subject property. In their amended complaint, the Barrionuevos assert claims against Defendants for wrongful foreclosure, slander of title, viоlating California Civil Code § 2923.5, and violating California’s Unfair Business Practices Act (Cal. Bus. Prof. Code § 17200). See Pis.’ Am. Compl. (Docket No. 20). On February 23, 2012, the Barrionuevos moved ex parte for a temporary restraining order barring Defendants from completing California’s nonjudicial foreclosure process, which this Court denied on February 29, 2012, after a hearing on the merits. See Pis.’ Mot. for TRO (Docket No. 5); Min. Entry Den. TRO (Docket No. 13). California Reconveyance and Chase thereafter filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6). See Defs.’ Mot. to Dismiss (Docket No. 23). Having considered the papers filed in support of and in opposition to the instant Motion, the Court deems the matter appropriate for decision without oral argument. Fed.R.Civ.P. 78; Local Rule. 7-6. For the following reasons, Defendants’ motion is DENIED.
II. FACTUAL & PROCEDURAL BACKGROUND
On February 28, 2006, the Barrionuevos entered into a DOT with Washington Mutual and California Reconveyance for the purchase of a single family home in Dublin, California. Defs.’ Mot. to Dismiss, Ex. A. The DOT was recorded in Alameda County on March 3, 2006, against the subject property (known as 5931 Annadele Way) to secure a promissory note in favor of Washington Mutual for a loan of $1,720,000. Pis.’ Am. Compl. ¶9. The DOT conveys title and power of sale to California Reconveyance, and names Washington Mutual as both “Lender” and “Beneficiary.” Defs.’ Mot. to Dismiss, Ex. A at 1-3. In the event of default or breach by the borrower, and after first having been given an opportunity to cure, the DOT grants to the Lender the power
In May of 2006, the Barrionuevos allege that Washington Mutual “securitized and sold Plaintiffs’ Deed of Trust to the WMALT Series 2006-AR4 Trust,” naming La Salle Bank as Trustee. Pis.’ Am. Compl. ¶ 10. In support of this allegation they point to a report prepared by Certified Forensic Loan Auditors, which apparently reaches the same conclusion. See Pis.’ Am. Compl., Ex. A — Property Securitization Analysis Report. In September of 2008, after the purported sale of the Barrionuevos’ DOT, the U.S. Office of Thrift Supervision closed Washington Mutual and appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. See Pis.’ Am. Compl. ¶ 11; Defs.’ Mot. to Dismiss at 2. Shortly thereafter, Chase acquired certain assets of Washington Mutual from the FDIC. Id. Having been sold аt an earlier point to the WMALT Series 2006-AR4 Trust, the Barrionuevos allege that any beneficial interest under their DOT could not have been purchased or obtained by Chase during this acquisition. See Pis.’ Opp. to Mot. to Dismiss at 3.
About a year later, California Reconveyance initiated nonjudicial foreclosure proceedings against the Barrionuevos regarding the subject property by recording a “Notice of Default and Election to Sell Under Deed of Trust” with the County of Alameda on April 7, 2009. Pis.’ Am. Compl., Ex. B — Notice of Default. The Notice of Default identified Washington Mutual as the beneficiary of record, and included a statement that “the beneficiary or its designated agent declares that it has contacted the borrower” or has “tried with due diligence to contact the borrower as required by California Civil Code 2923.5.” Id. at 2. The Barrionuevos allege, contrary to this statement, that neither of the Defendants contacted Plaintiffs “at least 30 days prior to recording the Notice of Default” in violation of § 2923.5.
The Barrionuevos initiated suit against Chase and California Reconveyance on February 3, 2012, with a complaint listing nine causes of action. Compl. (Docket No. 1). They have since filed an amended complaint listing only four causes of action, namely (1) Wrongful Foreclosure, (2) Slander оf Title, (3) Violation of Cal. Civ.Code
III. DISCUSSION
A. Legal Standard
Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. See Fed. R.Civ.P. 12(b)(6). A motion to dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks Sch. of Bus. v. Symington,
At issue in a 12(b)(6) analysis is “not whether a plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims” advanced in his or her complaint. Scheuer v. Rhodes,
B. Tender Rule
Chase and California Reconveyance argue as a threshold matter that “this Motion should be granted and Plaintiffs’ Complaint dismissed, in its entirety” because the Barrionuevos have failed to provide or allege a willingness to “tender the outstanding indebtedness owed under the promissory note and Deed of Trust.” Defs.’ Mot. to Dismiss at 8. They argue that, absent an offer to tender the obligation in full, California law deprives plaintiffs of standing to challenge nonjudicial foreclosure proceedings. See Id. at 7-8.
“The California Court of Appeal has held that the tender rule applies in an action to set aside a trustee’s sale for irregularities in the sale notice or procedure and has stated that ‘[t]he rationale behind the rule is that if plaintiffs could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the plaintiffs.’ ” Cohn v. Bank of America, No. 2:10-cv-00865 MCE KJN PS,
However, as this Court discussed at length in Tamburri, “the tender rule is not without exceptions.” Tamburri,
Further, a growing number of federal courts have explicitly held that the tender rule only applies in cases seeking to set aside a completed sale, rather than an action seeking to prevent a sale in the first place. See, e.g., Vissuet v. Indymac Mortg. Services, No. 09-CV-2321-IEG (CAB),
Finally, as this Court explained in length in Tamburri, “where a sale is void, rather than simply voidable, tender is not required.” Tamburri,
Moreover, the relevant documentation in this case supports the finding that the sale is void. Where a notice defect provides the basis for challenging a sale under a deed of trust, as is the case here with the Barrionuevos’ allegation of noncompliance with Cal. Civ.Code § 2923.5, California courts examine in detail the deed of trust’s language to determine whether it contains “conclusive presumption language in the deed” regarding notice defects that would render the sale merely voidable as opposed to void. Little, at 1359,
when a notice defect is at issue, it is not the extent of the defect that is dеterminative. Rather, “what seems to be determinative” is whether the deed of trust contains a provision providing for a conclusive presumption of regularity of sale. Little,188 Cal.App.3d at 1359 ,233 Cal.Rptr. 923 . “Where there has been a notice defect and no conclusive presumption language in the deed, the sale has been held void.” Id. (emphasis in original). In contrast, “[w]here there has been a notice defect and conclusive presumption language in a deed, courts have characterized the sales as ‘voidable.’ ” Id. (emphasis added).
Tamburri,
These exceptions and qualifications to the tender rule raise significant doubts as to whether it should be mechanically applied at the pleading stage under the allegations of the complaint herein. Thus, as in Tamburri, the Court declines to dismiss the complaint on the basis of the Barrionuevos’ failure to allege tender.
C. Wrongful Foreclosure
The Barrionuevos’ cause of action for wrongful foreclosure is based upon their belief that “Cal Reconveyance cannot conduct a valid foreclosure sale on behalf of Defendant JP Morgan because it is not the true present beneficiary under Plaintiffs’ Deed of Trust.” Pis.’ Am. Compl. ¶ 18. This belief is based upon the following chain of events:
In May of 2006, shortly after Plaintiffs entered into the Deed of Trust, WaMu [Washington Mutual] securitized and sold the beneficial interest in the Deed*972 of Trust to the Series 2006-AR4 Trust. From that point on, the Series 2006-AR4 Trust became the only true beneficiary under Plaintiffs’ Deed of Trust. Thus, when JP Morgan [Chase] acceded to certain of WaMu’s assets in 2008, it could not have included the beneficial interest in Plaintiffs’ Deed of Trust as WaMu had already sold the beneficial interest two years prior, in 2006. Since WaMu no longer owned the beneficial interest in Plaintiffs’ Deed of Trust, it had nothing to convey to Defendant JP Morgan in 2008 and Defendant JP Morgan is not the true beneficiary. Id.
Related to the allegation that Chase did not acquire Plaintiffs’ DOT from Washington Mutual, the Barrionuevos further base them wrongful foreclosure claim on the grounds that the Defendants have failed to comply with California Civil Code § 2932.5, in that they have not “recorded a document in the public chain of title reflecting from whom [they] acquired the beneficial interest in Plaintiffs’ Deed of Trust,” as required by the statute. Id. at 21. Section 2932.5 provides as follows:
Where a power to sell real property is given to a mortgagee, or other encumbrancer, in an instrument intended to secure the payment of money, the power is part of the security and vests in any person who by assignment becomes entitled to payment of the money secured by the instrument. The power of sale may be exercised by the assignee if the assignment is acknowledged and recordеd.
Cal. Civ. Code § 2932.5 (emphasis added).
Chase and California Reconveyance question Plaintiffs’ assertion that the DOT for the subject property was securitized into the Series 2006-AR4 Trust. See Defs.’ Mot. to Dismiss at 5 (“A careful analysis of the information provided in the prospectus for which the “Property securitization Analysis Report” provides a website address demonstrates the Loan at issue is not part of the WMALT Series 2006-AR4 Trust.”); see also Defs.’ Reply Br. ISO Mot. to Dismiss (Docket 26) at p. 2 (“As shown in the analysis of Defendant’s motion, there is no connection between the prospectus for the Series 2006-AR4 Trust and the Plaintiffs’ mortgage loan. There was no securitization.”). Neither the Defendants’ Motion to Dismiss, the Plaintiffs Response Brief, nor the Defendant’s Reply Brief address the § 2932.5 element of the Barrionuevos’ wrongful foreclosure cause of aсtion. The Court will, therefore, confine its analysis of the wrongful foreclosure claim to the Plaintiffs argument that the Defendants are not the current beneficiaries under the DOT.
Plaintiffs properly assert that only the “true owner” or “beneficial holder” of a Deed of Trust can bring to completion a nonjudicial foreclosure under California law. Pis.’ Response Brief at 4. In California, a “deed of trust containing a power of sale ... conveys nominal title to property to an intermediary, the “trustee,” who holds that title as security for repayment of [a] loan to [a] lender, or “beneficiary.” ” Kachlon v. Markowitz,
Sеveral courts have recognized the existence of a valid cause of action for wrongful foreclosure where a party alleged not to be the true beneficiary instructs a trustee to file a Notice of Default and initiate nonjudicial foreclosure. For example, the court in Sacchi v. Mortgage Electronic Registration Systems, Inc., No. CV 11-1658 AHM (CWx),
Similarly, in Javaheri v. JPMorgan Chase Bank, N.A., CV 10-08185 ODW FFMX,
Likewise in Ohlendorf v. Am. Home Mortg. Servicing,
In the present case, the Barrionuevos allege that Chase and California Reconveyance recorded their April 7, 2009, Notice of Default without the legal right to do so, given that the prior alienation of Plaintiffs DOT by Washington Mutual in 2006 precluded these Defendants from obtaining any beneficial interest in the DOT. See Am. Compl. ¶¶ 16-22; Pis.’ Response Brief at 3. In tandem to their § 2935.2 claim, Plaintiffs allege that this prior alienation of the DOT renders Defendants’ Notice of Default and subsequent Notices of Trustee’s Sales invalid. The allegation challenging the validity of Washington Mutual’s assignment of Plaintiffs’ DOT to Chase suggests that the foreclosing parties did not have authority to issue the Notices. Despite Defendants’ invitation to the сontrary, further examination into the 2006 transaction would require a factual inquiry not suitable in a 12(b)(6) motion. Thus, insofar as Plaintiffs contend that the Notice of Default is invalid due to a lack of authority to foreclose, their wrongful foreclosure claim is similar to those advanced in Sacchi, Javaheri, Ohlendorf Skoba, and, of course, this Court’s ruling in Tamburri.
Accordingly, this Court finds that the Plaintiffs have sufficiently stated a claim for wrongful foreclosure. Regardless of whether § 2932.5 applies, under California law a party may not foreclose without the legal power to do so. Plaintiff alleges that the wrong parties issued the Notice of Default. At the 12(b)(6) stage, given the factual uncertainties underlying the parties’ arguments, Plaintiffs’ claim is sufficient to withstand a motion to dismiss.
D. Slander of Title
The Barrionuevos next advance a cause of action for slander of title. In their amended complaint, they allege that Chase “acted with malice and a reckless disregard for the truth by simply assuming it was the beneficiary under Plaintiffs’ Deed of Trust” when it recorded a “Notice of Trustee’s Sale ... that cannot lead to a valid foreclosure.” Am. Compl. ¶ 24. They further allege that “the recordation of the February 2, 2012 Notice of Trustee’s Sale was therefore false, knowingly wrongful, without justification, in violation of statute, unprivileged, and caused doubt to be placed on Plaintiffs’ title to the property,” and that the “recordation of the
The California Court of Appeals for the Fifth District recently outlined the elements required to successfully bring a cause of action for slander of title. In Sumner Hill Homeowners’ Assn., Inc. v. Rio Mesa Holdings, LLC, the court explained that “slander or disparagement of title occurs when a person, without a privilege to do so, publishes a false statement that disparages title to property and causes the owner thereof some special pecuniary loss or damage.”
The Barrionuevos’ amended complaint is sufficient to “to state a claim to relief thаt is plausible on its face” with regard to this tort. Cousins,
Accordingly, to the extent Defendants’ Motion to Dismiss reaches Plaintiffs’ action for slander of title, Plaintiffs have met their burden to plead sufficient “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
E. California Civil Code § 2923.5
California Civil Code § 2923.5(a)(1) provides that “[a] mortgagee, trustee, ben
In the instant case, the Barrionuevos assert that Chase and California Reconveyance violated § 2923.5(a)(1) because they failed to contact them prior to filing the notice of default on April 7, 2009. Am. Compl. ¶¶ 28, 32. Despite the fact that the Defendants’ Notice of Default included a statement that “the beneficiary or its designated agent declares that it has contacted the borrower” оr has “tried with due diligence to contact the borrower as required by California Civil Code 2923.5,” Plaintiffs assert that they were, in fact, “never contacted.” Am. Compl., Ex. B— Notice of Default; Am. Compl. ¶ 28. Defendants initially argue that the Barrionuevos fail to state a claim under this cause of action because they offer “no specified factual support” for their allegations. Defs.’ Mot. to Dismiss at 9. However, their Reply Brief offers a very different assessment:
Plaintiffs could not be clearer; “Plaintiffs allege that the Declaration is false because Plaintiffs were in fact never contacted.” (Plaintiffs’ opposition, p. 6, In. 21-23). Plaintiffs therefore claim that Defendant never called, never left a voice message, and never knocked on their door to discuss their default on the lоan before having the NOD [Notice of Default] recorded. Plaintiffs’ allegation also means that Defendant never offered them a trial loan modification payment plan or even offered to evaluate them for a loan modification before recording the NOD.
Defs.’ Reply Brief at 3 (emphasis in original). Defendants nonetheless contends that “[w]hen the foreclosing entity declares that it tried to contact the borrower, the statutory requirements are satisfied. Id. Defendants are mistaken.
A mortgagee, beneficiary, or authorized agent has satisfied the “due diligence” requirement of § 2923.5:
if it was not able to contact the borrower after (1) mailing a letter containing certain information; (2) then calling the borrower “by telephone at least three times at different hours and on different days”; (3) mailing a certified letter, with return receipt requested, if the borrower does not call back within two weeks; (4) providing a telephone number to a live representative during business hours; and (5) posting a link on the homepage of its Internet Web site with certain information.
Argueta v. J.P. Morgan Chase,
F. Unfair Business Practices Act
California’s Unfair Business Practices Act, codified as Cal. Bus. Prof. Code § 17200, prohibits unfair competition, which is defined as, inter alia, “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. Plaintiffs asserts claims under § 17200 for Chase and California Reconveyance’s violation of Cal. Civ. Code § 2923.5, and openly acknowledge that their § 17200 claim “is a derivative cause of action.” Pis.’ Response Brief at 7. They also acknowledge that “plaintiffs’ ability to pursue this cause of action depends on the success or failure of their substantive causes of action.” Id.
Defendants challenge the § 17200 claim on the basis that “a violation [of Cal. Civ. Code § 2923.5] does not impact plaintiffs with an actual loss of money or property to give standing under Cal. B & P § 17200.” Defs.’ Reply Brief at 3. However, “[i]t is undisputed that foreclosure proceedings were initiated which put [the Barrionuevos] interest in the property in jeopardy; this fact is sufficient to establish standing as this Court has previously held.” Clemens v. J.P. Morgan Chase Nat. Corporate Services, Inc., No. C-09-3365 EMC,
Second, Defendants repeat their argument that Plaintiffs have “failed to allege facts sufficient to demonstrate that defendants violated Section 2923.5” Defs.’ Mot. to Dismiss at 9-10. “A plaintiff alleging unfair business practices under [17200] must state with reasonable particularity the facts supporting the statutory elements of the violation.” Khoury v. Maly’s of California, Inc.,
IV. CONCLUSION
For the foregoing reasons, the Court DENIES Defendants’ motion to dismiss.
This Order disposes of Docket No. 23.
IT IS SO ORDERED.
Notes
. Plaintiffs’ amended complaint refers to the Defendants’ Notice of Default as having been recorded on both November 21, 2011, and April 7, 2009. It appears that the November 21st date in the complaint is actually an erroneous reference to the Notice of Default recorded on April 7th, since the rest of record before the Court points only to April 7th as the date when that notice was recorded, and only the April 7th Notice of Default appears as an exhibit to the parties’ pleadings and motion papers.
. These three later notices included the following statement:
In compliance with California Civil Code 2923.5(c) the mortgagee, trustee, beneficiary, or authorized agent declares: that it has contacted the borrower(s) to assess their financial situation and to explore options to avoid foreclosure; or that it has made efforts to contact the borrower(s) to assess their financial situation and to explore options to avoid foreclosure by one of the following methods: by telephone; by United States mail; either 1st class or certified; by overnight delivery; or by personal delivery; by e-mail; by face to face meeting.
See e.g. Defs.’ Mot. to Dismiss, Ex. C at 1.
. Defendants request judicial notice of: (1) the February 28, 2006, Deed of Trust, (2) the April 7, 2009, Notice of Default, (3) the July 14, 2009, Notice of Trustee's Sale, (4) the October 19, 2010, Notice of Trustee's Sale, and (5) the February 2, 2012, Notice of Trustee's Sale. Defs.’ Request for Judicial Notice (Docket 23). The Notice of Default and February 2, 2012, Notice of Trustee's Sale were already introduced by Plaintiffs as part of the amended complaint. The remaining three documents are matters of public record and are properly subject to judicial notice under Fed.R.Evid. 201(b).
. California courts have also declined to view the 'tender rule’ as a bar to bringing аctions seeking to prevent a yet-to-be-completed foreclosure sale. In Mabry v. Superior Court,
. The "trustor” in this context is a borrower who executes a trust deed securing a promissory note in favor of a lender.