Re: Dkt. Nos. 37, 38
ORDER RE: MOTION TO DISMISS AND MOTION TO STRIKE
INTRODUCTION
This lawsuit arises from Plaintiffs Vi-ghyan and Sunila Pratap’s (“Plaintiffs”) default on four real estate loans and the resulting foreclosures on the properties pledged to secure those loans. Pending before the Court are Defendants Wells Fargo Bank, N.A., and Mortgage Electronic Registration Systems, Inc.’s (“MERS”) (collectively, “Defendants” Motion to Dismiss Plaintiffs’) Corrected First Amended Complaint (Dkt. No. 37) and Motion to Strike Portions thereof (Dkt. No. 38). The Court previously found this matter suitable for disposition without oral argument and vacated the hearing on Defendants’ motions. Dkt. No. 61. Having considered the parties’ papers, relevant legal authority, and the record in this case, the Court GRANTS Defendants’ Motion to Dismiss for the reasons set forth below. The Court additionally DENIES as moot Defendants’ Motion to Strike.
BACKGROUND
A. Overview
Plaintiffs are the Trustors/Borrowers on deeds of trust to four parcels of real property. First A m. Compl. (“FAC”) ¶2, Dkt. No. 33. The first property is a duplex located at 718 West Sunset Blvd. # 722, Hayward, California, 94541^4722, APN No. 432-0020-041, (“718 Sunset”). Id. The second property is a duplex located at 730 West Sunset Blvd. # 734, Hayward, California, 94541-M722, APN No. 432-0020-040 (“730 Sunset”). Id. The third property is a single family residence located at 1844 Bockman Road, San Lorenzo, California, 94580-2133, APN No. 411-0051-032 (“1844 Bockman”). Id. The fourth propertyis a single family residence located at 1970 149th Avenue, San Lean-dro, California, 94578-1302, APN No. 080-0008-019, (“1970 149th Ave.”). Id.
The relevant allegations, taken from Plaintiffs’ FAC and Defendants’ Request for Judicial Notice (“RJN”)
1. 718 Sunset
In May 2006, Plaintiffs took out an équity line of credit (“ELOC”) from Wells Fargo’s predecessor, World Savings Bank, FSB, in the amount of $233,000.- RJN, Ex. F.
On February 13, 2007, Plaintiffs signed a deed of trust concerning this property, securing a loan in the amount of $155,000.00 from Washington Mutual, which was recorded in the Alameda County Recorder’s Office on March 3, 2007. RJN, Ex. I. In February 2012, JPM Chase, as successor to Washington Mutual, caused to be recorded a NOD on its March 2007 DOT. RJN, Ex. J. According to the NOD, Plaintiffs defaulted on their loan in November 2010. Id. Plaintiffs were in arrears $16,518.25 at the time the NOD was recorded. Id. On May 11, 2012, a Notice of Trustee Sale (“NOT”) was recorded, noticing a sale date of June 5, 2012. RJN, Ex. K.
2. 730 Sunset Property
On May 24, 2006, Plaintiffs took out an ELOC from World Savings Bank in the amount of $233,000. RJN, Ex. L. This loan was secured by a DOT on the730 Sunset property. RJN, Ex. M. On February 1, 2011, Wells Fargo caused to be recorded a NOD on its May 2006' ELOC. RJN, Ex. N. The NOD was recorded by NDEX WEST, LLC (“NDEX”) as Agent for the Beneficiary, thereby initiating the process of foreclosing upon 730 Sunset. FAC ¶ 19. According to this Notice, Plaintiffs defaulted on this loan in November 2010, and were in arrears $3,922.23 at the time the Notice was recorded. Id. Shortly thereafter, a Substitution of Trustee was recorded naming N DeX as trustee. RJN, Ex. O. Subsequently, a NOT was recorded in September 2012. RJN, Ex. P.
3. 1970 U9th Ave.
In May 2006, Plaintiffs obtained another ELOC from World Savings Bank in the amount of $416,000.00, secured by a DOT on the 1970 149th Avenue property. RJN,
4. Bockman
In March 2003, Plaintiffs obtained a loan in the amount of $155,000.00 from SMCE Mortgage Bankers, Inc., secured by a DOT on the 1844 Bockman property. RJN, Ex. T. The DOT reflects that the beneficiary under the security instrument is MERS. Id. at 2. In March 2012, M ERS caused to be recorded a Corporate Assignment of Deed of Trust transferring all beneficial interest under the DOT to Wells Fargo. RJN, Ex. U.
In July 2012, Wells Fargo caused to be recorded a NOD on the SMCE loan. RJN, Ex. V. According to the Notice, Plaintiffs defaulted on this loan in January 2012, and were $11,169.15 in arrears at the time it was recorded. Id. A Substitution of Trustee was also recorded, substituting Cal-Western Reconveyance Corporation as Trustee. RJN, Ex. W. A NOS dated January 23, 2013 was recorded in the official records of the Alameda County Recorder’s Office on February 2, 2013. RJN, Exh. X.
C. Plaintiffs’ Allegations
Plaintiffs allege that when their loans originated, the lender securitized and sold each note and each deed of trust to" a securitized trust, after which Wells Fargo collected mortgage payments without authorization. FAC ¶ 14 (718 Sunset), ¶ 18 (730 Sunset), ¶ 25 (1844 Bockman), ¶ 29 (1970 149th Ave.). Plaintiffs allege that in collecting the mortgage payments, Wells Fargo violated the deed of trust and a Pooling and Servicing Agreement (“PSA”). Id. ¶¶ 16, 26, 30. Plaintiffs also allege that the recorded foreclosure documents (e.g., the notices of default, substitutions of trustee and notices of trustee sale) are void because they were robo-signed and signed by employees of Wells Fargo who did not have authority to sign the documents. Id. ¶¶ 38, 39, 41.
Based on the contention that Plaintiffs’ loans were sold as a mortgage-backed securities, and the securitization was not perfected, the FAC names Wells Fargo and M ERS in claims for slander of title (Id. ¶ 37) and violation of Business & Professions Code section 17200 (“UCL”) (Id. ¶49). Plaintiffs also claim violations of the Truth in Lending Act (“TILA”), Fair Debt Collection Practices Act (“FDCPA”) and Racketeering-Influenced and Corrupt Organizations Act (“RICO”), which are premised on alleged faulty assignments, securi-tization and note ownership theories. Id. ¶¶ 56-59, 73, 76, and 99.
Plaintiffs further allege that the recorded foreclosure documents (e.g., the notice of default, substitution of trustee and notice of trustee sale) are void because they were robo-signed and/or signed by employees of Wells Fargo who did not have authority to sign the documents based on securitization defects. Id. ¶¶ 38-41, 70, 77c. Plaintiff s base their slander of title, UCL and RICO claims are on these allegations as well.
Finally, Plaintiffs allege Wells Fargo failed to contact them as required by California Civil Code section 2923.5 prior to recording the notice of default on the 730 Sunset, 1844 Bockman and 1970 149th Av
D. Procedural Background
On November 12, 2012, Plaintiffs filed this lawsuit in Alameda County Superior Court, asserting claims under California law for: (1) breach of express agreements; (2) breach of implied agreements; (3) slander of title; (4) wrongful foreclosure; (5) violation of California Civil Code section 2923.5; and (6) violation of California Business and Professions Code section 17200 (unfair business practices). Dkt. No. 1, Ex. A. Defendants removed the case to this Court on December 17, 2012, based on diversity jurisdiction. Id. at 1.
On December 27, 2012, Defendants moved to dismiss Plaintiffs’ original complaint. Dkt. No. 4. On October 1, 2013, the Court granted Defendants’ motion to dismiss the six claims in the original complaint, but gave Plaintiffs leave to amend their slander of title and unfair competition claims to the extent they could set forth cognizable theories not premised on allegations of flawed securitization, challenges to note ownership, or violations of Civil Code section 2923.5. Order re: Mot. to Dismiss (“Order”), Dkt. No. 31.
Plaintiffs filed their FAC on October 17, 2013, asserting claims under California law for: (1) slander of title; (2) violation of the UCL; (3) violation of 15 U.S.C. § 1601 “TILA”; (4) violation of 15 U.S.C. § 1962 (FDCPA); and (5) violation of 18 U.S.C. § 1962 (RICO). Dkt. No. 33.
On October 31, 2013, Defendants moved to dismiss each of Plaintiffs’ claims pursuant to Federal Rule of Civil Procedure (“Rule”) 12(b)(6) on the grounds that Plaintiffs have failed to state facts sufficient to state claim, the claims are preempted by federal law, and the claims fail for lack of tender. Dkt. No. 37. Defendants also filed a Motion to Strike (“MTS”): (1) the Third, Fourth, and Fifth Claims pursuant to Rule 15(a)(2) because they were added without leave of Court; (2) the prayer for punitive damages; and (3) the prayer for money damages which are not available under the UCL. Dkt. No. 38. Plaintiffs have filed an Opposition to the Motion to Dismiss (Dkt. No. 42) and to the Motion to Strike (Dkt. No. 43). Defendants have filed a Reply to both motions. Dkt. Nos. 45 and 46.
LEGAL STANDARD
Under Rule 12(b)(6), a party may file a motion to dismiss based on the failure to state a claim upon which relief may be granted. A Rule 12(b)(6) motion challenges the sufficiency of a complaint as failing to allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,
Even under the liberal pleading standard of Rule 8(a)(2), under which a party is only required to make “a short and plain statement of the claim showing that the pleader is entitled to relief,” a “pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ ” Iqbal,
If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the- allegation of other facts.” Lopez v. Smith,
DISCUSSION
A. First Claim: Slander of Title
Plaintiffs allege slander of title in connection with the DOTs, NODs, and the substitution of trustee pertaining to the 730 Sunset, 1844 Bockman, and 1970 149th Avenue properties. FAC ¶¶ 33-45. This claim is identical to the claim which was previously dismissed, with the exception of several new allegations regarding robo-signing. Order at 13.
Defendants argue that Plaintiffs cannot allege a claim for slander of title because: (1) Plaintiffs lack standing to challenge the assertions of robo-signing; (2) the robo-signing allegations are too conclusory; (3) Plaintiffs cannot demonstrate any statement which is not privileged or made with malice; and (4) Plaintiffs cannot demonstrate prejudice.
To state a claim for slander of title, Plaintiffs must allege: “(1) a publication; (2) which is false; (3) which is without privilege or justification, and (4) which causes direct and immediate pecuniary loss.” Manhattan Loft, LLC v. Mercury Liquors, Inc.,
Plaintiffs’ slander of title theory is now premised on the allegation that February 25, 2011 Substitution of Trustee for the 730 W. Sunset property is invalid because it was robo-signed by Rick Juarez, a known robo-signer. See FAC ¶ 39; RJN, Ex. O. Plaintiffs allege that Rick Juarez is not authorized by Wells Fargo to sign the substitution of trustee as attorney in fact for Wells Fargo. FAC ¶ 39. Thus, NDeX was not the properly substituted trustee under the deed of trust. Id. On this basis, each subsequent document recorded by NDeX (i.e., the NOD, 2011 NOS and 2012 NOS) is false because NDeX did not have legal authority to record the documents. Id. Plaintiffs also allege that
These allegations do not support a slander of title claim. See Rubio v. U.S. Bank N.A.,
Moreover, to the extent that an assignment was in fact robo-signed, it would be voidable, not void, at the injured party’s option. Maynard,
Relying on Chan Tang v. Bank of America, N.A.,
In a final attempt to save this cause of action, Plaintiffs argue that Defendants failed to comply with California Civil Code section 2934a in recording the NOD because they did so before recording the SOT. Opp’n at 10-11. This argument fails to state a cause of action for slander of title. An authorized agent of the trustee, mortgagee or beneficiary may record a notice of default. Cal. Civ.Code § 2924(a)(1). As the NOD is not required to be recorded by the Trustee, it follows that the SOT did not have to be recorded prior to the recording of the notice of default. See Elliott,
Plaintiffs’ remaining allegations are based on allegations that were previously dismissed with prejudice, such as allegations of violation of California Civil Code section 2923.5. Order at 9-12; FAC ¶¶ 35-37, 41. The Court will not revisit its previous ruling regarding these. Accordingly, this cause of action is DISMISSED with prejudice.
B. Second Claim: Violation of Unfair Competition Law
Plaintiffs’ second claim is for violation of the UCL, which proscribes “unlaw
Defendants maintain that Plaintiffs failed to allege injury and, as a result, they lack standing to pursue their UCL claim. Mot. at 15. Defendants also argue that this claim should be dismissed because the UCL is a derivative cause of action and Plaintiffs have not properly pled any other claims. Id. The Court agrees with Defendants. Plaintiffs have' not alleged facts to show that Defendants’ practices directly caused economic injury and, thus, they lack standing under the UCL. See DeLeon v. Wells Fargo Bank, N.A.,
Plaintiffs’ section 17200 claims “rise and fall with the substantive causes of action already discussed.” Tamburri v. Suntrust Mortgage, Inc.,
C. Third Claim: Violation of Truth in Lending Act
Plaintiffs allege that Defendants violated 15 U.S.C. § 1641(f) and § 1641(g) of TILA because they failed to: (1) provide accurate material disclosures and (2) “disclose the actual noteholder-assignee to whom this promissory note was transferred and assigned.” FAC ¶¶ 55, 57. Plaintiffs allege they “have incurred and continue to incur damages” as a result of these violations. Id. ¶ 61.
Defendants argue that .the TILA claims fail because: (1) Plaintiffs’ failure to allege tender precludes their claims; and (2) the allegations are time-barred. Mot. at 17. Plaintiffs counter that failure to tender does not serve as a bar to their TILA action while a foreclosure sale is pending. Opp’n at 15 (citing Chan Tang,
TILA ensures that creditors disclose material information to consumers about the terms of credit transactions and requires disclosure at the time the credit contract is executed. Ananiev v. Aurora Loan Services, LLC,
Additionally, a borrower’s right to rescind a loan transaction under TILA “expire[s] three years after the date of the consummation of the transaction^]” 15 U.S.C. § 1635(f). “Unlike TILA’s one year period for civil damages claims, the three year period for TILA rescission claims is an ‘absolute’ statute of repose that cannot be tolled.” Falcocchia v. Saxon Mortg., Inc.,
Plaintiffs allege that the statute should be equitably tolled based on “Defendants’ failure to effectively provide the required disclosures and notices.” FAC ¶ 58. Delayed discovery requires facts establishing that: (1) plaintiffs had no knowledge of the injury; (2) they lacked means for obtaining such knowledge; and (3) how and when they actually learned of the injury. Cal. Sansome Co. v. U.S. Gypsum,
Based on this analysis, the Court finds that Plaintiffs’ claims are barred by the statute of limitations. Accordingly, Plaintiffs’ TILA rescission claim is DISMISSED with prejudice.
Plaintiffs allege that Wells Fargo’s written communications with Plaintiffs about their default constitutes illegal debt collections practices under the FDCPA. FAC ¶¶ 64-74. Defendants argue that the claims should be dismissed for three reasons: (1) Wells Fargo was collecting a debt owed to itself; (2) as a mortgage servicer, Wells Fargo is not a “debt collector” within the meaning of the FDCPA; and (3) foreclosing on a property pursuant to a deed of trust is not the collection of a debt within the meaning of the FDCPA. Mot. at 18-19. Plaintiffs maintain that Wells Fargo is a debt collector because a “letter requesting payment on a promissory note secured by a mortgage is “an attempt at debt collection” within the meaning of the FDCPA.” Opp’n at 16 (citing Reese v. Ellis, Painter, Ratterree & Adams, LLP
To state a claim under the FDCPA, “a plaintiff must allege facts that establish the following: (1) the plaintiff has been the object of collection activity arising from a consumer debt; (2) the defendant attempting to collect the debt qualifies as a ‘debt collector’ under the FDCPA; and (3) the defendant has engaged in a prohibited act or has failed to perform a requirement imposed by the FDCPA.” Gomez v. Wells Fargo Home Mortg.,
Wells Fargo is not a “debt collector” within the meaning of the FDCPA because it was attempting to collect its own debt. Valdez v. America’s Wholesale Lender,
E. Fifth Claim: Violation of 18 U.S.C. § 1962(c) and (d) (“RICO”)
Last, Plaintiffs assert a claims for violation of RICO, 18 U.S.C. § 1962(c) and (d) against Defendants. FAC ¶¶ 75-109. Plaintiffs allege that as part of a scheme to “defraud everyone,” Defendants: “concealed the fact that the Loans were securitized”; “concealed the terms of the Securitization Agreements”; “br[ought] suit on behalf of entities that were not the real parties in interest”; “actively conceal [ed] the parties’ lack of standing”; “draft[ed] ... fraudulent affidavits and documents,” including documents executed by robosigners; and conveyed foreclosure-related documents using the U.S. Mail and the internet. Id. ¶¶ 76-78.
“[C]ourts should strive to flush out frivolous RICO allegations at an early stage of the litigation.” Wagh v. Metris Direct Servs., Inc.,
CONCLUSION
Based on the analysis above, the Court hereby GRANTS Defendants’ Motion to Dismiss. Dkt. No. 37. Plaintiffs’ FAC is DISMISSED WITH PREJUDÍCE. Because the Court grants Defendants’ Motion to Dismiss, it DENIES as MOOT Defendants’ Motion to Strike. Dkt. No. 38.
IT IS SO ORDERED.
Notes
. Pursuant to Federal Rule of Evidence 201(b)(2), Defendants request that the Court take judicial notice of 24 documents, attached as Exhibits A—X to Defendants' Request. Dkt. No. 39. As to Exhibits A—E, the Court has reviewed these documents and agrees with Defendants that it may properly take judicial notice of them as true and correct copies of documents reflecting official acts of the executive branch of the United States pursuant to California Evidence Code section 452, as well as information obtained from government websites. See Preciado v. Wells Fargo Home Mortg.,
. Wells Fargo's predecessor in interest, World Savings Bank, FSB, changed its name to "Wachovia Mortgage, FSB” effective December 31, 2007, and then merged into Wells Fargo Bank, N.A. in November 2009. Exhibits A through E attached to Defendants' Request for Judicial Notice are documents issued by the Office of Thrift Supervision, the Office of the Comptroller of the Currency, and the FDIC that evidence this name change and merger.
. Plaintiffs maintain that they are the intended beneficiaries of the "Substitution of Trustee” procedures set forth in their loan contract. Opp'n at 14. Yet, Plaintiffs agreed that Wells Fargo has the exclusive right to appoint a successor trustee. RJN Ex. M, ¶ 27 at p.12 ("I agree that Lender may at any time appoint a successor trustee and that Person shall become the Trustee under this Security Instrument as if originally named as Trustee.”).
. To the extent Plaintiffs rely on Glaski v. Bank of America, N.A.,
. Plaintiffs inexplicably dedicate four pages of their Opposition to general argument that a plaintiff need not allege tender when challenging a foreclosure. Opp'n 5-8. Yet, Plaintiffs fail to address the issue of tender in response to Defendants’ TILA argument on page 17, which is the only claim to which tender is relevant. See Opp’n at 5-8, 15-16.
. In addition to being a non-binding case from the Eleventh Circuit case, Reese is factually distinguishable. In that case, a law firm representing a lender was found to be a debt collector when it aided its client in collecting the amount owed on the promissory note. Reese,