Opinion
No. 2:11-cv-01735-MCE-EFB
03-29-2012
TIM DEERINCK, et al., Plaintiffs, v. HERITAGE PLAZA MORTGAGE INC., et al. Defendants.
MEMORANDUM AND ORDER
Pending before the Court is Defendants Bank of America, N.A. and Bank of New York Mellon's Motion to Dismiss Plaintiffs' Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). (Defs.' Mot. to Dismiss, ECF No. 10.) For the reasons discussed below, Defendants' Motion to Dismiss is granted.
All further references to "Rule" or "Rules" are to the Federal Rules of Civil Procedure unless otherwise noted.
Because oral argument will not be of material assistance, the Court ordered this matter submitted on the briefing. See E.D. Cal. Local Rule 230(g).
BACKGROUND
A. Introduction
On June 28, 2011, Plaintiffs Tim and Dina Deerinck ("Plaintiffs") filed the present action against Bank of America, N.A. ("Bank of America"), doing business as BAC Home Loans Servicing, and Bank of New York-Mellon ("Bank of New York"), as trustee for the benefit of the Countrywide Alternate Trust 2006-8T1 ("Countrywide Trust")(collectively, "Defendants"). Plaintiffs' Complaint seeks relief under five causes of action:
On September 23, 2011, Plaintiffs dismissed all claims against Heritage Plaza Mortgage Inc., in its capacity as originating lender. (See ECF No. 19.)
(1) declaratory relief under 28 U.S.C. § 2201-2202;
(2) negligence; (3) violation of the Truth in Lending Act, 15 U.S.C. § 1641(g); (4) violation of Cal. Bus. & Prof. Code section 17200 et seq.; and (5) quiet title. B. Allegations in Plaintiffs' Complaint
The following facts are taken primarily from Plaintiffs' Complaint. (Compl., ECF No. 1.) For purposes of this Motion, the Court accepts these facts as true and makes all inferences in the light most favorable to Plaintiffs.
In January of 2006, Plaintiffs executed a promissory note for $585,000.00 ("Promissory Note") with Heritage Plaza Mortgage, Inc. ("Heritage"), in order to purchase property located in Manteca, California (the "subject property"). (Compl., ECF No. 1 ¶¶ 16, 58; Defs.' Request for Judicial Notice ("RJN"), ECF No. 11, Ex. B.) The Deed of Trust named Heritage as the lender, First American Title Company of Stockton as the trustee, and Mortgage Electronic Registrations System, Inc. ("MERS") as the beneficiary. (Compl. ¶ 58; Defs.' RJN, Ex. A at 1-2.) Plaintiffs identify Bank of America as the loan servicer. (Compl. ¶ 95.)
Defendants request the Court take judicial notice of the Promissory Note and Deed of Trust executed by Plaintiffs and Heritage pursuant to Federal Rules of Evidence 201(b) (authorizing judicial notice of adjudicative facts "capable of accurate and ready determination by resort to sources whose accuracy cannot be reasonably questioned"). Defendants' requests are unopposed and are the proper subject of judicial notice. Accordingly, Defendants' Request for Judicial Notice of the Deed of Trust (Ex. B) is granted.
Defendants' Request for Judicial Notice of the Promissory Note (Ex. A) is granted. See n.5.
Plaintiffs' claims focus on the securitization and sale of their Deed of Trust and Promissory Note on the secondary mortgage market. (Id. ¶ 3.) Specifically, at some point after origination, Heritage attempted to securitize and sell Plaintiffs' Deed of Trust and Promissory Note to the Countrywide Alternative Trust Series 8T1-2006 (the "Countrywide Trust"). (Id. ¶¶ 4, 9-10.) Bank of New York is the Trustee of the Countrywide Trust and the Countrywide Trust is governed by a Pooling and Servicing Agreement ("PSA"). The parties involved in the securitization allegedly failed to adhere to the PSA's requirement that the Deed of Trust and Promissory Note must be properly endorsed, transferred, accepted, and deposited with the Countrywide Trust on or before the date specified in the PSA. (Id.) As a result of this failure to comply with the PSA, Plaintiffs' contend that the Promissory Note and Deed of Trust are not part of the Countrywide Trust. (Id. ¶ 10.) Thus, Bank of New York, as Trustee for the Countrywide Trust, has no authority to collect on the loan. (Id. ¶¶ 4, 10-11.)
While Plaintiffs do not dispute that they owe money on the loan, they dispute the amount of money owed and seek the Court's assistance in determining who the holder in due course is of their Note and Deed of Trust.
Plaintiffs contend they then attempted to determine the identity of the current owner of their Deed of Trust and Promissory Note. On or around April 12, 2010, Plaintiffs sent a Qualified Written Request ("QWR") letter to Bank of America requesting specific information about the status of Plaintiffs' loan account. (Id. ¶ 44, Ex. B.) In response to the April 12, 2010 QWR, Bank of America represented that Bank of New York was the owner of Plaintiffs' Deed of Trust and Promissory Note and that Bank of America is the servicer. (Id. ¶ 45, Ex. C.) Per Plaintiffs' April 12, 2010 request, Bank of America enclosed a copy of Plaintiffs' Promissory Note. (Id.) According to the Plaintiffs, the Promissory Note was not endorsed by or to Bank of America or Bank of New York. (Id.)
On May 13, 2010, Plaintiff Tim Deerinck e-mailed Alicia Reatz, a relationship manager with the Bank of New York, to obtain more information about the ownership status of their Deed of Trust. (Id. ¶ 46.) Ms. Reatz informed Plaintiffs that Bank of New York is "a Trustee, therefore, we [Bank of New York] do not physically own the loan or the property." (Id. ¶ 47.)
On August 9, 2010, Plaintiffs commissioned a company called Luminaq to conduct a securitization audit on their Deed of Trust and Promissory Note to determine the current owner of their loan. (Id. ¶ 48.) Plaintiffs contend that Neil L. Garfield, Esq., an attorney with Luminaq, determined that: (1) Heritage did not effectively dispose of the beneficial interest in Plaintiffs' Deed of Trust and Promissory Note; (2) Heritage failed to transfer Plaintiffs' Promissory Note and Deed of Trust to Bank of New York and the Countrywide Trust; (3) that Heritage Plaza and Bank of New York intentionally and knowingly failed to follow the PSA governing the Countrywide Trust; (4) that Heritage Plaza failed to perfect title by not following the PSA; and (5) "[t]he beneficiaries have no power to enforce the terms of the [Countrywide] Trust." (Id. ¶¶ 49-50.)
On May 9, 2011, Plaintiffs sent a second QWR letter to Bank of America demanding the name, address, and contact information of the current owner of the Note. (Id. ¶ 55, Ex. E.) On June 7, 2011, Bank of America responded to Plaintiffs' second QWR by sending a life loan history report of Plaintiff's loan. (Id. ¶ 56, Ex. F.) According to Plaintiffs, Bank of America did not include any additional response. (Id.) Plaintiffs allege that because they cannot identify the true owner of their note, they do not know if they are sending their monthly mortgage payments to the correct party and that multiple banks may seek to enforce Plaintiffs' debt obligation. (Id. ¶ 8; emphasis added.)
Plaintiffs do not allege that they have defaulted on their mortgage payments, nor do they allege that any entity has commenced a nonjudicial foreclosure proceeding against the subject property.
In the course of Plaintiffs' quest to identify the owner of their loan, Defendants allegedly failed to properly credit payments made, incorrectly calculated interest on accounts, and failed to accurately debt fees. (Id. ¶¶ 71, 74-75, 77.) As a result, Plaintiffs contend that they have overpaid in interest, their credit limit has been reduced, and their credit score has been damaged. (Id. ¶¶ 71, 74-75, 77.)
Based on these allegations, Plaintiffs challenge the securitization of their loan and seek relief under five causes of action against Defendants. First, Plaintiffs request a judicial determination pursuant to 28 U.S.C. §§ 2201-2202 that Defendants do not have any right or interest in Plaintiffs' Promissory Note, Deed of Trust, or the subject property and similarly, lack the authority to collect Plaintiffs' mortgage payments or enforce Plaintiffs' debt obligation. (Id. ¶¶ 89-91.) Plaintiffs allege that an actual controversy exists between Plaintiffs, Bank of New York, and Bank of America with regard to Bank of New York's authority to collect mortgage payments and enforce Plaintiffs' loan and as to the secured or unsecured status of Plaintiffs' loan. (Id. ¶¶ 85-88.) Plaintiffs seek punitive damages in order to deter Defendants from engaging in similar conduct. (Id. ¶ 92.)
Second, Plaintiffs allege a negligence claim against Defendants. (Id. ¶¶ 93-97.) Specifically, Plaintiffs contend that Defendants owe a duty to exercise reasonable care to follow California law with respect to the enforcement of debts and to refrain from taking actions against Plaintiffs outside the scope of their legal authority. (Id. ¶¶ 95-96.)
Third, Plaintiffs allege that Defendant Bank of New York violated Truth in Lending Act section 1641(g) by failing to provide Plaintiffs with written notice specifying that Bank of New York had been assigned the beneficial interest in Plaintiffs' Deed of Trust within thirty days of the date of the assignment of the Deed of Trust. (Compl. ¶ 105.)
Fourth, Plaintiffs allege that Defendants have violated California Business and Profession Code section 17200 by engaging in "unlawful, fraudulent, and deceptive business practices" with respect to mortgage loan servicing, assignment of Plaintiffs' Note and Deed of Trust, and other related matters. (Compl. ¶ 115.) Additionally, Plaintiffs allege the Defendants engaged in unlawful, fraudulent and deceptive business practices by: (1) failing to disclose the principal which documents were being executed and recorded in violation of California Civil Code 1095; (2) failing to record powers of attorney in connection with other recorded documents in violation of California Civil Code 2933; (3) violating the "Security First Rule;" (4) demanding and accepting payment of debts which were non-existent; (5) accepting loan payments as beneficiaries and trustees without legal authority to do so; (6) other deceptive business practices; and
(7) violation of Truth in Lending Act section 1641(g). (Id. ¶¶ 115-116.)
Fifth, Plaintiffs request the Court quiet title to the subject property in the Plaintiffs. Specifically, Plaintiffs seek a judicial determination that title to the subject property is solely vested in Plaintiffs and that Defendants should be declared to have no right, title, or interest in the subject property. (Id. ¶¶ 122-128.) Plaintiffs allege that they have offered and are ready, willing and able to tender their obligation. (Id. ¶ 123.) Additionally, Plaintiffs allege they are the owners of the subject property, that their interest in title lies in the Deed of Trust from Heritage, that Defendants have no right, title, interest, or estate in the subject property, and that Plaintiffs' interest is adverse to Defendants' claim to ownership. (Id. ¶¶ 124-126.)
On August 5, 2011, Defendants filed the pending motion to dismiss. (ECF No. 10.) On September 8, 2011, Plaintiffs filed their Opposition. (ECF No. 16.)
Five months after Plaintiffs filed their Opposition to Defendants' Motion to Dismiss, Plaintiffs filed a document requesting the Court take judicial notice of an official report generated by the City and County of San Francisco's Office of the Assessor-Recorder entitled, "Foreclosure in California: A Crisis of Compliance Report." (Pls.' RJN, ECF No. 22, Ex. A.)
Plaintiffs' RJN is unopposed and is accordingly granted. See City of Sausalito v. O'Neill, 386 F.3d 1186, 1223 n.2 (9th Cir. 2004)(finding a court may take judicial notice of records and reports of state administrative bodies, so long as their authenticity is not in dispute). While the Court grants Plaintiffs' RJN, the Court notes Plaintiffs do not specify how this official report relates to Plaintiffs' allegations and claims against Defendants.
STANDARD
A. Motion to Dismiss Pursuant to 12(b)(6)
On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, "a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (internal citations and quotations omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (quoting Twombly, 550 U.S. at 555). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) (stating that the pleading must contain something more than "a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.")).
Furthermore, "Rule 8(a)(2) . . . requires a showing, rather than a blanket assertion, of entitlement to relief." Twombly, 550 U.S. at 556 n.3 (internal citations and quotations omitted). Thus, "[w]ithout some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only 'fair notice' of the nature of the claim, but also 'grounds' on which the claim rests." Id. (citing 5 Charles Alan Wright & Arthur R. Miller, supra, at § 1202). A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs . . . have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Id. However, "[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'" Id. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. Leave to amend should be "freely given" where there is no "undue delay, bad faith or dilatory motive on the part of the movant . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment . . . ."
/// Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend). Not all of these factors merit equal weight. Rather, "the consideration of prejudice to the opposing party . . . carries the greatest weight." Id. (citations omitted). Dismissal without leave to amend is proper only if it is clear that "the complaint could not be saved by any amendment." Intri-Plex Techs. v. Crest Group, Inc., 4 99 F.3d 1048, 1056 (9th Cir. 2007) (citations omitted); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) ("Leave need not be granted where the amendment of the complaint . . . constitutes an exercise in futility . . . .").
ANALYSIS
A. Declaratory Relief
Defendants move to dismiss Plaintiffs' declaratory relief claim on the basis that Plaintiffs have failed to plead an actual controversy exists. (ECF No. 10 at 12-13.)
Plaintiffs' first cause of action for declaratory relief is based on the theory that Defendant Bank of New York has no authority to collect on Plaintiffs' loan and has no interest or title in the subject property. (See Compl. ¶¶ 3,4, 9-12, 34-35, 42, 54.) Plaintiffs base their theory on the allegation that the parties involved in the securitization of Plaintiffs' Deed of Trust and Promissory Note did not comply with the securitization procedures set forth in the PSA governing the Countrywide Trust, thus, Plaintiffs' Deed of Trust and Promissory Note are not part of the Countrywide Trust. (See id. ¶¶ 4, 9, 10.)
Plaintiffs' theory does not give rise to a legally cognizable claim. Plaintiffs' claim is based on a alleged breach of the PSA—the securitization agreement—which governs the Countrywide Trust. However, Plaintiffs lack standing to challenge the process in which their mortgage was securitized because they are not a party to the PSA. Plaintiffs were not investors of the Countrywide Trust, nor are they third-party beneficiaries of the PSA, thus, they do not have standing to challenge an alleged breach of that agreement. See e.g., Bascos v. Federal Home Loan Mortg. Corp, 2011 WL 3157063, at *6 (C.D. Cal. July 22, 2011) ("To the extent Plaintiff challenges the securitization of his loan because Freddie Mac failed to comply with the terms of the securitization agreement, Plaintiff has no standing to challenge the validity of the securitization of the loan as he is not an investor of the loan trust.").
Other district courts have also held that borrowers do not have standing to challenge breach of securitization agreements. See Armeni v. America's Wholesale Lender, 2012 WL 253967 at *2 (C.D. Cal. Jan. 25, 2012)(same); Junger v. Bank of Am., N.A., 2012 WL 603262 (C.D. Cal. Feb. 24, 2012)(same); In re Correia, 452 B.R. 319, 324 (1st Cir. B.A.P. 2011)(Where debtors asked the court to declare mortgage assignment invalid based on breach of Pooling Services Agreement, a contract to which debtors were not a party nor third-party beneficiaries, the court found that debtors lacked standing to object to breaches of the terms of the PSA); Rodenhurst v. Bank of Am., 773 F. Supp. 2d 886, 899 (D. Haw. 2011) ("The overwhelming authority does not support a [claim] based upon improper securitization."); Greene v. Home Loan Servs. Inc., 2010 WL 3749243, *4 (D. Minn. Sept. 21, 2010) ("Plaintiffs do not have standing to bring their challenge regarding the securitization of the mortgage" because they were "not a party to the Pooling and Servicing Agreement.").
Here, the Plaintiffs lack standing for the same reason; namely, they are not a party to the PSA. Plaintiffs' claim for declaratory relief is based on their theory of improper securitization. Thus, because Plaintiffs lack standing to raise an alleged breach of the PSA, Plaintiffs' declaratory relief claim must fail. Accordingly, Defendants' Motion to Dismiss Plaintiffs' claim for declaratory relief is granted.
Plaintiffs have not sufficiently pled their claims against Defendants for negligence, violation of the Truth in Lending Act § 1641(g) and California Bus. & Prof. Code section 17200, to withstand Defendants' Motion to Dismiss. Accordingly, to the extent that Plaintiffs' declaratory relief claim is based on any of those claims, Plaintiffs' declaratory relief claim must be dismissed.
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B. Negligence
Defendants move to dismiss Plaintiffs' negligence claim on the basis that Plaintiffs have failed to explain what legal authority imposes a duty of care on Bank of New York and Bank of America, and Plaintiffs have not provided any facts that suggest that any alleged duty was breached. (ECF No. 10 at 14.)
In order to state a cause of action for negligence, a plaintiff must allege: (1) the defendant has a legal duty to use due care; (2) the defendant breached such legal duty; (3) the defendant's breach was the proximate or legal cause of the resulting injury; and (4) damage to the plaintiff. Ladd v. County of San Mateo, 12 Cal. 4th 913, 917 (1996). The existence of a legal duty on the part of the defendant is a question of law to be determined by the court. Kentucky Fried Chicken of California, Inc. v. Superior Court, 14 Cal. 4th 814, 819 (1997). When not provided by statute, the existence of such a duty depends upon the foreseeability of the risk and a weighing of policy considerations for and against the imposition of liability. Jacoves v. United Merchandising Corp., 9 Cal. App. 4th 88, 105 (1992).
"[A]s a general rule, a financial institution owes no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal. App. 3d 1089, 1095-96 (affirming summary judgment in favor of defendant lending institution because defendant owed no duty to plaintiff in conducting its loan processing procedures); see Wagner v. Benson, 101 Cal. App. 3d 27, 35 (1980) (finding liability to a borrower for negligence arises only when the lender actively participates in the financed enterprise beyond the domain of the usual money lender)(internal quotations and citations omitted). "Under California law, a lender does not owe a borrower or third party any duties beyond those expressed in the loan agreement, except those imposed due to special circumstance." Resolution Trust Corp. v. BVS Dev., 42 F.3d 1206, 1214 (9th Cir. 1994) (citing Nymark, 231 Cal. App. 3d at 1096); see also Castaneda v. Saxon Mortg. Services, Inc., 687 F. Supp. 2d 1191, 1197-98 (E.D. Cal. 2009)(concluding that a loan servicer owed no duty of care to the plaintiff). Further, a trustee under a deed of trust "is not a true trustee, and owes no fiduciary obligations; [it] merely acts as a common agent for the trustor and beneficiary of the deed of trust. [The trustee's] only duties are: (1) upon default to undertake the steps necessary to foreclose the deed of trust; or (2) upon satisfaction of the secured debt to reconvey the deed of trust." Wong v. Am. Servicing Co., Inc., 2009 WL 5113516, at *6 (E.D. Cal. Dec. 18, 2009) (alterations in original) (internal quotation marks omitted).
Here, Plaintiffs fail to allege facts that show special circumstances that would suggest either Bank of New York or Bank of America owed Plaintiffs a duty of care. For example, Plaintiff has not alleged that Bank of New York, as trustee of the Countrywide Trust, actively participated in Plaintiffs' loan transaction such that Bank of New York now owes Plaintiffs a duty of care. Moreover, as previously noted, Plaintiffs are not beneficiaries of or parties to the Countrywide Trust. Similarly, Plaintiffs fail to allege Bank of America, as loan servicer, actively participated in the financed enterprise "beyond the usual practices associated with the lending business," Wong, 2009 WL 5113516 at *6. Plaintiffs have not alleged that either of these Defendants assumed a duty or entered into a special relationship besides what one would expect from an arm's length mortgage transaction. Plaintiffs do not allege that their relationship with Bank of New York and Bank of America went beyond that of borrower, beneficiary, and loan servicer. Plaintiffs do not cite to any common law or statutory authority that gives rise to a duty of care. Instead, Plaintiffs allege that Bank of New York and Bank of America owed a unique duty to not take actions against Plaintiffs which Bank of New York and Bank of America did not have legal authority to take. (Compl. ¶¶ 95-96 (emphasis added).) This bare allegation fails to amount to the active participation required to establish a duty of care under Nymark. 231 Cal. App. 3d at 1097.
Plaintiffs have failed to establish that Bank of New York and Bank of America owed Plaintiffs a duty of care. Accordingly, Defendants' Motion to Dismiss Plaintiffs' negligence claim is granted.
C. Truth In Lending Act § 1641(g)
Defendants move to dismiss that Plaintiffs' Truth in Lending Act ("TILA"), 15 U.S.C. 1640 et seq., claim on the basis that Plaintiffs do not allege sufficient facts to trigger the protection of TILA and fail to allege detrimental reliance. (ECF No. 10 at 16.)
The purpose of the TILA is to ensure that users of consumer credit are informed as to the terms on which credit is offered them. Jones v. E*Trade Mortg. Corp., 397 F.3d 810, 812 (9th Cir. 2005). TILA "requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower's rights." Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). TILA § 1641, titled "Liability of Assignees," requires that when an entity purchases or is assigned the beneficial interest in a loan on a property, it must notify the borrower in writing within 30 days of when the loan was transferred. See 15 U.S.C. § 1641(g). Subsection (g) of § 1641 lists the particular information that the assignee's notice must contain. This subsection only applies to the "new owner or assignee of the debt." See id.
Here, Plaintiffs allege that TILA § 1641(g) applies to Bank of New York, that Bank of New York did not provide written notice to Plaintiffs within 30 days of the date of assignment, that Plaintiffs did not receive notice of how to reach a Bank of New York agent or where their Deed of Trust was recorded, and did not receive any other relevant information about Bank of New York. (Compl. ¶¶ 101-112.) However, Plaintiffs do not offer any supporting factual allegations. Significantly, Plaintiffs fail to provide any factual allegation regarding when the purported transfer occurred, or why Bank of New York is subject to TILA's notice requirements. Plaintiffs make only conclusory allegations that they did not receive notice required by TILA § 1641(g) from Bank of New York. Plaintiffs' cursory recitation of the requirements of TILA § 1641(g) is insufficient to support a TILA violation claim and to survive Defendants' Motion to Dismiss. Iqbal, 129 S. Ct. at 1950. Accordingly, Defendants' Motion to Dismiss Plaintiffs' TILA claim is granted.
D. California Bus. & Prof. Code section 17200
Defendants move to dismiss Plaintiffs' claim for violations of California Bus. & Prof. Code section 17200 on the basis that Plaintiffs' claims are not supported by their factual allegations. (ECF No. 10 at 17-19.)
California's Business and Professions Code §§ 17200 et seq. (more commonly known as California's Unfair Competition Law ("UCL")) defines unfair competition as "any unlawful, unfair or fraudulent business act or practice." "Unlawful" practices are practices "forbidden by law, be it civil or criminal, federal, state, or municipal, statutory, regulation, or court-made." Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-39 (1994) (citing People v. McKale, 25 Cal. 3d 626, 632(1979)). To state a cause of action based on an "unlawful" business act or practice under the UCL, a plaintiff must allege facts sufficient to show a violation of some underlying law. McKale, 25 Cal.3d at 635.
A business act or practice is "unfair" when the conduct "threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to a violation of the law, or that otherwise significantly threatens or harms competition." Cel-Tech Communications, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 187 (1999). To sufficiently plead an action based on an "unfair" business act or practice, a plaintiff must allege facts showing the "unfair" nature of the conduct and that the harm caused by the conduct outweighs any benefits that the conduct may have. Motors, Inc. v. Times Mirror Co., 102 Cal. App. 3d 735, 740 (1980).
A "fraudulent" business act or practice is one in which members of the public are likely to be deceived. Hall v. Time, Inc., 158 Cal. App. 4th 847, 849 (2008); Olsen v. Breeze, Inc., 48 Cal. App. 4th 608, 618 (1996)("does not refer to the common law tort of fraud but only requires a showing members of the public 'are likely to be deceived'"). Thus, in order to state a cause of action based on a "fraudulent" business act or practice, the plaintiff must allege that consumers are likely to be deceived by the defendant's conduct. Committee on Children's Television, Inc. v. General Foods Corp., 35 Cal. 3d 197, 212 (1983). Furthermore, 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., 14 Cal. App. 4th 612, 619 (1993).
In this case, Plaintiffs fail to plead a UCL claim under any available theory. First, the "unlawful" prong of the UCL requires an underlying violation of a state or federal statute or common law. As discussed above, the Court has granted Defendants' Motion as to Plaintiffs' negligence and TILA claims. As a result, these claims cannot form the basis of Plaintiffs' UCL claim. In addition, merely listing Civil Code violations, as Plaintiffs do here, without more, is not sufficient to maintain a plausible claim. Iqbal, 129 S. Ct. at 1949. Ultimately, Plaintiffs' conclusory statements suggesting that Defendants are in violation of certain statutes are not sufficient to withstand a motion to dismiss.
Next, Plaintiffs do not adequately plead an independent UCL claim for unfair or fraudulent business practices because Plaintiffs fail to allege facts to support any identifiable wrongdoing by specific Defendants. Likewise, Plaintiffs' mere conclusory recitation of the elements of these claims do not give proper notice to the respective Defendants as to the alleged misconduct. Accordingly, Plaintiffs' UCL claim cannot survive Defendants' Motion to Dismiss. Accordingly, Defendants' Motion to Dismiss Plaintiffs' UCL claim is granted.
E. Quiet Title
Defendants move to dismiss Plaintiffs' quiet title claim on the basis that Plaintiffs do not and cannot allege that they have made an offer to tender or tendered the amount due on the loan. (ECF No. 12 at 20.) Defendants argue that to maintain a quiet title action, Plaintiffs must pay the outstanding debt owed on the subject property.
California Code of Civil Procedure § 760.010 provides for a quiet title action "to establish title against adverse claims to real or personal property or any interest therein." To state a cause of action for quiet title, a plaintiff must plead: (1) a legal description of the property that is the subject of the action; (2) the title of the plaintiff and the basis upon which such title is asserted; (3) the adverse claims to the title of the plaintiff against which a determination is sought; (4) the date as of which the determination is sought; and (5) a prayer for the determination of the title of the plaintiff against the adverse claims. See Cal. Civ. Proc. Code § 760.020. The complaint in an action to quiet title must be verified, unless plaintiff is a public entity. Id. Additionally, in an action to quiet title, the plaintiff must stand on the strength of his or her own title and not the weaknesses of the defendant's title. Millard v. Faus, 268 Cal. App. 2d 76, 82 (1968).
Further, under California law, "it is well-settled that 'a mortgagor cannot quiet his title against the mortgagee without paying the debt secured.'" Briosos v. Wells Fargo Bank, 737 F. Supp. 2d 1018, 1032 (N.D. Cal. 2010) (quoting Shimpones v. Stickney, 219 Cal. 637, 649 (1934)). Therefore, "to maintain a quiet title claim, a plaintiff 'is required to allege tender of the proceeds of the loan at the pleading stage.'" Id. (quoting Velasquez v. Chase Home Fin., LLC, 2010 WL 3211905, at *4 (N.D. Cal. Aug. 12, 2010)); see also Hensley v. Bank of New York Mellon, 2010 WL 5418862, at *3 (E.D. Cal. Dec. 23, 2010) (dismissing a quiet title claim where the plaintiff did "not allege that she has tendered, or is able to tender").
Contrary to Defendants' argument, Plaintiffs have adequately alleged their ability to tender and that Plaintiffs have offered to tender their obligation. (See Compl. ¶ 123.) Specifically, the allege they have offered and are ready, willing and able to tender their obligation in full. (Id.) Further, Plaintiff has sufficiently alleged all the requisite elements under California Code of Civil Procedure section 760.20 to support a cause of action for quiet title. (See id. ¶¶ 124-128.)
However, Plaintiffs base their quiet title action on the alleged weakness of Defendants' interest in title, instead of the strength of their own title. Specifically, similar to their claim for declaratory relief, Plaintiffs' quiet title claim is based on the allegation that Heritage failed to properly transfer Plaintiffs' Deed of Trust and Promissory Note into the Countrywide Trust in violation of the Countrywide Trust PSA, and thus, Bank of New York, as Trustee of the Countrywide Trust, has no interest in Plaintiffs' Deed of Trust or Promissory Note and no authority to enforce Plaintiffs' loan. Plaintiffs' quiet title action relies on the assumption that Plaintiffs' Deed of Trust and Promissory Note are not part of the Countrywide Trust res, and thus, Defendants do not have any interest in the subject property or authority to enforce Plaintiffs' loan. As previously discussed, Plaintiffs have failed to establish that they have standing to challenge such a breach of the securitization agreement governing the Countrywide Trust. Therefore, Plaintiffs' quiet title claim must be dismissed. Accordingly, Defendants' Motion to Dismiss Plaintiffs' quiet title claim is granted.
CONCLUSION
For the reasons stated above, Defendants' Motion to Dismiss (ECF No. 10) is granted with leave to amend. Plaintiffs may file an amended complaint not later than twenty (20) days following the date of this Memorandum and Order should they choose to do so.
IT IS SO ORDERED.
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MORRISON C. ENGLAND, JR.
UNITED STATES DISTRICT JUDGE