Opinion
Case No. 15-CV-00792-LHK
10-30-2015
BROCK WILLIAMS, et al., Plaintiffs, v. BANK OF AMERICA NATIONAL ASSOCIATION, et al., Defendants.
ORDER GRANTING DEFENDANTS' MOTIONS TO DISMISS WITH PREJUDICE
Re: Dkt. Nos. 28, 30
Plaintiffs Brock Williams and Sylvia Williams ( "Plaintiffs") sued to quiet title against Defendants Bank of America, N.A. ("BANA") and U.S. Bank National Association, as Trustee for Resident Accredit Loans Inc. Series 2006 QS2 ("U.S. Bank") (collectively, "Defendants"). Before the Court are Defendants' Motions to Dismiss Plaintiffs' First Amended Complaint ("FAC"). ECF Nos. 28, 30. Having considered the parties' submissions, the relevant law, and the record in this case, the Court hereby GRANTS Defendants' Motions to Dismiss with prejudice.
I. BACKGROUND
A. Factual Background
On December 15, 2005, Plaintiffs purchased the real property located at 940 College Drive, San Jose, California 95128 (the "Property"), via a grant deed recorded against the Property on January 4, 2006, as instrument number 18754844. FAC ¶¶ 12-13, Ex. A. The purchase was financed by a first deed of trust (the "First Deed of Trust") and a second deed of trust, both recorded in favor of American Mortgage Express Corp. ECF No. 29-1, Exs. 1-2. The second deed of trust was reconveyed on November 17, 2006. Id. Ex. 3. This reconveyance was recorded against the Property on November 21, 2006. Id.
On November 6, 2006, Plaintiffs refinanced the Property by obtaining a home equity line of credit from BANA in the amount of $200,000 (the "Loan"). FAC ¶ 14, Ex. B. The Loan was secured by a deed of trust (the "Loan Deed of Trust") recorded against the Property by the Santa Clara County Recorder on September 16, 2008, as instrument number 19989695. Id. Plaintiffs do not dispute that Plaintiffs obtained the Loan from BANA. See generally FAC. However, Plaintiffs allege that BANA forged the Loan Deed of Trust, and point to anomalies in the Loan Deed of Trust in order to demonstrate the forgery. Id. ¶¶ 14, 16-17. For example, Plaintiff Sylvia Williams allegedly did not sign the Loan Deed of Trust, and her signature on the document is allegedly a forgery. Id. ¶ 16f. Plaintiffs do not allege that Plaintiff Brock Williams's signature on the Loan Deed of Trust is a forgery. See generally FAC.
On December 2, 2011, Mortgage Electronic Registration Systems, Inc. ("MERS") (the nominee of American Mortgage Express Corp.) assigned the beneficial interest under the First Deed of Trust to U.S. Bank, as evidenced by an Assignment of Deed of Trust (the "Assignment") recorded in the Official Records of Santa Clara County on December 12, 2011, as instrument number 21454357. Id. ¶ 18, Ex. D. Plaintiffs allege that the Assignment was ineffective to transfer the First Deed of trust and forged, because: (1) the individual signing on behalf of the nominee MERS was not a MERS employee; (2) American Mortgage Express Corp. was not in business at the time of the assignment; (3) the express terms of the First Deed of Trust prohibited the assignment; and (4) there are anomalies in the signature of the notary public that indicate the signature was forged. Id. ¶¶ 20-24.
Non-judicial foreclosure proceedings commenced after Plaintiffs defaulted on the First Deed of Trust in July 2011 by missing their monthly payment. ECF No. 29-1, Ex. 4. U.S. Bank issued a Notice of Default and Election to Sell and recorded it in the Official Records of Santa Clara County on December 30, 2011, as instrument number 21481333. Id. This Notice of Default was rescinded on November 24, 2014. Id. Ex. 5. On November 13, 2014, a subsequent Notice of Default and Election to Sell Under Deed of Trust (the "NOD") was recorded in the Official Records of Santa Clara County, as instrument number 22767063. Id. Ex. 6. The NOD lists the amount due under the First Deed of Trust as $151,852.86 as of September 22, 2014. Id.
On April 9, 2015, the Loan Deed of Trust was reconveyed (the "Reconveyance"), as recorded in the Official Records of Santa Clary County as instrument number 22912008. FAC ¶¶ 15-16, Ex. C. Plaintiffs allege that, despite the Reconveyance, BANA continues to claim an adverse interest in the Property. Id. ¶ 15. Plaintiffs further allege that the Reconveyance was ineffective to reconvey the Property to Plaintiffs because the Reconveyance lacks specificity. Id. ¶¶ 15-16. For instance, the Reconveyance allegedly fails to specify on what grounds the legal entitlement to the Reconveyance rests and "fails to name either of the Plaintiffs or even specify the number of persons to whom said reconveyance applies to forgive any debt." Id. Thus, according to Plaintiffs, the Property remains encumbered by the forged Loan Deed of Trust.
Plaintiffs seek to quiet title to the Property. Id. ¶ 25-29. Plaintiffs further seek the cancellation of the Loan Deed of Trust and the Assignment, which Plaintiffs claim were wrongfully recorded. Id. ¶¶ 31, 37. Plaintiffs do not seek cancellation of the First Deed of Trust.
B. Procedural History
On January 14, 2015, Plaintiffs, who are represented by counsel, filed this action to quiet title in Santa Clara County Superior Court. ECF No. 1-1. On February 20, 2015, BANA removed the case to federal court. ECF No. 1. On February 27, 2015, BANA filed a Motion to Dismiss. ECF No. 8. Plaintiffs did not file an Opposition or Statement of Non-Opposition. On March 19, 2015, BANA filed a Reply indicating that "BANA has not received any opposition to the Motion to Dismiss." ECF No. 15 at 1.
On March 20, 2015, Plaintiffs, still represented by counsel, filed a Motion to Remand the case to state court. ECF No. 16. BANA opposed the motion on April 3, 2015. ECF No. 18. Plaintiffs did not reply. On April 24, 2015, the Court denied the Motion to Remand based on the existence of diversity jurisdiction. ECF No. 21 ("Remand Order"). In light of Plaintiffs' failure to oppose BANA's Motion to Dismiss and to file a reply in support of Plaintiffs' Motion to Remand, the Court also ordered Plaintiffs to show cause why the case should not be dismissed for failure to prosecute. Id. at 6.
On May 1, 2015, U.S. Bank filed a Motion to Dismiss. ECF No. 22. On May 5, 2015, Plaintiffs responded to the Order to Show Cause and requested reconsideration of the Court's Remand Order. ECF No. 23. That same day, the Court declined to dismiss Plaintiff's lawsuit for failure to prosecute, granted BANA's Motion to Dismiss with leave to amend, denied U.S. Bank's Motion to Dismiss as moot, and denied Plaintiffs' Request for Reconsideration of the Remand Order. ECF No. 24.
On June 4, 2015, Plaintiffs filed the FAC. ECF No. 26. The FAC includes two counts: quiet title against Defendants under California Code of Civil Procedure § 760.010, and cancellation of instruments under California Civil Code § 3412. Id. ¶ 1. BANA moved to dismiss the FAC on June 22, 2015. ECF No. 28 ("BANA Mot."). BANA filed a Request for Judicial Notice in support of its Motion to Dismiss. ECF No. 29. Also on June 22, 2015, U.S. Bank moved to dismiss the FAC and joined BANA's Request for Judicial Notice. ECF No. 30 ("U.S. Bank Mot.").
The Court GRANTS BANA's and U.S. Bank's unopposed Request for Judicial Notice. ECF No. 29-1; ECF No. 30 at 2 n.2. The Court may take notice of facts not subject to reasonable dispute that are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). BANA and U.S. Bank request judicial notice of certain documents recorded in the Official Records of Santa Clara County. These documents are appropriate for judicial notice. See Lee v. City of L.A., 250 F.3d 668, 689-90 (9th Cir. 2001) (noting that courts may take judicial notice of matters of public record), overruled on other grounds by Galbraith v. Cnty. of Santa Clara, 307 F.3d 1119, 1125-26 (9th Cir. 2002).
Plaintiffs opposed BANA's Motion to Dismiss on July 6, 2015. ECF No. 32. Plaintiffs opposed U.S. Bank's Motion to Dismiss on July 7, 2015, one day after the Opposition was due. ECF No. 33. U.S. Bank filed a Reply on July 10, 2015. ECF No. 35 ("U.S. Bank Reply"). BANA filed a Reply on July 13, 2015. ECF No. 36.
Plaintiffs filed two oppositions to BANA's Motion to Dismiss, one on July 6, 2015, ECF No. 32, and one on July 7, 2015, ECF No. 34. Plaintiffs do not provide any explanation for the two filings and the documents appear to be the same. For the purposes of evaluating BANA's Motion to Dismiss, the Court looks to the opposition filed on July 6, 2015, as that was Plaintiffs' deadline to file. See ECF No. 28 (setting briefing schedule).
II. LEGAL STANDARD
A. Rule 12(b)(1) Subject Matter Jurisdiction
A defendant may move to dismiss an action for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure. "The party asserting federal subject matter jurisdiction bears the burden of proving its existence." Chandler v. State Farm Mut. Auto Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010). The party carries that burden by putting forth "the manner and degree of evidence required" by whatever stage of the litigation the case has reached. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992).
B. Rule 12(b)(b) Motion to Dismiss
Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include "a short and plain statement of the claim showing that the pleader is entitled to relief." A complaint that fails to meet this standard may be dismissed pursuant to Rule 12(b)(6). Rule 8(a) requires a plaintiff to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id.
For purposes of ruling on a Rule 12(b)(6) motion, the Court "accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party." Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). The Court, however, need not accept as true allegations contradicted by judicially noticeable facts, see Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and it "may look beyond the plaintiff's complaint to matters of public record" without converting the Rule 12(b)(6) motion into a motion for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor must the Court "assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam). Mere "conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss." Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004).
C. Leave to Amend
If the court concludes that the complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend "shall be freely given when justice so requires," bearing in mind "the underlying purpose of Rule 15 . . . [is] to facilitate decision on the merits, rather than on the pleadings or technicalities." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (citation omitted). Nonetheless, a district court may deny leave to amend a complaint due to "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." See Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008).
I. DISCUSSION
Defendants move to dismiss both Plaintiffs' quiet title and cancellation of instruments claims. U.S. Bank also challenges Plaintiffs' standing to bring either claim against U.S. Bank. The Court addresses Plaintiffs' standing first, followed by the quiet title and cancellation of instruments claims. See Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 93-95 (1998) (explaining that Article III jurisdiction must be established "as a threshold matter"); see also Vt. Agency of Natural Res. v. U.S. ex rel. Stevens, 529 U.S. 765, 771 (2000) ("We first address the jurisdictional question whether respondent Stevens has standing under Article III of the Constitution to maintain this suit.").
A. Standing
U.S. Bank contends that Plaintiffs cannot challenge any defects in the Assignment, and thus cannot bring either a quiet title or cancellation of instruments claim against U.S. Bank. U.S. Bank Mot. at 6-7; U.S. Bank Reply at 3. U.S. Bank first frames this argument as a lack of cognizable claim, U.S. Bank Mot. at 6-7, and then as a lack of standing, see U.S. Bank Reply, at 3. Because Article III standing must be established "as a threshold matter," the Court examines U.S. Bank's standing argument even though it was first clearly made in U.S. Bank's reply brief. See Padgett v. Wright, 587 F.3d 983, 985 n.2 (9th Cir. 2009) (per curiam) (courts do not generally consider matters "not specifically and distinctly raised and argued in the opening brief); Steel Co., 523 U.S. at 93-95 (Article III standing is a "threshold jurisdictional question"); cf. Wood v. City of San Diego, 239 Fed. App'x 310, 310 (9th Cir. 2007) (district courts may sua sponte raise and examine standing).
To establish Article III standing, "a plaintiff must show (1) it has suffered an 'injury in fact' that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical; (2) the injury is fairly traceable to the challenged action of the defendant; and (3) it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180-81 (2000) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). A suit brought by a plaintiff without Article III standing is not a "case or controversy," and an Article III federal court therefore lacks subject matter jurisdiction over the suit. Steel Co., 523 U.S. at 93-95. In that case, the suit should be dismissed under Federal Rule of Civil Procedure 12(b)(1). See id. at 109-10.
Plaintiffs' quiet title and cancellation of instruments claims against U.S. Bank are premised on the theory that the Assignment was ineffective in transferring ownership of the First Deed of Trust. FAC ¶¶ 20-21. For each of these claims, Plaintiffs bring an action as borrowers, and assert three injuries arising from the defective Assignment: a cloud on their title, possible forced sale of the Property, and future difficulty in selling the Property due to U.S. Bank's lien. Id. ¶¶ 38-39. U.S. Bank moves to dismiss these causes of action because Plaintiffs lack standing. Reply at 3. Specifically, U.S. Bank asserts that Plaintiffs do not allege an injury in fact because there is no prejudice to Plaintiffs from any defects in the Assignment. Id.
The Court agrees with U.S. Bank. "Third-party borrowers lack standing to assert problems in the assignment of the loan" because the borrowers have not suffered an injury in fact. Flores v. GMAC Mortg., LLC, No. 12- 00794 SI, 2013 WL 2049388, at *3 (N.D. Cal. May 14, 2013); see also Jenkins v. JP Morgan Bank, N.A., 216 Cal. App. 4th 497, 513-14 (Ct. App. 2013) (noting there is no actual controversy between the parties because the assignment "merely substituted one creditor for another, without changing [the plaintiff's] obligations under the note"); Fontenot v. Wells Fargo Bank, N.A., 198 Cal. App. 4th 256, 272 (Ct. App. 2011). Assignment defects do not injure borrowers because "[e]ven if there were some defect in the [subsequent] assignment of the deed of trust, that assignment would not have changed plaintiff's payment obligations." Simmons v. Aurora Bank, FSB, No. 13-00482 HRL, 2013 WL 5508136, at *2 (N.D. Cal. Sept. 30, 2013); see also Apostol v. CitiMortgage, Inc., No. 13-01983 WHO, 2013 WL 6328256, at *7-8 (N.D. Cal. Nov. 21, 2013); Siliga v. Mortg. Elec. Registration Sys., Inc., 219 Cal. App. 4th 75, 85 (Ct. App. 2013) ("The assignment of the deed of trust and the note did not change [Plaintiffs'] obligations under the note, and there is no reason to believe that . . . the original lender would have refrained from foreclosure in these circumstances.").
Here, Plaintiffs have failed to specify an injury "fairly traceable to the challenged action of the defendant." See Laidlaw, 528 U.S. at 180. Plaintiffs do not challenge the First Deed of Trust. See generally FAC; ECF No. 33, at 4 (Plaintiffs agree that "even if the assignment were invalid, that would not somehow justify cancelling the underlying deed of trust. It would simply mean that some entity other than US Bank currently has the beneficial interest in the deed of trust"). Because Plaintiffs' obligation to repay the First Deed of Trust is unaffected by any assignment defects, Plaintiffs' alleged injuries—the cloud on the title, possible foreclosure, and the lien on the Property—remain unchanged by the alleged defects in the Assignment. See Moran v. GMAC Mortg., LLC, No. 5:13-CV-04981-LHK, 2014 WL 3853833, at *4-6 (N.D. Cal. Aug. 5, 2014). Therefore, even if U.S. Bank forged the Assignment, "the true victim was not [Plaintiffs] but the original lender, which would have suffered the unauthorized loss" of the promissory note. Fontenot, 198 Cal. App. 4th at 272. Regardless of who holds the beneficial interest on the First Deed of Trust, Plaintiffs remain obligated to repay the First Deed of Trust and thus are not harmed by the alleged defects in the Assignment. See Flores, 2013 WL 2049388, at *3 ("Since an assignment merely substituted one creditor for another, without changing [the plaintiff's] obligations under the note, the borrower was not harmed even were there some defect in the manner in which the loan was assigned." (alteration in original)). Consequently, Plaintiffs have not alleged an injury in fact, and lack standing to challenge the alleged irregularities in the Assignment. See id.
In their opposition to U.S. Bank's Motion to Dismiss, Plaintiffs state that "Plaintiffs have clearly alleged that the Assignment of Deed of Trust is a forgery & the [sic] with the note and deed of trust being bifurcated, the deed of trust is a nullity." ECF No. 33, at 3. However, the FAC does not allege that the note and deed of trust are bifurcated or that the First Deed of Trust is a nullity. See generally FAC. Plaintiffs do not allege that the First Deed of Trust is a forgery. Moreover, Plaintiffs make no substantive argument that the allegedly forged Assignment invalidates the First Deed of Trust. See generally ECF No. 33. In fact, Plaintiffs do not deny that they owe money on the First Deed of Trust and "fully agree" that "even if the assignment were invalid, that would not somehow justify cancelling the underlying deed of trust. It would simply mean that some entity other than US Bank currently has the beneficial interest in the deed of trust." Id. at 4. --------
Because Plaintiffs' quiet title and cancellation of instruments claims against U.S. Bank are based on the alleged defects in the Assignment, the Court concludes that Plaintiffs lack standing to bring these claims against U.S. Bank. See Moran, 2014 WL 3853833, at *4-6 (finding the plaintiff lacked standing to challenge defects in assignment of the deed of trust and dismissing claims arising out of alleged assignment defects, including quiet title and cancellation of instruments claims); Apostol, 2013 WL 6328256, at *7-8. This defect is a legal one that cannot be cured by additional factual allegations. Thus, leave to amend would be futile. The Court GRANTS with prejudice U.S. Bank's Motion to Dismiss Plaintiffs' quiet title and cancellation of instruments claims for lack of standing. See Moran, 2014 WL 3853833, at *6.
B. Quiet Title
"Apart from standing, the Court now identifies additional and independent reasons to dismiss" Plaintiffs' quiet title claim against U.S. Bank. Id. at *7. In addition to addressing the alternative reasons for dismissing the claims against U.S. Bank, the Court also considers Plaintiffs' quiet title claim against BANA. The Court will then turn to Plaintiffs' cancellation of instruments claim against BANA.
BANA and U.S. Bank both argue that Plaintiffs fail to plead the essential elements of a quiet title claim. BANA Mot. at 5-8; U.S. Bank Mot. at 4-5. BANA further claims that Plaintiffs' quiet title claim is barred by the statute of limitations and that Plaintiffs have failed to show that the Loan Deed of Trust is a forgery. BANA Mot. at 9-10. Because the Court finds below that Plaintiffs have not sufficiently alleged a quiet title claim, the Court need not address BANA's remaining arguments.
Under California law, a quiet title action must include: (1) a description of the property in question; (2) the basis for Plaintiffs' title; (3) the adverse claims to Plaintiffs' title; (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. Cal. Code Civ. Proc. § 761.020. BANA contends that Plaintiffs fail to allege the third element, an adverse claim. U.S. Bank argues that Plaintiffs have failed to allege the second element, the basis for Plaintiffs' title. The Court addresses these arguments in turn.
1. Adverse Claims to Plaintiffs' Title
Plaintiffs argue that BANA claims an adverse interest in the Property under the allegedly forged Loan Deed of Trust. BANA disputes that the Loan Deed of Trust is a forgery. BANA also argues that, whatever interest the Loan Deed of Trust purported to convey, BANA reconveyed the Loan Deed of Trust to Plaintiffs and thus has no adverse claim to Plaintiffs' title.
The Court agrees that BANA has no adverse claim to Plaintiffs' title. "[T]here is no entitlement to a judgment quieting title insofar as there is no antagonistic property interest." Friends of the Trails v. Blasius, 78 Cal. App. 4th 810, 831 (Ct. App. 2000). As evidenced by the Reconveyance, BANA has no antagonistic interest in the Property. FAC Ex. C. Specifically, BANA concedes that the Reconveyance "reconveys BANA's lien against the Property and reflects that the balance of Plaintiffs' Loan was forgiven by BANA." BANA Mot. at 7. Plaintiffs acknowledge that "BANA has admitted that they have no interest in the Plaintiffs' Property." ECF No. 32, at 3. Thus, there is no controversy between Plaintiffs and BANA. Both parties agree that BANA has no interest in the Property. See Friends of the Trails, 78 Cal. App. 4th at 831 (denying relief against easement owner was proper when the easement owner had no interest adverse to the plaintiffs).
In this lawsuit, Plaintiffs seek exactly what BANA has conceded and the Reconveyance demonstrates—namely, that Plaintiffs own the Property free of the Loan Deed of Trust. In opposition to BANA's motion to dismiss, however, Plaintiffs reject BANA's concession and the Reconveyance to argue that BANA retains an interest in the Property. ECF No. 32, at 2, 5. It is not clear to the Court why Plaintiffs would advance this argument, as Plaintiffs' goal in this litigation is for the Court to cancel any interest that BANA has in the Property. See FAC at 10. If BANA has no interest in the Property, as BANA concedes and the Reconveyance demonstrates, then there is no need for Plaintiffs to get a Court order cancelling BANA's interest. Although it appears to be against Plaintiffs' interest to argue that BANA retains an interest in the Property, Plaintiffs offer two reasons that BANA retains an interest: (1) BANA previously conceded it had an interest in the Property upwards of $200,000, and (2) the Reconveyance was ineffective. FAC ¶¶ 15-16; ECF No. 32, at 2, 5. The Court will address these arguments in turn.
First, Plaintiffs argue that, during the course of this litigation, BANA conceded an interest in the Property and claimed upwards of a $200,000 interest against Plaintiffs. ECF No. 32, at 2, 5. However, Plaintiffs are confusing BANA's interest in the Property with BANA's demonstration of the amount in controversy for the purposes of diversity jurisdiction. The amount in controversy is determined by the "value of the object in litigation"—here, the value of the Property. See Remand Order at 5. In the Notice of Removal, BANA did not, as Plaintiffs claim, "admit[] it had a $200,000 adverse claim regarding the subject property." ECF No. 32, at 5. Rather, BANA represented that the Property itself was worth over $75,000 and thus the case satisfied the requirements for diversity jurisdiction. See Remand Order at 5-6 (concluding that BANA demonstrated by a preponderance of the evidence that the amount in controversy was over $75,000). Moreover, there is no dispute that Plaintiffs obtained a loan from BANA in the amount of $200,000. Id. BANA's past interest in the Property, however, does not demonstrate that BANA retained an interest in the Property after the Reconveyance.
Second, Plaintiffs allege that the Reconveyance was ineffective because it fails to specify on what grounds the legal entitlement to the Reconveyance rests and "fails to name either of the Plaintiffs or even specify the number of persons to whom said reconveyance applies to forgive any debt." FAC ¶¶ 15-16. As BANA explains, Plaintiffs misunderstand the Reconveyance. BANA Mot. at 7. The Reconveyance specifically names both Plaintiffs as trustors of the Loan Deed of Trust, "dated 11/06/2006 and recorded on 09/16/2008, as Instrument or Document Number 19989696." FAC Ex. C. The Reconveyance substitutes a trustee, who "does hereby reconvey, without warranty, to the person or persons legally entitled thereto, the estate now held by Trustee" under the Loan Deed of Trust. Id. Accordingly, the Reconveyance is not vague, but specifically reconveys BANA's lien against the Property. The Reconveyance was recorded, so individuals examining Plaintiffs' chain of title will be aware of the Reconveyance. See id. Although the Court accepts the allegations in the complaint as true, the Court need not "accept as true allegations that contradict exhibits attached to the Complaint." Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). The Reconveyance, attached to the FAC as Exhibit C, demonstrates that BANA reconveyed its interest in the Property to Plaintiffs. Thus, BANA has no antagonistic interest in the Property. See Friends of the Trails, 78 Cal. App. 4th at 831.
Accordingly, the Court finds that Plaintiff cannot state a quiet title claim against BANA. See id. Moreover, the Court finds that amendment would be futile, given that Plaintiffs attached the Reconveyance to the FAC and acknowledge BANA's admission that the Reconveyence reconveyed BANA's lien. See Bonin v. Calderon, 59 F.3d 815, 845 (9th Cir. 1995) ("Futility of amendment can, by itself, justify the denial of a motion for leave to amend."). Accordingly, the Court GRANTS BANA's Motion to Dismiss Plaintiffs' quiet title claim with prejudice. See Leadsinger, 512 F.3d at 532.
2. The Basis for Plaintiffs' Title
U.S. Bank contends that Plaintiffs cannot state a quiet title claim because Plaintiffs have not paid or offered to pay the amount outstanding on the First Deed of Trust, which is the deed underlying the Assignment. "A basic requirement of an action to quiet title is an allegation that plaintiffs 'are the rightful owners of the property, i.e., that they have satisfied their obligations under the Deed of Trust.'" Santos v. Countrywide Home Loans, No. Civ. 2:09-02642, 2009 WL 3756337, at *4 (E.D. Cal. Nov.6, 2009) (quoting Kelley v. Mortgage Elec. Reg. Sys., Inc., 642 F. Supp. 2d 1048, 1057 (N.D. Cal. 2009); see also Aguilar v. Bocci, 39 Cal. App. 3d 475, 477-78 (Cal. Ct. App. 1974) ("The cloud upon [the mortgagor's] title persists until the debt is paid. He . . . cannot clear his title without satisfying his debt." (internal citations omitted)). Accordingly, under California law, a borrower may not assert an action to quiet title against a mortgagee without first paying the outstanding debt on the property. See Miller v. Provost, 33 Cal. Rptr. 2d 288, 290 (Cal. Ct. App. 1994) ("[A] mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee.") (internal citation omitted).
Plaintiffs have not alleged that they have paid or offered to pay the First Deed of Trust, which is the deed of trust underlying the Assignment. See generally FAC. As discussed above, the FAC includes no allegations challenging the validity of the First Deed of Trust. Id. Thus, Plaintiffs have not demonstrated that they are the "rightful owners of the property" or that they deserve the requested declaration that Plaintiffs own the Property in fee simple. See Karimi v. GMAC Mortg., No. 11-CV-00926-LHK, 2011 WL 3360017, at *4 (dismissing quiet title claim when the plaintiff failed to allege that the plaintiff had satisfied the outstanding debt on the property); Kelley, 642 F. Supp. 2d at 1057 (same).
In the first Motion to Dismiss in this case, U.S. Bank argued that Plaintiffs failed to state a quiet title claim because Plaintiffs failed to allege that they had paid the outstanding debt on the Property. ECF No. 22, at 4-5; see also ECF No. 8, at 4-5 (BANA making the same argument). In granting BANA's Motion to Dismiss, the Court found that Plaintiffs were "on notice of the alleged deficiencies with their Complaint that Defendants have identified." ECF No. 24, at 4. Plaintiffs' failure to plead new facts addressing the payment of the First Deed of Trust is "a strong indication that the plaintiffs have no additional facts to plead." Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 1007 (9th Cir. 2009). The Court therefore concludes that further amendment would be futile. Thus, in addition to Plaintiffs' lack of standing, the Court also GRANTS U.S. Bank's Motion to Dismiss Plaintiffs' quiet title claim with prejudice on the grounds that Plaintiffs have failed to state a claim. See Leadsinger, 512 F.3d at 532.
C. Cancellation of Instruments
BANA argues that the cancellation of instruments claim fails because it is not an independent basis for liability. As a preliminary matter, the Court notes that Plaintiffs make no substantive response to BANA's (or U.S. Bank's) arguments on the cancellation of instruments. In fact, the only mention of Plaintiffs' cancellation of instruments claims in Plaintiffs' oppositions to the Motions to Dismiss is to "request that this Court grant the following relief" including that "the purported [Loan] Deed of Trust be declared void" and "defendant BANA deliver the purported Deed of Trust immediately to the clerk of the court for cancellation." ECF No. 32, at 6; ECF No. 33, at 4 (requesting that the Assignment be declared void). Thus, it appears that Plaintiffs abandoned this claim. See In re TFT-LCD (Flat Panel) Antitrust Litig., 586 F. Supp. 2d 1109, 1131 (N.D. Cal. 2008) (dismissing claim with prejudice when the plaintiffs' opposition did not address the claim or the defendants' arguments); see also Jenkins v. Cnty. of Riverside, 398 F.3d 1093, 1095 n.4 (9th Cir. 2005) (concluding the plaintiff abandoned two claims by not raising them in opposition to the defendant's motion for summary judgment).
Even if Plaintiffs had not abandoned the cancellation of instruments claim, the Court concludes that the claim must be dismissed. The cancellation of an instrument such as a deed is an equitable remedy and not an independent basis for liability. See, e.g., Gwin v. Pac. Coast Fin. Servs., No. 09cv2734 BTM (BLM), 2010 WL 1691567, at *4 (S.D. Cal. Apr. 23, 2010) ("Cancellation is an equitable remedy."); Qureshi v. Countrywide Home Loans, Inc., No. C 09-4198 SBA, 2010 WL 841669, at *7 (N.D. Cal. Mar.10, 2010) ("A request to cancel a trustee's deed is a request for a remedy as opposed to an independent cause of action.") (citing Porter v. Superior Court, 73 Cal. App. 3d 793, 799 (Ct. App. 1977)); Yazdanpanah v. Sacramento Valley Mortg. Grp., No. C 09-02024 SBA, 2009 WL 4573381, at *6 (N.D. Cal. Dec.1, 2009) ("A request to cancel the trustee's deed is 'dependent upon a substantive basis for liability, [and it has] no separate viability.'" (modification in original) (quoting Glue-Fold, Inc. v. Slautterback Corp., 82 Cal. App. 4th 1018, 1023 n. 3 (Ct. App. 2000))). Because Plaintiffs have not stated a viable quiet title claim, Plaintiffs have no independent basis for liability. Thus, Plaintiffs cannot state a claim for cancellation of instruments. See Qureshi, 2010 WL 841669, at *7.
A district court may deny leave to amend a complaint if amendment would be futile. See Leadsinger, 512 F.3d at 532. Given that the Court is dismissing Plaintiff's quiet title claim against BANA with prejudice, any amendment of Plaintiff's cancellation of instruments claim would be futile. Additional factual allegations would not change the fact that Plaintiffs cannot state a cancellation of instruments claim independent from a viable quiet title claim, which Plaintiffs do not have. See Lopez, 203 F.3d at 1130 (court may dismiss claim without leave to amend where "pleading could not possibly be cured by the allegation of other facts"). Consequently, the Court GRANTS BANA's Motion to Dismiss the claim for cancellation of instruments with prejudice. See TFT-LCD, 586 F. Supp. 2d at 1131; Leadsinger, 512 F.3d at 532.
3. CONCLUSION
For the foregoing reasons, the Court GRANTS Defendants' Motions to Dismiss with prejudice. The Clerk shall close the case file.
IT IS SO ORDERED.
Dated: October 30, 2015
/s/_________
LUCY H. KOH
United States District Judge