Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-02380/USCOURTS-caed-2_09-cv-02380-0/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

BRYSON WEBB and YVONNE WEBB,

Plaintiffs,

 v.

INDYMAC BANK HOME LOAN

SERVICING, INDYMAC FEDERAL

BANK, INDYMAC MORTGAGE

SERVICES, MTC FINANCIAL, INC.

d/b/a TRUSTEE CORPS., MORTGAGE

ELECTRONIC REGISTRATION

SYSTEMS, INC., MTH MORTGAGE,

LLC, JOYCE S. PERKINS, and

DOES 1 through 20, inclusive,

Defendants. /

NO. CIV. 2:09-2380 WBS DAD

MEMORANDUM AND ORDER RE:

MOTIONS TO DISMISS AND MOTION

TO STRIKE

----oo0oo----

Plaintiffs Bryson Webb and Yvonne Webb filed this

action against defendants Indymac Bank Home Loan Servicing

(“Indymac Servicing”), Indymac Federal Bank (“Indymac Bank”),

Indymac Mortgage Services (“Indymac Mortgage”), MTC Financial,

Inc. d/b/a Trustee Corps. (“Trustee Corps”), Mortgage Electronic

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1 Although the FAC alleges that the loan was obtained on

August 15, 2009, this is obviously an accident given the other

dates referenced in the FAC. According to the Deed of Trust in

MTC’s Request for Judicial Notice (“RJN”) the loan was

consummated on August 15, 2006, the date plaintiff likely meant

to reference. (MTC’s RJN Ex. A.)

2

Registration Systems, Inc. (“MERS”), MTH Mortgage, LLC (“MTH”),

and Joyce S. Perkins, alleging various state and federal claims

relating to a loan they obtained to purchase their home in

Lincoln, California. MERS and Trustee Corp each move to dismiss

plaintiffs’ First Amended Complaint (“FAC”) pursuant to Federal

Rule of Civil Procedure 12(b)(6) for failure to state a claim

upon which relief can be granted. Trustee Corps also moves to

strike plaintiffs’ demands for punitive damages from the FAC

pursuant to Federal Rule of Civil Procedure 12(f). 

I. Factual and Procedural Background

On August 15, 2006,1 plaintiffs obtained a loan from

MTH to purchase their home, located at 1248 Jurgenson Drive in

Lincoln, California. (FAC ¶¶ 7, 38.) This loan was memorialized

in a Promissory Note (“the Note”) secured by a Deed of Trust on

the property. (Id. ¶ 38.) Plaintiffs claim that they were

channeled into this allegedly unaffordable loan through the

conduct of their mortgage broker Perkins, who allegedly

exaggerated plaintiff’s earnings to secure the loan. (Id. ¶¶ 31-

33.) The Deed of Trust listed First American Title as trustee,

MTH as lender, and MERS as nominee and beneficiary for the lender

and lender’s successors and assigns. (Id. ¶¶ 38-39.) MERS

facilitates the transfer of mortgage interests by providing an

electronic tracking system for the mortgage interests registered

in its system. To do this, MERS is the beneficiary of record in

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a “nominee” capacity for the mortgage lender on all security

instruments in its system. (Id. ¶ 11.) 

Plaintiffs eventually defaulted on their loan, and a

Notice of Default and Election to Sell Under Deed of Trust was

filed in Placer County by Trustee Corps on March 13, 2009. (Id. ¶

41.) On March 9, 2009, Trustee Corps allegedly noticed the

trustee sale of the property. (Id. ¶ 42.) This notice identified

Trustee Corps as the trustee under the Deed of Trust. (Id.) On

June 9, 2009, plaintiffs allegedly sent a Qualified Written

Request (“QWR”) under the Real Estate Settlement Procedures Act

(“RESPA”), 12 U.S.C. §§ 2601-2617, to Indymac Bank that included

a demand to rescind their loan under the Truth in Lending Act

(“TILA”), 15 U.S.C. §§ 1601-1667f. (Id. ¶ 43.) 

In their FAC, plaintiffs assert ten causes of action

against seven defendants. MERS and Trustee Corps’s motions to

dismiss challenge only the causes of action that apply to MERS

and Trustee Corps, respectively. 

II. Discussion

On a motion to dismiss, the court must accept the

allegations in the complaint as true and draw all reasonable

inferences in favor of the plaintiff. Scheuer v. Rhodes, 416

U.S. 232, 236 (1974), overruled on other grounds by Davis v.

Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

(1972). To survive a motion to dismiss, a plaintiff needs to

plead “only 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). This “plausibility standard,” however, “asks

for more than a sheer possibility that a defendant has acted

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unlawfully,” and where a complaint pleads facts that are “merely

consistent with” a defendant’s liability, it “stops short of the

line between possibility and plausibility.” Ashcroft v. Iqbal,

129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-

57).

In general a court may not consider items outside the

pleadings upon deciding a motion to dismiss, but may consider

items of which it can take judicial notice. Barron v. Reich, 13

F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial

notice of facts “not subject to reasonable dispute” because they

are either “(1) generally known within the territorial

jurisdiction of the trial court or (2) capable of accurate and

ready determination by resort to sources whose accuracy cannot

reasonably be questioned.” Fed. R. Evid. 201. 

Trustee Corps submitted a RJN in support of its motion

to dismiss and motion to strike that contains seven exhibits, all

of which are recorded documents relating to plaintiffs’ loan

transaction and subsequent foreclosure. Plaintiffs also

submitted a RJN which contains publically recorded documents

relating to plaintiffs’ mortgage and two law review articles

discussing the “mortgage crisis.” The court will take judicial

notice of defendants’ exhibits and the publically recorded

documents of plaintiffs, as they are matters of public record

whose accuracy cannot be questioned. See Lee v. City of Los

Angeles, 250 F.3d 668, 689 (9th Cir. 2001). The court will not

take notice of the law review articles submitted by plaintiffs,

as they are sources whose accuracy may be debated and questioned. 

A. California Civil Code Section 47 Privilege

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Trustee Corps contends that its conduct was privileged

under California Civil Code sections 47 and 2924(d) and therefore

all claims against it must be dismissed. Non-judicial

foreclosure sales “are governed by a ‘comprehensive’ statutory

scheme. This scheme, which is found in Civil Code sections 2924

through 2924k, evidences a legislative intent that a sale which

is properly conducted ‘constitutes a final adjudication of the

rights of the borrower and lender.’” Royal Thrift & Loan Co. v.

County Escrow, Inc., 123 Cal. App. 4th 24, 32 (quoting 6 Angels,

Inc. v. Stuart-Wright Mortgage, Inc., 85 Cal. App. 4th 1279,

1283-1284 (footnote omitted) (2001)). Under section 2924(d) the

“mailing, publication, and delivery” of foreclosure notices and

“performance” of the foreclosure procedures created by California

law constitute “privileged communications” pursuant to section

47. Cal. Civ. Code § 2924(d). 

The privilege created by section 2924(d) “provides a

qualified privilege for communications made without malice, to a

person interested therein, . . . by one who is also interested.” 

Kachlon v. Markowitz, 168 Cal. App. 4th 316, 336 (2008) (internal

quotation marks omitted). For the purposes of the statute,

“malice is defined as actual malice, meaning that the publication

was motivated by hatred or ill will towards the plaintiff or by a

showing that the defendant lacked reasonable grounds for belief

in the truth of the publication and therefore acted in reckless

disregard of the plaintiff’s rights.” Id. (internal quotation

marks omitted). This privilege applies to tort claims other than

malicious prosecution and also applies to alleged violations of

California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof.

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Code §§ 17200-17210. Hagberg v. Cal. Fed. Bank FSB, 32 Cal. 4th

350, 361 (2004) (“As noted, the only tort claim we have

identified as falling outside the privilege established by

section 47(b) is malicious prosecution.”); see Stevens v.

Superior Court, 75 Cal. App. 4th 594, 603-604 (1999) (finding

that the UCL “allows a private plaintiff to proceed under it to

seek redress for conduct which violates any predicate statute,

unless the defendant is privileged, [or] immunized by another

statute . . . .”).

All of the claims alleged against Trustee Corps arise

out of its performance of the non-judicial foreclosure procedures

enumerated in the California Civil Code as agent for the

beneficiary of plaintiffs’ loan. The allegations against Trustee

Corps stem from its alleged misrepresentations of its right to

foreclose on plaintiffs’ property and subsequent actions in

foreclosing on the property. Plaintiffs have not plead any facts

that demonstrate that Trustee Corps acted with malice during the

foreclosure process. Trustee Corps’s actions are clearly

privileged under California law and accordingly plaintiffs cannot

succeed on any of their claims against Trustee Corps. See

Cisneros v. Instant Capital Funding Group, Inc., No. CV F 09-1436

LJO SMS, --- F.R.D. ----, 2009 WL 3049209, at *4-5 (E.D. Cal.

Sept. 18, 2009) (finding Trustee Corps’s actions as trustee for

beneficiary allows them to claim immunity under California Civil

Code section 2924(d)). However, even if Trustee Corps was not

immune from suit by plaintiffs the court would still grant

Trustee Corps’s motion to dismiss plaintiffs’ claims because each

cause of action fails to state a claim upon which relief can be

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granted.

B. Negligence

To prove a cause of action for negligence, a plaintiff

must show “(1) a legal duty to use reasonable care; (2) breach of

that duty, and (3) proximate [or legal] cause between the breach

and (4) the plaintiff’s injury.” Mendoza v. City of Los Angeles,

66 Cal. App. 4th 1333, 1339 (1998) (citation omitted). “The

existence of a legal duty to use reasonable care in a particular

factual situation is a question of law for the court to decide.” 

Vasquez v. Residential Invs., Inc., 118 Cal. App. 4th 269, 278

(2004). Plaintiffs allege that MERS owed them a duty to 

“perform its administrative function recording,[sic] maintaining,

and transferring documents as it relates to [p]laintiffs’ loan in

a manner not to cause [p]laintiffs harm.” (FAC ¶ 80.) 

Plaintiffs further contend that MERS breached this duty when “it

failed to receive, maintain or transfer the negotiable instrument

related to [p]laintiffs’ loan, and authorized others to collect

payments on [p]laintiffs’ mortgage and commence foreclosure

proceedings.” (Id.) 

Plaintiffs cite no authority for the proposition that

MERS owed a duty to not cause plaintiff harm in its capacity the

nominal beneficiary for the loan. Absent contrary authority, a

pleading of an assumption of duty by MERS, or a special

relationship, plaintiffs cannot establish MERS owed a duty of

care. See Hardy v. Indymac Fed. Bank, --- F.R.D. ---, No. CV F

09-935 LJO SMS, 2009 WL 2985446, at *7 (E.D. Cal. Sept. 15,

2009); Bentham v. Aurora Loan Servs., No. C-09-2059 SC, 2009 WL

2880232, at *2-3 (N.D. Cal. Sept. 1, 2009). 

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Additionally, the FAC does not indicate what, if any,

duties were breached by Trustee Corps. (See FAC ¶¶ 74-81.) 

Trustee Corps is not so much as mentioned by name in plaintiffs’

negligence claim. Trustee Corps should not be forced to guess

how their conduct was allegedly negligent. See Associated Gen.

Contractors of Cal., Inc. v. Cal. State Council of Carpenters,

459 U.S. 519, 526 (1983); Gauvin v. Trombatore, 682 F. Supp.

1067, 1071 (N.D. Cal. 1988). The FAC fails to state that MERS

and Trustee Corps have breached a cognizable legal duty, and

accordingly the court will grant defendants’ motions to dismiss

plaintiffs’ cause of action for negligence against MERS and

Trustee Corps. 

C. Fraud

In California, the essential elements of a claim for

fraud are “(a) a misrepresentation (false representation,

concealment, or nondisclosure); (b) knowledge of falsity (or

‘scienter’); (c) intent to defraud, i.e., to induce reliance; (d)

justifiable reliance; and (e) resulting damage.” In re Estate of

Young, 160 Cal. App. 4th 62, 79 (2008). Under the heightened

pleading requirements for claims of fraud under Federal Rule of

Civil Procedure 9(b), “a party must state with particularity the

circumstances constituting the fraud.” Fed. R. Civ. P. 9(b). 

The plaintiffs must include the “who, what, when, where, and how”

of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106

(9th Cir. 2003) (citation omitted); Decker v. Glenfed, Inc., 42

F.3d 1541, 1548 (9th Cir. 1994). Additionally, “[w]here multiple

defendants are asked to respond to allegations of fraud, the

complaint must inform each defendant of his alleged participation

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in the fraud.” Ricon v. Recontrust Co., No. 09-937, 2009 WL

2407396, at *3 (S.D. Cal. Aug. 4, 2009) (quoting DiVittorio v.

Equidyne Extractive Indus., 822 F.2d 1242, 1247 (2d Cir. 1987)).

Plaintiffs’ fraud allegations do not even come close to

surviving a motion to dismiss. Plaintiffs allege that MERS

“misrepresented to [p]laintiffs on the Deed of Trust that it is a

qualified beneficiary with the ability to assign or transfer the

Deed of Trust and/or the Note . . . [and] that it followed the

applicable legal requirements to transfer the Note and Deed of

Trust . . . .” (FAC ¶ 109.) Plaintiffs further allege that

Trustee Corps “misrepresented to [p]laintiffs that Trustee Corps

was entitled to enforce the security interest and has the right

to institute a non-judicial foreclosure proceeding . . . .” (Id.

¶ 110.) Plaintiffs go on to simply state the remaining elements

of a cause of action for fraud. (See id. ¶¶ 111-115.) 

Even though plaintiffs reincorporate their earlier

allegations into this cause of action, plaintiffs do not identify

when the alleged misrepresentations by Trustee Corps were made,

who made them on behalf of MERS or Trustee Corps, or why they

were false. In fact, plaintiffs’ allegations against Trustee

Corps simply sound like an attempt by plaintiffs to force Trustee

Corps to “produce the Note” to have the right to foreclose on the

property. However, under California law, there is no

requirement for the production of the original note to initiate a

non-judicial foreclosure. Kamp v. Aurora Loan Servs., No. SACV

09-00844-CJC(RNBx), 2009 WL 3177636, at *4 (C.D. Cal. Oct. 1,

2009); Oliver v. Countrywide Home Loans, Inc., No. CIV S-0-1381

FCD GGH, 2009 WL 3122573, at *3 (E.D. Cal. Sept. 29, 2009)

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(citing Alvara v. Aurora Loan Servs., No. C-0-1512 SC, 2009 WL

1689640, at *6 (N.D. Cal. Jun. 16, 2009)); Putkkuri v. Recontrust

Co., No. 08cv1919 WQH (AJB), 2009 WL 32567, at *2 (S.D. Cal. Jan.

5, 2009). Accordingly, plaintiffs have failed to plead any

fraudulent representations by Trustee Corps or MERS with

sufficient particularity.

Plaintiffs also do not state how MERS’s alleged

misrepresentation of its rights as a beneficiary on the Note or

Trustee Corps’s representations of its ability to foreclose on

the property harmed them. Instead plaintiffs make the conclusory

statement that they “were harmed and suffered damages.” (FAC ¶

115.) At the pleading stage, the complaint “must show a cause

and effect relationship between the fraud and damages sought;

otherwise no cause of action is stated.” Small v. Fritz Cos., 30

Cal. 4th 167, 202 (2003) (quotations omitted). Without such

information it is impossible for the court to determine whether

plaintiffs alleged damages “were otherwise inevitable or due to

unrelated causes.” Goehring v. Chapman Univ., 121 Cal. App. 4th

353, 365 (2004). Without pleading facts to explain this causal

connection, plaintiffs’ cause of action must fail. See Iqbal,

129 S. Ct at 1949. Accordingly, the court will grant MERS and

Trustee Corps’s motions to dismiss plaintiffs’ fraud claim. 

D. Wrongful Foreclosure

Plaintiffs’ FAC purports to state a claim for “wrongful

foreclosure” against Trustee Corps. Plaintiffs have failed to

produce any common law rule or authority providing for a claim of

“wrongful foreclosure” at law. See Fortaleza v. PNC Fin. Servs.

Group, Inc., --- F.Supp.2d ---, No. C 09-2004 PJH, 2009 WL

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2246212, at *11 (N.D. Cal. July 27, 2009). Wrongful foreclosure

is an action in equity, where a plaintiff seeks to set aside a

foreclosure sale. See Abdallah v. United Sav. Bank, 43 Cal. App.

4th 1101, 1009 (1996); Karlsen v. Am. Sav. & Loan Ass’n, 15 Cal.

App. 3d 112, 117 (1971). 

Plaintiffs attempt to base this claim first on

California Commercial Code section 3301, alleging that Trustee

Corps was not in possession of the Note, and is not a

beneficiary, assignee or employee of the entity in possession of

the note, and is therefore not a “person entitled to enforce” the

security interest on the property in accordance with section

3301. (FAC ¶ 146.) However, section 3301 reflects California’s

adoption of the Uniform Commercial Code, and does not govern nonjudicial foreclosures, which is governed by California Civil Code

section 2924. See Gaitan v. Mortgage Elec. Registration Sys.,

No. EDCV 09-1009 VAP (MANx), 2009 WL 3244729, at *10 (C.D. Cal.

Oct. 5, 2009). “The comprehensive statutory framework

established to govern nonjudicial foreclosure sales is intended

to be exhaustive.” Moeller v. Lien, 25 Cal. App. 4th 822, 834

(1994). As previously mentioned, there is no requirement for the

production of the original Note to initiate a non-judicial

foreclosure in California. Kamp, No. SACV 09-00844-CJC(RNBx),

2009 WL 3177636, at *4; Oliver, No. CIV S-0-1381 FCD GGH, 2009 WL

3122573, at *3; Putkkuri, No. 08cv1919 WQH (AJB), 2009 WL 32567,

at *2. Therefore, plaintiff cannot assert a claim based on

Trustee Corps’s failure to comply with an inapplicable commercial

code when defendants are not required to “produce the Note”

according to California law.

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Plaintiffs also base their wrongful foreclosure action

on the basis of California Civil Code section 2923.5, arguing

that the Notice of Default and Notice of Trustee sale were

defective because Trustee Corps did not have the right to

foreclose on their property. (FAC ¶ 149.) However, this is just

a reiteration of plaintiffs’ argument that defendants must

“produce the Note” to foreclose on their property. As such, this

claim is deficient as a matter of law. Accordingly, the court

will grant Trustee Corps’s motion to dismiss plaintiffs’ wrongful

foreclosure claim.

E. California’s UCL

California’s UCL prohibits “any unlawful, unfair, or

fraudulent business act or practice.” Cal-Tech Commc’ns, Inc. v.

L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). This cause

of action is generally derivative of some other illegal conduct

or fraud committed by a defendant, and “[a] plaintiff must state

with reasonable particularity the facts supporting the statutory

elements of the violation.” Khoury v. Maly’s of Cal., Inc., 14

Cal. App. 4th 612, 619 (1993).

Plaintiffs’ claim under the UCL is vague and

conclusory, simply alleging that MERS and Trustee Corps’s

“negligence, fraud, and illegal foreclosure activities, as

alleged herein, constitute unlawful, unfair, and/or fraudulent

business practices . . . .” (FAC ¶¶ 122-23.) Plaintiffs do not

identify a single specific practice of MERS or Trustee Corps that

they find to be “unfair” or “deceptive” in their cause of action. 

The court has already indicated it will dismiss plaintiffs’ other

causes of action against MERS and Trustee Corps for failure to

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2 Trustee Corps contends that plaintiffs’ UCL claim is

preempted by the Homeowners Loan Act of 1937 (“HOLA”), 12 U.S.C.

§ 1461. The court does not reach this question because it does

not find a lengthy preemption analysis necessary, since

plaintiffs’ UCL claim is facially deficient and will be

dismissed.

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state a claim. Since plaintiffs have failed to state a claim on

any of these grounds, and because these grounds appear to be the

sole basis for plaintiffs’ UCL claim, plaintiffs by necessity

have failed to state a claim against MERS and Trustee Corps under

the UCL.2 Accordingly, the court will grant MERS and Trustee

Corps’s motions to dismiss plaintiffs’ UCL cause of action.

F. Motion to Strike

Trustee Corps additionally moves to strike the portions

of plaintiffs’ FAC which request punitive damages. This motion

will be denied as moot, since all claims against Trustee Corps

have been dismissed.

IT IS THEREFORE ORDERED that MERS’s motion to dismiss

plaintiffs’ claims against MERS be, and the same hereby is,

GRANTED.

IT IS FURTHER ORDERED that Trustee Corps’s motion to dismiss

plaintiffs’ claims against Trustee Corps be, and the same hereby is,

GRANTED; and Trustee Corps’s motion to strike be, and the same hereby

is, DENIED as moot.

Plaintiffs have twenty days from the date of this Order to

file an amended complaint, if they can do so consistent with this

Order.

DATED: January 6, 2010

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