Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_15-cv-01400/USCOURTS-caed-1_15-cv-01400-3/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

JUAN H. VILLAREAL; LORENA 

VILLAREAL,

Plaintiffs,

v.

SENECA MORTGAGE SERVICING, 

LLC; U.S. BANK, N.A.; and DOES 1 –

20, inclusive,

Defendants.

Case No. 1:15-cv-01400-EPG

ORDER RE: DEFENDANT’S MOTION 

TO DISMISS

(ECF No. 8)

I. INTRODUCTION

On September 16, 2015, Plaintiffs Juan and Lorena Villareal (―Plaintiffs‖) filed a 

Complaint against Defendants Seneca Mortgage Servicing, LLC and U.S. Bank, N.A.

(―Defendants‖). (ECF No. 1.) The Complaint alleges that Defendants foreclosed on property 

owned by Plaintiffs after Plaintiffs had filed for bankruptcy.1 On December 7, 2015, Defendant 

filed a Motion to Dismiss the Complaint under Federal Rule of Civil Procedure 12(b)(6). (ECF 

No. 8.) Plaintiffs filed an untimely opposition brief in response to the Motion and Defendants 

filed a reply brief. (ECF Nos. 12, 13.) Plaintiffs then filed an ―Amended Opposition‖ to the 

 

1

Plaintiffs previously filed suit against Seneca Mortgage in 2014, alleging that Seneca Mortgage engaged in 

fraudulent loan modification practices while initiating foreclosure proceedings. That complaint was dismissed 

without leave to amend on July 9, 2015. See Villareal v. Seneca Mortgage Services et al., Case No. 1:14-cv-02033-

MCE-GSA.

Case 1:15-cv-01400-EPG Document 27 Filed 03/07/16 Page 1 of 9
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Motion. (ECF No. 17.) After reviewing the Amended Opposition brief, Defendants elected to 

stand on the arguments they had proffered in their original Reply Brief. (ECF No. 21.) 

II. BACKGROUND

This case arises out of the default by Plaintiffs on a home loan. On May 17, 2008, 

Plaintiffs obtained a loan in the amount of $162,450 from Countrywide Bank, FSB. The loan was 

secured by a piece of property located at 926 East Tulare Avenue, Earlimart, California 93219.2

By February 2010, Plaintiffs were having difficulty making the payments on the loan and a notice 

of default was issued. Over the next four years, the deed of trust was assigned to various

successive parties and numerous notices of default were issued and then rescinded. The most 

recent Notice of Default and Election to Sell was recorded on May 29, 2014 at the request of 

trustee Carrington Foreclosure Services, LLC and indicates arrearages of $68,879.40. 

A Notice of Trustee‘s Sale was recorded on September 4, 2014. On September 29, 2014, 

Plaintiff Juan Villareal filed a Chapter 7 petition in the United States Bankruptcy Court for the 

Eastern District of California. The petition was dismissed on October 17, 2014 after Plaintiff 

failed to file the required documents. Fourteen days later, Plaintiff Lorena Villareal filed a 

Chapter 7 petition. That petition was dismissed on November 12, 2014 after Plaintiff failed to 

file the required documents. Twenty days later, Plaintiff Juan Villareal filed a Chapter 13 

petition, which was dismissed on December 19, 2014 because Plaintiff again failed to file the 

required documents. On May 11, 2015, Plaintiff Juan Villareal again filed a Chapter 7 petition. 

The trustee‘s sale finally proceeded on May 13, 2015. Defendant U.S. Bank now holds the Deed 

Upon Sale. On June 10, 2015, Plaintiff‘s Chapter 7 petition was dismissed for failure to file the 

required documents.3 

Plaintiffs‘ Complaint contains six causes of action:

 

2 The address on the deed of trust was later modified to reflect the address as 926 East Tulare Street.

3

Plaintiffs‘ failures to comply with court orders and instructions are not restricted to their bankruptcy cases. 

Plaintiffs initially filed the instant Complaint listing an invalid service address. On no fewer than five occasions 

since this case was filed, Plaintiffs have been instructed, either via order or verbal instructions from chambers staff, 

to update their mailing address so that the Court can properly serve them. In response to these instructions, Plaintiffs 

filed a single Notice of Change of Address (ECF No. 16), which also provided an invalid mailing address. At the 

hearing on the Motion to Dismiss, the Court instructed Plaintiffs to file a written notice of their address within five 

days. Plaintiffs did not do so. 

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1. The First Cause of Action, alleging that Defendants ―attempted and purported to sell‖ 

the property at 926 East Tulare Street in violation of an automatic bankruptcy stay 

imposed by 18 U.S.C. 362(a);

2. The Second Cause of Action, alleging that, because the trustee‘s sale of the property 

violated the stay, the Deed Upon Sale is void;

3. The Third Cause of Action, to quiet title based on the violation of the stay;

4. The Fourth Cause of Action, alleging that Defendants have slandered Plaintiffs‘ title

by causing an invalid Notice of Default to be recorded against the property;

5. The Fifth Cause of Action, alleging a breach of the implied covenant of good faith and 

fair dealing because Defendants conducted a trustee‘s sale of the property while the 

automatic stay was in place; and,

6. The Sixth Cause of Action, alleging a violation of California Business and Professions 

Code § 17200.

Defendants‘ Motion to Dismiss came on for hearing on February 19, 2016 at 10:00 a.m. 

Plaintiffs Juan and Lorena Villareal appeared telephonically and Defendants appeared 

telephonically through counsel Todd Chvat of Wright, Finlay & Zak, LLP. All parties consented 

to have a United States Magistrate Judge conduct all proceedings in their case under 28 U.S.C. § 

636(c)(1). (ECF Nos. 19, 22, 23.) After reviewing the briefing and for the reasons set forth 

below and on the record at the hearing, the Court determines that Defendants‘ Motion will be 

GRANTED and the Complaint will be DISMISSED WITHOUT LEAVE TO AMEND.

III. REQUEST FOR JUDICIAL NOTICE

Defendants request the Court take judicial notice of the following documents maintained 

in the Official Records of Tulare County and the U.S. Bankruptcy Court, Eastern District of 

California; Deed of Trust, recorded on June 9, 2008; Loan Modification Agreement to the Deed 

of Trust, recorded on August 29, 2008; Notice of Default and Election to Sell Under Deed of 

Trust, recorded on February 3, 2010; Substitution of Trustee and Assignment of Deed of Trust, 

recorded March 5, 2010; Notice of Rescission of Declaration of Default and Demand for Sale and 

of Notice of Default, recorded May 5, 2011; Notice of Default and Election to Sell Under Deed of 

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Trust, recorded April 23, 2012; Notice of Rescission of Declaration of Default and Demand for 

Sale and of Notice of Default and Election to Sell, recorded July 18, 2013; Corporation 

Assignment of Deed of Trust, recorded February 14, 2014 (#2014-0007951); Corporation 

Assignment of Deed of Trust, recorded February 14, 2014 (#2014-0007952); Substitution of 

Trustee, recorded February 14, 2014; Notice of Rescission of Notice of Default, recorded May 

29, 2014; Notice of Default and election to Sell Under Deed of Trust, recorded May 29, 2014; 

Notice of Trustee‘s Sale, recorded September 4, 2014; Trustee‘s Deed Upon Sale, recorded May 

27, 2015; Docket for U.S. Bankruptcy Court, Eastern District of California Case No. 14-14786; 

Order Dismissing Case for Failure to Timely File Documents in Case No. 14-14786; Docket for 

U.S. Bankruptcy Court, Eastern District of California Case No. 14-15322; Order Dismissing Case 

for Failure to Timely File Documents in Case No. 14-15322; Docket for U.S. Bankruptcy Court, 

Eastern District of California Case No. 14-15773; Order Dismissing Case for Failure to Timely 

File Documents in Case No. 14-15773; and Docket for U.S. Bankruptcy Court, Eastern District of 

California Case No. 15-11903. (Request for Judicial Notice in Support of Defendant‘s Motion to 

Dismiss Plaintiffs‘ Complaint, Exhs. 1 - 22, ECF No. 9-1.) 

Courts 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. Plaintiffs do not argue that the request for judicial notice should 

be denied. All the documents attached by Defendant are public records or court documents and 

the Court takes judicial notice of them. Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 

1016 fn. 9 (9th Cir. 2012); U.S. v. Corinthian Colls., 655 F.3d 984, 999 (9th Cir. 2011) (courts 

may ―take judicial notice of  ̳matters of public record‘‖ and consider them when ruling on a Rule 

12(b)(6) motion.).

IV. LEGAL STANDARDS FOR A MOTION TO DISMISS

To survive a motion to dismiss, a plaintiff must 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 

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acted unlawfully,‖ and ―[w]here a complaint pleads facts that are  ̳merely consistent with‘ a 

defendant‘s liability, it  ̳stops short of the line between possibility and plausibility of entitlement 

to relief.‘‖ Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The court must ―accept all factual 

allegations in the complaint as true and construe the pleadings in the light most favorable to the 

nonmoving party.‖ Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899-900 (9th 

Cir. 2007). Legally conclusory statements, not supported by actual factual allegations, need not 

be accepted. Ashcroft, 556 U.S. at 678-79. A court may, however, consider documents other 

than the complaint when they are judicially noticeable under Federal Rule of Evidence 201 or 

where ―no party questions their authenticity and the complaint relies on those documents.‖ 

Harris v. Cnty. of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012).

V. DISCUSSION

Defendants move to dismiss the Complaint on the grounds that: (1) under the United 

States Bankruptcy Code, no automatic stay went into effect after Plaintiff filed his third 

bankruptcy petition and thus the claims in the Complaint have no basis; and (2) Plaintiffs‘ causes 

of action are untenable and unsupported as a matter of law. Plaintiffs‘ opposition brief addresses 

the automatic stay issue and responds to some, but not all, of Defendants‘ other arguments.

A. The Scope of the Bankruptcy Automatic Stay

Ordinarily, the United States Bankruptcy Code imposes an automatic stay on litigation 

pursued against a debtor or the property of a debtor after a bankruptcy petition is filed. 11 U.S.C. 

§ 362(a). The automatic stay is intended to ―give[ ] the debtor a breathing spell from his creditors 

during which the debtor can try to reorganize‖ and ―prevent[ ] creditors from pursuing, to the 

detriment of other creditors, their own remedies against the debtors‘ property.‖ In re Dawson, 

390 F.3d 1139, 1147 (9th Cir. 2004), citing H.R. Rep. No 95-595, at 340 (1977) (―The automatic 

stay is one of the fundamental debtor protections provided by the bankruptcy laws . . . [i]t stops 

all collection efforts, all harassment, and all foreclosure actions.‖). In most circumstances, the

automatic stay goes into effect ―upon the date of the filing of the petition.‖ In re Smith, 876 F.2d 

524, 526 (6th Cir. 1989), citing 2 Collier on Bankruptcy ¶ 362.03 (15th ed. 1988). The stay does 

not substantively terminate legal proceedings; rather, it is a procedural maneuver that merely 

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delays the collection of nondischargeable debts. Johnson v. JP Morgan Chase Bank, 395 B.R. 

442, 449 (E.D. Cal. 2008).

The rule imposing an automatic stay upon filing of a bankruptcy petition is not unlimited. 

There are a number of enumerated exceptions to the automatic stay provisions, all of which 

prevent the automatic imposition of a stay upon filing of a bankruptcy petition. 11 U.S.C. § 

362(b); Penn Terra Ltd. v. Dep’t of Envtl. Res., 733 F.2d 267, 273 (3d Cir. 1984) (―By excepting 

an act or action from the automatic stay, the bill simply requires that the trustee move the court 

into action, rather than requiring the stayed party to request relief from the stay. There are some 

actions, enumerated in the exceptions, that generally should not be stayed automatically upon 

commencement of the case, for reasons of either policy or practicality. Thus, the court will have 

to determine whether a particular action which may be harming the estate should be stayed.‖). 

Actions taken by the debtor may also prevent the imposition of a stay. Section 

362(c)(4)(A)(i), in particular, provides that:

. . . if a single or joint case is filed by or against a debtor who is an individual 

under this title, and if 2 or more single or joint cases of the debtor were pending 

within the previous year but were dismissed, other than a case refiled under a 

chapter 7 after dismissal under section 707(b), the stay under subsection (a) shall 

not go into effect upon the filing of the later case.

Courts have read this to mean that ―where a debtor has filed a third bankruptcy case in a one-year 

period, the automatic stay never goes into effect.‖ In re Bates, 446 B.R. 301, 304 (8th Cir. B.A.P. 

2011). This provision need not be explicitly called upon by the creditor or debtor to apply and 

prevent the automatic stay from taking effect; it means that an automatic stay simply does not 

occur if the debtor has had two or more cases dismissed within the previous year. Id. at 305. 

B. Applicability in the Current Case

Plaintiff Juan Villareal filed Chapter 7 bankruptcy petitions on September 29, 2014 and 

December 19, 2014. Both petitions were dismissed after Plaintiff failed to file the required 

documents with the court. These two petitions were filed (and dismissed) within one year of May 

11, 2015, the date that Plaintiff filed his third Chapter 7 petition. Under the plain terms of 

Bankruptcy Code section 362(c)(4)(A)(i), no automatic stay thus took effect on May 11, 2015 and 

Defendants were not precluded from noticing and conducting a trustee‘s sale on the subject 

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property.

Plaintiffs contend that an automatic stay took effect on May 11, 2015 and that Defendants 

were required to seek permission from the court to lift the stay. But this argument misreads the 

statutory language of the Bankruptcy Code. The Code instructs that, in the circumstances laid out 

above, a party in interest may ―request‖ that the court ―promptly enter an order confirming that 

no stay is in effect.‖ 11 U.S.C. § 362(c)(4)(A)(ii) (emphasis added). Put another way, a party 

may, but is not obligated to, request that the bankruptcy court clarify that no automatic stay exists. 

Such an order is merely a confirmation of an already existing state of affairs—it does not, per the 

language of the statute, lift or otherwise remove an automatic stay. It only confirms that no 

automatic stay ever existed.

Nor does Plaintiffs‘ argument make sense, given the language of the automatic stay 

statute. The statute‘s language is mandatory, not permissive: it requires that an automatic stay 

―shall not go into effect upon the filing of the later case.‖ 11 U.S.C. § 362(c)(4)(A)(i) (emphasis 

added). Plaintiffs‘ interpretation—that a creditor is required to seek a lifting of the automatic 

stay—would read this language out of the statute and make the existence of an automatic stay 

discretionary on the part of the court. This result is plainly disallowed by the plain language of 

the statute. In re Jackson, 184 F.3d 1046, 1051 (9th Cir. 1999) (―When the statutory language is 

clear and consistent with the statutory scheme at issue, the statute‘s plain language is conclusive 

and this Court need not inquire beyond the plain language of the statute.‖). 

Each of Plaintiffs‘ causes of action in the Complaint is premised on the existence of an 

automatic stay as of May 11, 2015, a fact that Plaintiffs acknowledge. The First Cause of 

Action, for example, that the ―trustee‘s deed was wrongfully executed, delivered and recorded in 

violation of U.S.C. § 362(a),‖ relies exclusively on the asserted violation of the automatic stay. 

(Complaint ¶ 15, ECF No. 1.) Because no automatic stay existed when the trustee‘s sale 

occurred, the First Cause of Action fails as a matter of law.

Similarly, the Second Cause of Action alleges that the ―trustee‘s deed . . . is invalid and 

void/voidable‖ and the Third Cause of Action alleges that ―Defendants have no right, title, estate 

lien or interest in the Property‖ based solely on the contention that an automatic stay existed at the 

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time of the trustee‘s sale. Id. at ¶¶ 20, 24. If, as Defendants contend and the Court agrees, no 

automatic stay ever took effect, then the trustee‘s deed is valid and Defendants do, in fact, have 

title to the property at issue. The Second and Third Causes of Action thus must also be 

dismissed. 

The same automatic stay allegations are the basis for the slander of title that Plaintiffs 

allege in their Fourth Cause of Action, are explicitly referenced in the Fifth Cause of Action, 

and allegedly led to the ―unfair business practices‖ alleged in the Sixth Cause of Action, and thus 

they must be dismissed as well. Id. at ¶ 39. The Fourth Cause of Action, for instance, which 

alleges that Defendants have slandered Plaintiffs‘ title to the property, only makes sense if 

Defendants had no valid title to the property as a result of an automatic stay.

4

 As described 

above, no automatic stay ever went into effect. Consequently, Defendants did not engage in 

tortious activity in foreclosing on the property. The Fifth Cause of Action is similarly precluded 

because the only basis Plaintiffs allege for the breach of the implied covenant of good faith and 

fair dealing is that ―Defendants conducted and participated in a trustee‘s sale of the Plaintiff‘s 

property when it was protected by the automatic stay under U.S.C. § 362(a).‖ (Complaint at ¶ 39, 

ECF No. 1.) Finally, Plaintiffs make no substantive allegations about why or how Defendants 

have engaged in unfair business practices, except to say that Defendants ―committed acts of 

unfair business practices defined by California Business and Professions Code § 17200, et seq. by 

engaging in acts and practices as alleged above.‖ Id. at ¶ 45. Plaintiffs appear to be referring to 

their earlier allegations that Defendants conducted a trustee‘s sale shortly after Plaintiff had filed 

his third bankruptcy petition. As explained above, however, the third bankruptcy petition had no 

effect and did not impose any automatic stay on foreclosure proceedings. As a result, Defendants 

did not engage in any wrongdoing in violation of § 17200. 5

Plaintiffs offer no argument that any of their causes of action can exist if the automatic 

 

4 A slander of title claim requires a showing of a ―tortious injury to property resulting from unprivileged, false, 

malicious publication of disparaging statements regarding the title to property owned by plaintiff, to plaintiff‘s 

damage.‖ Watts v. Decision One Mortg. Co., LLC, No. 09 CV 0043 JM (BLM), 2009 WL 648669, at *6 (S.D. Cal. 

March 9, 2009), quoting Southcott v. Pioneer Title Co., 203 Cal.App.2d 673, 676 (1962).

5 And, in any case, the allegation of unfair business practices lacks the ―reasonable particularity‖ for factual 

allegations that is required to state a claim under California Business and Professions Code § 17200. Khoury v. 

Maly’s of Cal., Inc., 14 Cal.App.4th 612, 619 (1993).

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stay did not go into effect at the time of the May 11, 2015 bankruptcy petition. Indeed, they 

concede that their Complaint, and each of the causes of action therein, relied solely on the 

existence of an automatic stay. 

As laid out above and on the record at the hearing, no automatic stay took effect when 

Plaintiff filed for bankruptcy on May 11, 2015. Because no automatic stay existed, the Complaint 

cannot state a claim against Defendants and must be dismissed. No amendment could alter this 

fact. The failure in the Complaint is not merely that there are inadequate or non-specific facts—it 

is that the legal effect of the facts alleged is not what Plaintiffs suppose them to be. Leave to 

amend is thus inappropriate in this instance.

VI. ORDER

For the reasons set forth above, the Court finds that the Complaint fails to state a claim 

under Federal Rule of Civil Procedure 12(b)(6). Accordingly, the Motion to Dismiss is

GRANTED and the Complaint is DISMISSED WITHOUT LEAVE TO AMEND. 

IT IS SO ORDERED.

Dated: March 7, 2016 /s/

UNITED STATES MAGISTRATE JUDGE

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