Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_10-cv-02365/USCOURTS-casd-3_10-cv-02365-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1441 Petition for Removal

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CRAIG A. CARTER, et al.,

Plaintiffs,

CASE NO. 10CV2365 DMS (POR)

ORDER GRANTING

DEFENDANTS’ MOTION TO

DISMISS PLAINTIFFS’

COMPLAINT

vs.

U.S. BANK N.A., et al.,

Defendants.

Pending before the Court is Defendants U.S. Bank, N.A. and Western Progressive, LLC’s

motion to dismiss Plaintiffs’ Complaint. For the following reasons, Defendants’ motion to dismiss

is granted.

I.

BACKGROUND

This action relates to a loan obtained by Plaintiffs from Argent Mortgage Company, Inc. in

June 2005 on their real property, which was secured by a Deed of Trust pledging the property as

security. (Complaint ¶¶ 5-6.) Plaintiffs allege Defendant Western Progressive, LLC, without the

authority to do so, caused a notice of default to be recorded, falsely alleging that a breach of the

obligation secured by the Deed of Trust had occurred and that Defendant U.S. Bank, N.A., as

beneficiary, had elected to sell the trust property. (Id. at ¶ 9.) Plaintiffs further allege Western

Progressive, without the authority to do so, caused to be recorded a notice of sale and a trustee’s deed

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to U.S. Bank as to the property. (Id. at ¶ 10.) 

Plaintiffs filed a Complaint in San Diego Superior Court, which Defendants removed to this

Court on November 17, 2011. (Doc. 1.) The Complaint states five claims for relief: (1) to set aside

the trustee’s sale, (2) to cancel the trustee’s deed, (3) negligence, (4) conversion, and (5) declaratory

relief. On December 9, 2010, Defendants filed a motion to dismiss the Complaint in its entirety.

(Doc. 5.) Plaintiffs filed an opposition to the motion and Defendants filed a reply. (Docs. 7, 9.) 

II.

LEGAL STANDARD

A party may move to dismiss a claim under Rule 12(b)(6) if the claimant fails to state a claim

upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). The Federal Rules require a pleading to

include a “short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.

R. Civ. P. 8(a)(2). The Supreme Court, however, recently established a more stringent standard of

review for pleadings in the context of 12(b)(6) motions to dismiss. See Ashcroft v. Iqbal, ___ U.S.

___, 129 S. Ct. 1937 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). To survive a motion

to dismiss under this new standard, “a complaint must contain sufficient factual matter, accepted as

true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S. Ct. at 1949 (quoting

Twombly, 550 U.S. at 570). “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.” Id. (citing Twombly, 550 U.S. at 556). “Determining whether a complaint states a plausible

claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its

judicial experience and common sense.” Id. at 1950 (citing Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d

Cir. 2007)). The reviewing court must therefore “identify the allegations in the complaint that are not

entitled to the assumption of truth” and evaluate “the factual allegations in [the] complaint to

determine if they plausibly suggest an entitlement to relief.” Id. at 1951.

III.

DISCUSSION

Plaintiffs allege “Argent Mortgage Company, Inc. as beneficiary has not signed and recorded

an assignment of the Deed of Trust and it has not signed and recorded as beneficiary a Substitution of

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Trustee satisfying the requirements of California Civil Code 2934(a) for an effective substitution of

trustee,” and that Argent therefore remains the beneficiary of the Deed of Trust and Town and Country

Title Services, Inc. remains the trustee of the Deed of Trust. (Complaint ¶¶ 7-8.) Accordingly,

Plaintiffs allege Defendant Western Progressive did not have the authority to record a notice of default

or notice of sale or to transfer a trustee’s deed and Defendant U.S. Bank did not have the authority to

elect to sell the property. 

Defendants move to dismiss the Complaint on the basis that Plaintiffs’ claims are barred by

the doctrine of res judicata and otherwise fail as a matter of law. As an initial matter, Defendants

argue Plaintiffs’ claim for conversion must be dismissed because a claim for conversion is limited to

personal, and not real, property. Plaintiffs do not oppose the motion to dismiss this claim.

Accordingly, Plaintiffs’ claim for conversation is dismissed. The parties’ remaining arguments are

discussed below.

A. Res Judicata

Defendant’s first argument in support of its motion to dismiss is that Plaintiffs’ claims are

barred by the doctrine of res judicata. “The doctrine of res judicata, or claim preclusion, bars parties

from relitigating the same cause of action in a subsequent action.” Malkoskie v. Option One Mortgage

Corp., 188 Cal. App. 4th 968, 973 n.4 (2010). “Claim preclusion applies when ‘(1) the decision in the

prior proceeding is final and on the merits; (2) the present proceeding is on the same cause of action

as the prior proceeding; and (3) the parties in the present proceeding or parties in privity with them

were parties to the prior proceeding.’” Planning & Conservation League v. Castaic Lake Water

Agency, 180 Cal. App. 4th 210, 226 (2009)(quoting Fed’n of Hillside &Canyon Ass’ns v. City of Los

Angeles, 126 Cal. App. 4th 1180, 1202 (2004)). 

Defendants argue the issues of the validity of the trustee’s sale and U.S. Bank’s title were

finally determined in the October 19, 2010 Judgment of the San Diego Superior Court in Defendant

U.S Bank’s unlawful detainer action against Plaintiffs. In their Opposition to the motion to dismiss,

Plaintiffs argue the doctrine of res judicata should not apply because the motion for summary

judgment in the unlawful detainer action was “heard as an expedited matter and via expedited

procedure . . . and lasted approximately five minutes.” (Opp. at 2.) However, the issues regarding the

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In support of their motion to dismiss, Defendants request the Court to take judicial 1

notice of (1) Deed of Trust, (2) Assignment of Deed of Trust, (3) Notice of Default, (4) Substitution

of Trustee, (5) Notice of Trustee’s Sale, (6) Trustee’s Deed Upon Sale, (7) Defendants Opposition to

Plaintiff’s Separate Statement of Undisputed Material Facts and Supporting Evidence on Motion for

Summary Judgment and Declaration of Jack M. Winick in Opposition to Plaintiff’s Motion for

Summary Judgment in the unlawful detainer action, (8) Order Granting Plaintiff’s Motion for

Summary Judgment, and (9) Judgment. As these documents are matters of public record subject to

judicial notice under Federal Rule of Evidence 201, Defendants’ request for judicial notice is granted.

In their Opposition to Defendants’ motion to dismiss, Plaintiffs also request the Court take judicial

notice of a Limited Power of Attorney. As this document is recorded and is a matter of public record,

Plaintiffs’ request is also granted. 

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validity of the trustee’ssale and U.S. Bank’s entitlement to title on the property raised by Plaintiffs in

the instant Complaint were raised in the unlawful detainer action. In opposition to U.S. Bank’s motion

for summary judgment in the unlawful detainer action, Plaintiffs argued there was nothing in the public

records showing a legal transfer from Argent Mortgage Company, as beneficiary under the Deed of

Trust, or from Town and Country Title Services, as trustee under the Deed of Trust, to any other party

and, therefore, U.S. Bank did not have the authority to exercise the power of sale contained in the Deed

of Trust and the non-judicial foreclosure process was therefore invalid. (Defendants’ RJN Ex. 7.)1

Nonetheless, in its Judgment in the unlawful detainer action, the Court found that proof satisfactory

to the Court was made “that title to the Premises has been duly perfected in the name of . . . U.S. Bank

N.A., as Trustee for the Registered Holders of Asset Backed Certificates, Series 2005-HE4, by virtue

of a Trustee’s Deed Upon Sale . . . and the Premises was acquired in accordance with Section 2924

of the California Civil Code . . . .” (Id. at Ex. 9.) The Court further found there was “no triable issue

of material fact to support an affirmative defense” by Plaintiffs to the unlawful detainer action. (Id.)

“The res judicata effect of an unlawful detainer proceeding is narrow, but is not nonexistent.

Generally speaking, an unlawful detainer judgment has limited res judicata force because it typically

follows a summary proceeding focused only on deciding a party’s right to immediate possession of

property. But when litigants to an unlawful detainer proceeding fully try other issues besides the right

of possession, the unlawful detainer judgment is conclusive as to those other litigated issues.”

Gombiner v. Swartz, 167 Cal. App. 4th 1365, 1371 (2008)(citations omitted). Here, Plaintiffs

challenged the validity of the foreclosure sale and of U.S. Bank’s claim to status as beneficiary to the

Deed of Trust in their opposition to U.S. Bank’s motion for summary judgment in the unlawful

detainer action. Accordingly, these claims were at issue in that action and were resolved. See

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Malkoskie, 188 Cal. App. 4th at 973-76.

Defendants also argue Plaintiffs’ claims regarding lack of possession of the note are barred by

the doctrine of res judicata. However, the documents provided to the Court by Defendants relating

to the unlawful detainer action state nothing as to possession of the note. Nonetheless, Plaintiffs’

allegations regarding lack of possession of the promissory note, even if not barred by the doctrine of

res judicata, are insufficient to state plausible claims for relief to set aside the trustee’s sale or cancel

the trustee’s deed. In the case of a non-judicial foreclosure sale pursuant to a power of sale contained

in a deed of trust, no party needs to physically possess the promissory note for the foreclosure to occur.

See Cal. Civ. Code § 2924(a)(1); see also Harrington v. Home Capital Funding, Inc., No. 08cv1579

BTM (RBB), 2009 WL 514254, at * 4 (S.D. Cal. Mar. 2, 2009)(“There is no requirement that the

original note be in possession of or produced by the party filing the notice of default or giving the

notice of sale.”). 

Finally, Plaintiffs allege, in support of their claims for negligence and declaratory relief, that

Western Progressive, as trustee, breached its duty to Plaintiffs by failing to conduct the foreclosure sale

according to law and by failing to ascertain who was in possession of the note and whether the

assignment of the Deed of Trust was valid. However, as discussed above, possession of the note is

not necessary for a foreclosure sale to occur and the Court found in the unlawful detainer action that

the property was acquired in accordance with Section 2924 of theCaliforniaCivil Code. Accordingly,

Plaintiffs’ claims for negligence and declaratory relief are also dismissed with prejudice. 

IV.

CONCLUSION

For the foregoing reasons, Defendants’ motion to dismiss Plaintiffs’ Complaint is granted.

Plaintiffs’ Complaint is dismissed with prejudice. 

IT IS SO ORDERED.

DATED: March 18, 2011

HON. DANA M. SABRAW

United States District Judge

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