Almutarreb v. Bank of N.Y. Trust Co., N.A.

• Decision Date: 24 September 2012
• Docket Number: No. C-12-3061 EMC,C-12-3061 EMC
• Parties: MUHAMED ALMUTARREB, et al., Plaintiff, v. BANK OF NEW YORK TRUST COMPANY, N.A., as successor Trustee to JP MORGAN CHASE BANK, et al., Defendants.
• Court: U.S. District Court — Northern District of California

MUHAMED ALMUTARREB, et al., Plaintiff,

v. BANK OF NEW YORK TRUST COMPANY, N.A.,as successor Trustee to JP MORGAN CHASE BANK, et al., Defendants.

No. C-12-3061 EMC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Dated: September 24, 2012

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS'

MOTION TO DISMISS

(Docket No. 4)

Plaintiffs Muhamed and Sophia Almutarreb filed a complaint against Defendants Bank of New York Trust Company, N.A., BAC Home Loan Servicing, L.P., Recontrust Company, N.A., and Mortgage Electronic Registration Systems ("MERS"), arising out of the pending foreclosure of their home in San Pablo, CA. Plaintiffs assert claims for Declaratory Relief; Negligence; Quasi Contract; violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605; violation of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692; violation of the California Business & Professions Code § 17200 ("UCL"); Accounting; Wrongful Foreclosure; Fraud; and Quiet Title. Compl., Docket No. 1.

Defendants move to dismiss Plaintiffs' claims for failure to state a claim upon which relief may be granted under Federal Rule of Civil Procedure 12(b)(6). Pursuant to Civil Local Rule 7-1(b), the Court determines that the matters are appropriate for resolution without oral argument, and VACATES the hearing. Having considered the parties' submissions and for the reasons set forth below, the Court GRANTS in part and DENIES in part Defendants' motion to dismiss.

I. DISCUSSION

A. Legal Standard

Under Rule 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6). A motion to dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the claims alleged. See Parks Sch. Of Bus. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). In considering such a motion, a court must take all allegations of material fact as true and construe them in the light most favorable to the nonmoving party, although "conclusory allegations of law and unwarranted inferences are insufficient to avoid a Rule 12(b)(6) dismissal." Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). While "a complaint need not contain detailed factual allegations . . . it must plead 'enough facts to state a claim to relief that is plausible on its face.'" Id. "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); see also Bell Atl. Corp v. Twombly, 550 U.S. 544, 556 (2007). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than sheer possibility that a defendant acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).

B. Application

1. Violation of the Pooling Service Agreement

The gravamen of Plaintiffs' complaint is that Defendants failed to comply with the terms of the Pooling Service Agreement ("PSA") for the trust into which Plaintiffs' note was transferred. Specifically, Plaintiffs allege Defendants transferred the note past the trust's closing date, and thereby failed to effectuate a valid transfer at all. See, e.g., Compl. ¶¶ 21, 27-32. Therefore, according to Plaintiffs, Defendants lack standing or authority to exercise any claim to the deed of trust or property at issue by collecting payments due on that loan and, most importantly, by foreclosing on the property since proper title to the loan was never properly transferred. Id. ¶¶ 30-31, 66-69, 73-74, 76-77. These allegations form the basis of Plaintiffs' Declaratory Relief, Negligence, Quasi Contract, FDCPA, UCL, Accounting, Wrongful Foreclosure, Fraud, and Quiet Title causes of action. Id. ¶¶ 87-90, 98, 102-03, 116, 121. 132, 136-37, 144, 155. Plaintiffs do notallege that there was never an assignment of the subject deed of trust to the Merrill Lynch Trust; they only claim the assignment was not timely. See Opp. at page 9; Compl. ¶¶ 65-67 and Ex. E.

Plaintiffs' argument has been soundly rejected by courts that have addressed similar arguments. For example, in Junger v. Bank of Am., N.A., the district court rejected plaintiffs' allegations that "defendants failed to adhere to the January 31, 2006 deadline for transferring the note as required by the pool servicing agreement ("PSA") that governed the securitization of the note." CV 11-10419 CAS VBKX, 2012 WL 603262, at *1 (C.D. Cal. Feb. 24, 2012). The court found "that plaintiff lacks standing to challenge the process by which his mortgage was (or was not) securitized because he is not a party to the PSA. Id. at *3 (citing In re Correia, 452 B.R. 319, 324 (1st Cir. BAP 2011)). The Court agrees that because Plaintiffs were not parties to the PSA, they lack standing to challenge the validity of the securitization process, including whether the loan transfer occurred outside the temporal bounds prescribed by the PSA. Id.; see also Sami v. Wells Fargo Bank, C 12-00108 DMR, 2012 WL 967051, at *5-6 (N.D. Cal. Mar. 21, 2012) (rejecting claim "that Wells Fargo failed to transfer or assign the note or Deed of Trust to the Securitized Trust by the 'closing date,' and that therefore, 'under the PSA, any alleged assignment beyond the specified closing date' is void" because the plaintiff lacked standing) (collecting additional cases); Bascos v. Fed. Home Loan Mortg. Corp., CV 11-3968-JFW JCX, 2011 WL 3157063 (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 its 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.").¹

Also, Defendants do not lose the ability to exercise their authority under the deed of trust due to any securitization. See Benham v. Aurora Loan Services, 2009 WL 2880232 at *3 (N.D. Cal. Sept.1, 2009) ("Other courts in this district have summarily rejected the argument that companies like MERS lose their power of sale pursuant to the deed of trust when the original promissory note is assigned to a trust pool.").

Plaintiffs allege no other infirmities in the assignment process with respect to their loan. Nor do they allege that they are not actually in default, or that Defendants have acted on an error with respect to the amount owed on their loan. Accordingly, because Plaintiffs' PSA violation theory fails as a matter of law, Plaintiffs have failed to state a claim for Declaratory Relief, Negligence, Quasi Contract, FDCPA, UCL, Accounting, Wrongful Foreclosure, Fraud, and Quiet Title to the extent they are based on that theory. These claims are therefore DISMISSED. Plaintiffs shall be permitted leave to amend to the extent they can allege any facts supporting the above claims that do not rely on their PSA violation theory.

To the extent some of Plaintiffs' claims do not depend in whole or in part on their PSA theory, the Court addresses them below.

2. FDCPA

To the extent Plaintiffs' FDCPA claim is based on their theory that Defendants lack authority under the deed of trust because of PSA violations, their claim fails for the reasons described above. In addition, Plaintiffs cannot allege an FDCPA claim against Defendants based on their foreclosure because they are not debt collectors within the meaning of the FDCPA. See Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985), modified on other grounds, 761 F.2d 237 (5th Cir.1985) ("[A] debt collector does not include the consumer's creditors, a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned.") (internal citations omitted); Lal v. Am. Home Servicing, Inc., 680 F. Supp. 2d 1218, 1224 (E.D. Cal. 2010) ("The law is well settled that FDCPA's definition of debt collector does not include the consumer'screditors, a mortgage servicing company, or any assignee of the debt.") (internal citations and quotation marks omitted) (collecting cases); Nool v. HomeQ Servicing, 653 F. Supp. 2d 1047, 1053 (E.D. Cal. 2009) (same).

Moreover, "the 'activity of foreclosing on property pursuant to a deed of trust is not the collection of a debt within the meaning of the' FDCPA." Junger, 2012 WL 603262 at *4 (quoting Tina v. Countrywide Home Loans, Inc., 2008 WL 4790906, *6 (S.D. Cal. Oct. 30, 2008)); see Hulse v. Ocwen Fed. Bank, FSB, 195 F. Supp. 2d 1188, 1204 (D. Or. 2002) (same). Plaintiffs' attempt to recast foreclosure as the "attempt[] to collect a debt and threat[] to take action if payments were not made" in order to characterize Defendants' actions as debt collection is unpersuasive. See Opp. at 25.

Accordingly, Plaintiffs' FDCPA claim fails. As Plaintiffs fail to demonstrate any FDCPA would not be futile, this claim is DISMISSED with prejudice.

3. RESPA

21 U.S.C. § 2605(e) provides as follows:

(e) Duty of loan servicer to respond to borrower inquiries.

(1) Notice of receipt of inquiry.

(A) In general. If any servicer of a federally related mortgage loan receives a qualified written request from the borrower (or an agent of the borrower) for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 20 days (excluding legal public holidays, Saturdays, and Sundays) unless the action requested is taken within such period.

12 U.S.C. § 2605(e)(1)(A).

Plaintiffs' RESPA claim suffers from several flaws. First, the bulk of Plaintiffs' requests for information appear to relate to the validity of the loan, rather than its servicing. See Compl. ¶ 109 (describing information sought as "information of the loan, specifically the identity and cont[]act information of the holder in due course of Plaintiffs' Note, . . . and requested information to verify the validity of the purported debt owed to BNY and/or BAC"). As this Court has...