Diamond Real Estate v. Am. Brokers Conduit

• Decision Date: 31 January 2017
• Docket Number: Case No. 16-cv-03937-HSG
• Court: U.S. District Court — Northern District of California
• Parties: DIAMOND REAL ESTATE, et al., Plaintiffs, v. AMERICAN BROKERS CONDUIT, et al., Defendants.

DIAMOND REAL ESTATE, et al., Plaintiffs, v. AMERICAN BROKERS CONDUIT, et al., Defendants.

Case No. 16-cv-03937-HSG

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

January 31, 2017

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS

Re: Dkt. No. 7

I. INTRODUCTION

On May 26, 2016, Diamond Real Estate ("Diamond"), Porfirio Jorque, and Editha Palancia (collectively, "Plaintiffs") filed a complaint in state court alleging sixteen causes of action against American Brokers Conduit; American Home Mortgage Servicing, Inc. ("AHMS"); American Home Mortgage Acceptance, Inc.; American Home Mortgage Assets, LLC; Citibank, N.A., as Trustee American Home Mortgage Assets Trust 2006-3, Mortgage-Backed Pass Through Certificates Series 2006-3 ("Citibank"); Ocwen Loan Servicing, LLC ("Ocwen"); Western Progressive, LLC ("Western"); Mortgage Electronic Registration Systems, Inc. ("MERS"); and Does 1 through 50, inclusive. On July 13, 2016, Ocwen removed the action to federal court pursuant to 28 U.S.C. § 1441(c) based upon federal question jurisdiction under 28 U.S.C. § 1331. Dkt. No. 1 at 3.

On July 20, 2016, Ocwen, Citibank, AHMS, and MERS (collectively, "Defendants") filed the pending motion to dismiss Plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), Dkt. No. 7 ("Mot."), as well as a request for judicial notice, Dkt. No. 8 ("RJN"). Although Plaintiffs missed the first two deadlines to file their opposition, see Dkt. Nos. 17, 19, after the case was reassigned, Dkt. No. 21, the Court set a new deadline of August 25, 2016, Dkt. No. 25, when Plaintiffs finally filed their opposition, Dkt. No. 26 ("Opp."). The opposition was over eleven pages longer than permitted, and lacked the requisite tables. See Civil L.R. 7-4(b) (opposition brief may not exceed 25 pages); Civil L.R. 7-4(a)(2) (briefs over ten pages must include table of contents and table of authorities). On August 31, 2016, Defendants replied. Dkt. No. 27 ("Reply"). More than three weeks later, on September 23, 2016, Plaintiffs filed a "Response" to Defendants' reply, Dkt. No. 29 ("Response"), even though this was not permitted by the Local Rules, see Civil L.R. 7-3(d) (prohibiting any additional filings after a reply has been filed, except for two circumstances that do not apply here).¹

On November 16, 2016, the Court continued the hearing on the motion to dismiss. Dkt. No. 43. In that order, the Court directed corporate Plaintiff Diamond to file a declaration by December 16, 2016, stating that it had obtained counsel. Id. After the Court granted an extension of time, Dkt. No. 53, Diamond filed papers on December 30, 2016, reflecting it had obtained counsel, Dkt. Nos. 54-55. Plaintiffs Jorque and Palancia continue to proceed pro se.

In its November 16, 2016 order, the Court also directed the parties to file supplemental briefing regarding the issue of whether Plaintiffs Jorque and Palancia are real parties in interest under Federal Rule of Civil Procedure 17(a)(1). See Dkt. No. 43 ("The Court therefore ORDERS Defendants to file supplemental briefing not to exceed 10 pages no later than December 23, 2016, explaining on a claim-by-claim basis why the substantive law governing each claim alleged by Plaintiffs does not grant them a cause of action so as to make them real parties in interest pursuant to Fed. R. Civ. P. 17(a). The Court ORDERS Plaintiffs to file responsive supplemental briefing on the same question, also not to exceed 10 pages, no later than January 6, 2016.") Defendants filed a supplemental brief on December 21, 2016, which largely rehashed their arguments from the motion to dismiss and reply. Dkt. No. 52 ("Supp. Br."). Plaintiffs failed to file a supplemental brief, despite the fact that Diamond obtained counsel prior to the deadline.

The Court has carefully considered the parties' arguments in their written submissions, finds the matter is suitable for disposition without oral argument, see Civ. L.R. 7-1(b), and GRANTS Defendants' motion to dismiss.

II. REQUEST FOR JUDICIAL NOTICE

The Court first addresses Defendants' request for judicial notice because, if warranted, it would add helpful structure to the factual allegations set forth in the complaint. Defendants seek to judicially notice publicly-recorded instruments and notices involving the real property at issue in this case. Plaintiffs have not opposed Defendants' RJN. See generally Opp.

The Court may take judicial notice of documents "not subject to reasonable dispute." Fed. R. Evid. 201(b). Publicly-recorded real estate instruments and notices are the proper subject of judicial notice, unless subject to reasonable dispute. See Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866 n.1 (9th Cir. 2004) (declaring that courts may judicially notice matters of public record that are not subject to reasonable dispute); Gamboa v. Tr. Corps & Cent. Mortg. Loan Servicing Co., No. 09-0007 SC, 2009 WL 656285, at **2-3 (N.D. Cal. Mar. 12, 2009) (taking judicial notice of various publicly recorded real estate instruments and notices that directly related to the parties' transactional history and claims).

The Court GRANTS Defendants' RJN with relation to Exhibits A through J, as these publicly-recorded real estate instruments and notices are not subject to reasonable dispute.² The Court DENIES AS MOOT Defendants' RJN with relation to Exhibit K, as that document relates to an argument that is now moot.³

III. BACKGROUND

This action arises out of a foreclosure on real property located in Hayward, California ("Subject Property"). Plaintiffs Porfirio Jorque and Editha Palancia obtained a loan in the amount of $460,000 ("Subject Loan") in June 2006 secured by a Deed of Trust that was recorded on June12, 2006. See RJN, Ex. A. In October 2012, a company called Diamond Investments, Inc. recorded a Grant Deed transferring Jorque and Palancia's interest in the Subject Property to Diamond Investments, Inc. Id. Ex. C. The same day, Alma Valdez, who is not party to this action, recorded a transfer of 10% of Diamond Investment, Inc.'s interest in the Subject Property to her. Id. Ex. B. Both of the transfers recorded in October 2012 had originally been executed in July 2011. Id. Exs. B-C. In July 2013, the beneficial interest in the Subject Property was transferred to Citibank. Id. Ex. D. In May 2014, a notice and recession of default was issued. Compl. Ex. G. In September 2014, Alma Valdez transferred her 10% interest back to Diamond Investments. RJN, Ex. E. In December 2014, Diamond Investments transferred its interest in the Subject Property to Plaintiff Diamond. Id. Ex. F. In August 2014, Western Progressive, LLC was substituted as the new trustee under the Deed of Trust. Id. Ex. G.

Plaintiffs defaulted on the Subject Loan in July 2015, owing $134,766.23. Id. Ex. H. A notice of trustee's sale was recorded in December 2015, which estimated that the unpaid balance and other charges on the loan totaled $659,216.94. Id. In April 2016, a foreclosure sale took place, and Citibank took title. Id. Ex. J. In May 2016, a securitization audit report was completed for Jorque and Palancia with relation to the property at issue, based upon documents submitted by them. Compl. Ex. B. The report puts forward a series of concerns relating to the Subject Loan, Deed of Trust, assignments, appointments, and representation in foreclosure. See id. at 2 (summarizing the five main issues discussed in the report).

Plaintiffs' 63-page complaint (which attaches 121 pages of exhibits), filed in July 2016, alleges the following sixteen causes of action against all Defendants: (1) violation of section 2923.6 of the California Civil Code; (2) breach of the covenant of good faith and fair dealing; (3) injunctive relief; (4) violation of California Civil Code 1572; (5) fraud; (6) intentional misrepresentation; (7) declaration of relief; (8) violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq.; (9) violation of the Real Estate Settlement Procedures Act ("RESPA"), 1 U.S.C. § 2601, et seq.; (10) rescission; (11) "Unfair and Deceptive Business Act Practices"; (12)defective and wrongful foreclosure, Cal. Civ. Code §§ 2932.5, 2924.11⁴; (13) breach of fiduciary duty; (14) unconscionability; (15) quiet title; (16) violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, et seq. See Compl. ¶¶ 124-250.

IV. LEGAL STANDARD

A. Rule 12(b)(6)

Federal Rule of Civil Procedure 8(a) requires that a complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" A defendant may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff must 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 is facially plausible when a 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).

In reviewing the plausibility of a complaint, courts "accept factual allegations in the complaint as true and construe 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). Nonetheless, Courts do not "accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). And even where facts are accepted as true, "a plaintiff may plead [him]self out of court" if he "plead[s]...