Stewart v. Am. Gen. Fin., Inc.
| Decision Date | 02 November 2018 |
| Docket Number | No. 2:18-cv-01844 KJM CKD (PS),2:18-cv-01844 KJM CKD (PS) |
| Court | U.S. District Court — Eastern District of California |
| Parties | RUSSELL STEWART, Plaintiff, v. AMERICAN GENERAL FINANCE, INC., et al., Defendants. |
On October 17, 2018, the undersigned held a hearing on defendants' motion to dismiss the complaint pursuant to Rule 12(b)(6). (ECF No. 14; see ECF No. 17.) Plaintiff appeared pro se, and James Ramos and Brett Goodman appeared telephonically on behalf of defendants. At the close of the hearing, the court took the matter under submission.
In order to survive dismissal for failure to state a claim pursuant to Rule 12(b)(6), a complaint must contain more than a "formulaic recitation of the elements of a cause of action"; it must contain factual allegations sufficient to "raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). "[A] complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).
//// In considering a motion to dismiss, the court must accept as true the allegations of the complaint in question, Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976), construe the pleading in the light most favorable to the party opposing the motion, and resolve all doubts in the pleader's favor. Jenkins v. McKeithen, 395 U.S. 411, 421, reh'g denied, 396 U.S. 869 (1969). The court will "'presume that general allegations embrace those specific facts that are necessary to support the claim.'" National Organization for Women, Inc. v. Scheidler, 510 U.S. 249, 256 (1994), quoting Luian v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). Moreover, pro se pleadings are held to a less stringent standard than those drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520 (1972).
Plaintiff asserts multiple state and federal claims against defendant financial entities relating to the foreclosure sale of real property at 256 Shilling Avenue in Lathrop, California. (ECF No. 1 ("Cmplt").)
In 2002, plaintiff executed a loan agreement ("Loan") with defendant American General Finance in the amount of $141,451.15, secured with a Deed of Trust ("DOT") that was subsequently reassigned multiple times. 1 Between 2003 and 2017, plaintiff received five Notices of Default on the subject Loan. (See Defs' Exhs. D, E, F, G & H.) In 2013, plaintiff entered a Loan Modification Agreement with defendant Springleaf Financial Services. (Defs' Exh. I) Plaintiff alleges that between August and October 2013, he made "threeagreed-upon trial period loan modification payments" of $997.00. (Cmplt., ¶ 81; see Plff's Exh. J at 117.) Plaintiff then "discovered discrepancies in the Loan Modification Agreement" and "disputed the figures upon which [it] was based." (Id., ¶ 82.) He repeatedly attempted to work with Springleaf Financial Services to "resolve the discrepancy and set up a new or amended Loan Modification Agreement," but while Springleaf continued to accept payments on the loan, it never agreed to a new loan modification. (Id., ¶ 83.) In 2017, plaintiff was notified that he was again in default. (Defs' Exh. H.) In October 2017, nine months after the final Notice of Default, the property was sold to a third party in a foreclosure sale. (Cmplt., ¶ 49; Defs Exh. J.)
The gravamen of the complaint is that the Loan was improperly assigned, such that the subsequent foreclosure on the property was unlawful. (See Cmplt., ¶¶ 41-42, 48.) Plaintiff alleges that the assignment of the Loan was void because defendants "failed to adhere to the PSA [Pooling and Servicing Agreement]2, which requires that Plaintiff's Note and Deed of Trust be properly endorsed, transferred, accepted and deposited with the securitized trust . . . on or before the 'closing date' indicated on the Prospectus." (Id., ¶ 42; see ¶¶ 45-48.)
Plaintiff further alleges that the note and Deed of Trust were not transferred together, a failure that has "resulted in an unperfected lien that none of the Defendants can enforce in any manner whatsoever." (Id., ¶¶ 46-48.) "Plaintiff alleges that, prior to demanding mortgage payments [from] Plaintiff, none of the defendants . . . had, nor presently have, a secured or unsecured . . . interest in Plaintiff's Note and/or Deed of Trust as required by California law - irrespective of who is actually in physical possession of plaintiff's Note." (Id., ¶ 68.)
In their Rule 12(b)(6) motion, defendants argue that plaintiff's conclusory allegations are insufficient to state a claim. Before reaching the claim elements however, defendants argue as a threshold issue that plaintiff lacks standing to challenge the allegedly faulty loan assignments that underpin his claims.
"The federal courts are under an independent obligation to examine their own jurisdiction, and standing 'is perhaps the most important of [the jurisdictional] doctrines.'" Labyrinth Optical Techs. LLC v. Alcatel-Lucent USA, Inc., 2015 WL 8227494, at *2 (C.D. Cal. Mar. 23, 2015), citing United States v. Hays, 515 U.S. 737, 742 (1995). Whether a party has standing to sue is a question of law. Id., citing Prima Tek II L.L.C. v. A-Roo Co., 222 F.3d 1372, 1376 (Fed. Cir. 2000). "A plaintiff generally has the burden of proving standing to sue." Id., citing Tyco Healthcare Grp. LP v. Ethicon Endo-Surgery, Inc., 587 F.3d 1375, 1378 (Fed. Cir. 2009). Moreover, it is well-established that a plaintiff "cannot rest his claim to relief on the legal rights or interests of third parties." Warth v. Seldin, 422 U.S. 490, 499 (1975).
Here, the DOT to plaintiff's home was assigned to a series of successors-in-interest and lastly to defendant Clear Recon Corporation, which conveyed the property to third parties in an October 2017 foreclosure sale. "A deed of trust may . . . be assigned one or multiple times over the life of the loan it secures," the California Supreme Court has stated. Yvanova v. New Century Mortgage Corp., 62 Cal. 4th 919, 927-928 (2016) (internal citations omitted). Plaintiff essentially argues that due to defective assignments, Clear Recon was not the true owner of the DOT at the time of sale.
Plaintiff's standing to sue on this basis turns on whether he is alleging "void" or "voidable" loan assignments. "A home loan borrower has standing to claim a nonjudicial foreclosure was wrongful because an assignment by which the foreclosing party purportedly took a beneficial interest in the deed of trust was not merely voidable but void." In re Turner, 859 F.3d 1145, 1149 (9th Cir. 2017), citing Yvanova, 62 Cal. 4th at 942-943. While a void contract is without legal effect and nonbinding, a voidable transaction, "[d]espite its defects, is subject to ratification by the parties." Yvanova, 62 Cal. 4th at 930 (citations omitted). "When an assignment is merely voidable, the power to ratify or avoid the transaction lies solely with theparties to the assignment; the transaction is not void unless and until one of the parties takes steps to make it so," the Yvanova court reasoned. "A borrower who challenges a foreclosure on the ground that an assignment to the foreclosing party bore defects rendering it voidable could thus be said to assert an interest belonging solely to the parties to the assignment rather than to herself." Id. at 936. The California Supreme Court concluded that "a wrongful foreclosure plaintiff has standing to claim the foreclosing entity's purported authority to order a trustee's sale was based on a void assignment of the note and deed of trust," but the same does not apply to "claimed defects that would make the assignment merely voidable[.]" Id. at 939.
Thus the issue is whether plaintiff is alleging "void" or "voidable" loan assignments. Defendants cite Saterbak v. JPMorgan Chase Bank, N.A., 245 Cal. App. 4th 808, 814-815 (2016), a case in which Ms. Saterbak (like the instant plaintiff) contended that the DOT to her home was assigned in an untimely manner under the pooling and service agreement, rendering the loan assignment void. Id. at 814. The Saterbak court affirmed the dismissal of her complaint, concluding that the untimely assignment alleged by plaintiff was "merely voidable" and thus did not confer standing under Yvanova. Id. at 815. Similarly, the Ninth Circuit found that a plaintiff lacked standing to sue for wrongful foreclosure based on an alleged defect in the securitization process which rendered the assignment merely voidable. The Court reasoned:
A borrower does have standing to challenge an assignment of her note and deed of trust on the basis of defects allegedly rendering the assignment void. Yvanova v. New Century Mortg. Corp., 62 Cal.4th 919 (2016). But because an act in violation of a trust agreement is voidable—not void—under New York law, which governs the Pooling and Servicing Agreement (PSA) at issue, Morgan lacks standing here. SeeRajamin v. Deutsche Bank Nat. Trust Co., 757 F.3d 79, 87-90 (2d Cir. 2014) ().
Morgan v. Aurora Loan Services, LLC, 646 Fed. Appx. 546, **6-7 (9th Cir. March 28, 2016); see also Renard v. JP Morgan Chase Bank, N.A., 2017 WL 8292774, *8 (C.D. Cal. Dec. 13, 2017) (...
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