Tamburri v. Suntrust Mortg. Inc.

• Decision Date: 15 December 2011
• Docket Number: No. C-11-2899 EMC,C-11-2899 EMC
• Parties: DEBORAH TAMBURRI, Plaintiff, v. SUNTRUST MORTGAGE, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of California

DEBORAH TAMBURRI, Plaintiff,

v.SUNTRUST MORTGAGE, INC., et al., Defendants.

No. C-11-2899 EMC

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

Dated: December 15, 2011

ORDER GRANTING IN PART AND

DENYING IN PART DEFENDANTS'

MOTION TO DISMISS; GRANTING

DEFENDANTS' MOTION TO STRIKE;

DENYING PLAINTIFF'S MOTION FOR

DEFAULT JUDGMENT; AND

GRANTING DEFENDANT'S MOTION

TO SET ASIDE DEFAULT

(Docket Nos. 31, 54, 57)

Plaintiff Deborah Tamburri initiated this lawsuit in state court, asserting claims for, inter alia, violation of California Civil Code § 2923.5, violation of the Real Estate Settlement Procedures Act ("RESPA"), unfair business practices, and wrongful foreclosure. Defendants are Suntrust Mortgage, Inc. ("Suntrust"), Wells Fargo Bank, NA ("Wells Fargo"), U.S. Bank National Association ("US Bank"), Recontrust Company, NA ("Recontrust"), and Mortgage Electronic Registration Systems, Inc. ("MERS"). Defendant Suntrust removed the case to federal court, and the next day Ms. Tamburri moved for a temporary restraining order to enjoin the foreclosure sale of her home. This Court granted the motion and, after holding a hearing on June 28, 2011, granted the preliminary injunction enjoining Defendants from foreclosing on her home. Docket No. 33. All Defendants besides Wells Fargo and Recontrust have moved to dismiss Plaintiff's complaint andstrike her claim for punitive damages.¹ Wells Fargo did not appear in this matter and default was entered against it on September 6, 2011. Docket No. 45. Plaintiff moved for default judgment against Wells Fargo, but Wells Fargo subsequently moved to set aside default.

Pending before the Court are Defendants Suntrust, MERS, and US Bank's motion to dismiss and strike,² Plaintiff's motion for default judgment, and Wells Fargo's motion to set aside default. Docket Nos. 31, 54, 57. After considering the parties' submissions, oral argument, and supplemental briefing, and for the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART the motion to dismiss, GRANTS the motion to strike, DENIES the motion for default judgment, and GRANTS the motion to set aside default.

I. FACTUAL & PROCEDURAL BACKGROUND

Plaintiff's First Amended Complaint, Docket No. 21 ("FAC"),³ raises nine causes of action against Defendants:

1. Cal. Civ. Code § 2923.5 (against Suntrust, Wells Fargo, MERS, and Recontrust)

2. 11 U.S.C. § 2605 (RESPA) (against Suntrust, Wells Fargo, MERS, and US Bank)

3. Cal. Bus. & Prof. Code § 17200 (against all Defendants)

4. Fraud (against Suntrust and US Bank)

5. Quiet Title (against all Defendants)

6. Wrongful Foreclosure (against all Defendants)

7. Negligence (against all Defendants)

8. Accounting (against Suntrust, Wells Fargo, and US Bank)

9. Declaratory Relief (against all Defendants)

In her FAC, Plaintiff alleges as follows. Ms. Tamburri entered into a refinance mortgage with Suntrust in December of 2006. FAC ¶ 17. Suntrust has been her loan servicer. Id. ¶ 18. The Note and Deed of Trust ("DOT") executed in conjunction with that loan, Docket No. 11, Ex. 1, conveys title and power of sale to Jackie Miller as Trustee. It names Suntrust as the Lender and MERS as the Beneficiary. As Beneficiary, MERS "holds only legal title to the interests granted by Borrower in this Security Instrument, but, if necessary to comply with law or custom, MERS (as nominee for Lender and Lender's successors and assigns) has the right: to exercise any or all of those interests, including, but not limited to, the right to foreclose and sell the Property; and to take any action required of Lender including, but not limited to, releasing and canceling this Security Instrument." DOT at 3.

In August 2008, Plaintiff defaulted on her loan. FAC ¶ 20. Suntrust recorded a Notice of Default on April 21, 2009, id. ¶ 21, which stated that it had complied with § 2923.5's requirement that it contact Plaintiff regarding alternatives to foreclosure, id. ¶ 22. However, Suntrust never contacted Plaintiff. Id. ¶ 23. Plaintiff sent documents to Suntrust numerous times, but she was only requested to re-send them. Id. ¶ 24. She sent a qualified written request ("QWR") in November 2009, but Suntrust's delayed response referenced the wrong account. Id. 25-26. The Notice of Default was then rescinded on January 13, 2010. Id. ¶ 27. Plaintiff learned at this time that Wells Fargo actually held the Note, but Wells Fargo was unable to confirm that information in response to Plaintiff's QWR. Id. ¶¶ 28-29. Plaintiff's subsequent attempts to contact Suntrust were also fruitless. Id. ¶¶ 30-31.

Another Notice of Default was filed on June 9, 2010, listing US Bank as the beneficiary and Recontrust as the Trustee, according to Plaintiff. Id. ¶ 32; Tamburri Decl., Docket No. 11, Ex. 6. It lists US Bank as the entity to contact regarding questions of payment and how to stop the foreclosure. On June 21, 2010, an Assignment of the Deed of Trust was recorded naming MERS as the grantor and US Bank as the grantee. FAC ¶ 33. It also substituted Recontrust as Trustee. Docket No. 9.

In response to a Notice of Trustee's Sale, Plaintiff filed for bankruptcy to stop the foreclosure. FAC ¶¶ 34-35. She also submitted additional QWRs to Suntrust, MERS, and US Bank,but only Suntrust responded. Id. ¶¶ 36-37. Suntrust's response asserted that Wells Fargo owns the Note.⁴ Id. After Plaintiff was discharged from bankruptcy, she filed this action and, upon removal to this Court, sought a TRO enjoining the sale. Id. ¶¶38-39. The Court granted the TRO and, after a hearing, granted a preliminary injunction. Docket No. 33.

Defendants Suntrust, MERS, and US Bank moved the Court to dismiss all causes of action on July 1, 2011. Docket Nos. 31, 35 (US Bank's notice of joinder). Meanwhile, the Clerk entered default against Wells Fargo, which had failed to appear. After Plaintiff filed a motion for default judgment, Docket No. 54, Wells Fargo has now filed a motion to set aside default asserting no interest at all in the property. Docket No. 57. In addition, Recontrust filed a "Declaration of Non-Monetary Status" on August 2, 2011. Docket No. 39. Pursuant to Cal. Civ. Code § 2924l(d),⁵ Recontrust will not participate in this action and will be bound by any order relating to the deed of trust.

II. DISCUSSION

A. Motion to Dismiss

1. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss based on the failure to state a claim upon which relief may be granted. See 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. v. 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 'enoughfacts 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, 129 S. Ct. 1937, 1949 (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." Id.

2. Tender Rule

Defendants argue first that all of the claims should be dismissed because each of them is based on an alleged wrongful foreclosure and Plaintiff has failed to provide or allege tender of the indebtedness owed. Mot. to Dismiss at 4-5.

"The California Court of Appeal has held that the tender rule applies in an action to set aside a trustee's sale for irregularities in the sale notice or procedure and has stated that '[t]he rationale behind the rule is that if plaintiffs could not have redeemed the property had the sale procedures been proper, any irregularities in the sale did not result in damages to the plaintiffs.'" Cohn v. Bank of America, No. 2:10-cv-00865 MCE KJN PS, 2011 WL 98840, at *9 (E.D. Cal. Jan. 12, 2011) (quoting FPCIRE-HAB 01 v. E & GInvs., Ltd., 207 Cal. App.3d 1018, 1021 (1989)). As explained in the Miller & Starr legal treatise,

A challenge to the validity of the trustee's sale is an attempt to have the sale set aside and to have the title restored. The action is in equity, and a trustor seeking to set the sale aside is required to do equity before the court will exercise its equitable powers. Therefore, as a condition precedent to an action by the trustor to set aside the trustee's sale on grounds that the sale is voidable, the trustor must pay, or offer to pay, the secured debt, or at least all of the delinquencies and costs due for redemption, before an action is commenced or in the complaint. Without an allegation of such a tender in the complaint that attacks the validity of the sale, the complaint does not state a cause of action.

Miller & Starr California Real Estate 3d § 10:212; see also Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575, 578-79 (1984) ("It is settled that an action to set aside a trustee's sale for irregularities in sale notice or procedure should be accompanied by an offer to pay the full amount of the debt for which the property was security. This rule is premised upon the equitable maxim that a court of equity will not order that a useless act be performed.").

While the tender rule thus has application to the instant case in general terms, the Court should note that despite Defendants' suggestions, the tender rule is not without exceptions. First, there is a general equitable exception that "tender may not be required where it would be inequitable to do so.'" Onofrio v. Rice, 55 Cal. App....