Warner v. CMG Mortgage Inc et al

Northern District of California, cand-4:2015-cv-01835

ORDER by Judge Yvonne Gonzalez Rogers granting {{46}} Motion to Dismiss; granting {{52}} Motion to Dismiss; granting {{55}} Motion to Dismiss (ygrlc4, COURT STAFF)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 JACQUELINE A. WARNER, 7 Case No. 15-cv-01835-YGR Plaintiff, 8 v. ORDER GRANTING MOTIONS TO DISMISS 9 CMG MORTGAGE INC, ET AL., Re: Dkt. Nos. 46, 52, 55 10 Defendants. 11 12 Pro se plaintiff Jacqueline Warner filed this action on April 23, 2015. (Dkt. No. 1.) After Northern District of California United States District Court 13 defendants moved to dismiss, she filed an amended complaint on June 12, 2015. (Dkt. No. 34 14 ("FAC").) Plaintiff asserts three claims: (1) violation of the Truth in Lending Act, 15 U.S.C. §§ 15 1601 et seq. ("TILA") and 12 C.F.R. § 226.23(d)(1)-(3); (2); violation of TILA § 1635(b) and 12 16 C.F.R. § 226.23(d)(1)-(3); and (3) breach of fiduciary duty.1 Thereafter, defendants Orange Coast 17 Title Company ("Orange Coast"), CMG Mortgage Inc. ("CMG"), and Ally Bank and Ally 18 Financial Inc. (collectively, the "Ally Defendants") filed motions to dismiss. (Dkt. Nos. 46, 52, 19 55.)2 In apparent opposition thereto, plaintiff began filing largely unintelligible notices of "non- 20 1 21 The third count also references 15 U.S.C. § 1635(f), 12 C.F.R. § 226.23(d)(1)-(2), and California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200 et seq. ("UCL"). The 22 Court construes "Count III" as in fact asserting two claims—one for breach of fiduciary duty and one for violation of the UCL. 23 2 CMG filed a request for judicial notice pursuant to Federal Rule of Evidence 201 along 24 with its motion, seeking notice of (1) the docket and various filings in plaintiff's bankruptcy case, Jacqueline Anne Warner, U.S. Bankruptcy Court, Northern District of California, Case Number 25 09-33436; and (2) an order from the U.S. Bankruptcy Court for the Southern District of New York. (Dkt. No. 56.) Orange Coast filed a request for judicial notice of certain publicly recorded 26 real property documents relating to the subject property. (Dkt. No. 47.) Finally, the Ally Defendants filed a request for judicial notice as to similar categories of documents (a bankruptcy 27 docket and filings and a recorded document). (Dkt. No. 53.) Plaintiff objected to a number of these documents purportedly on grounds of "authenticity," however the explanations for the 28 objections instead turn on plaintiff's interpretation of their legal force, not their authenticity. (Dkt. Nos. 61, 65, 67.) In certain instances, plaintiff claims a filing in her bankruptcy case was 1 consent." (See, e.g., Dkt. Nos. 50, 57, 58.) The Court's July 7, 2015 Order required plaintiff to 2 file a single opposition brief of no more than 25 pages addressing the legal arguments contained in 3 the motions to dismiss. (Dkt. No. 60.) Thereafter, plaintiff filed a combined opposition brief. 4 (Dkt. No. 64.) 5 Having carefully considered the papers submitted, the operative complaint, the record in 6 this case, and good cause shown, the Court GRANTS defendants' motions to dismiss. 7 I. BACKGROUND 8 On November 9, 2007, plaintiff obtained a $1 million line of credit from defendant CMG, 9 secured by a deed of trust recorded against her residential property at 10 Emerald Lake Place, 10 Redwood City, California 94062 (the "subject property"). (FAC ¶ 7; see also Dkt. No. 47, Exh. 11 1.)3 On June 29, 2009, plaintiff mailed a notice of rescission to defendants CMG and Ally Bank. 12 (FAC ¶ 8.) Defendants took no action to vacate the rescission in the subsequent twenty-one days. Northern District of California United States District Court 13 (FAC ¶ 12.) Thereafter, dismissed defendant GMAC Mortgage, LLC issued a notice of default 14 and the subject property was sold, with escrow agent Orange Coast apparently transferring 15 $1,021,506 from the sale proceeds to Ally Bank (via GMAC) to pay off the loan balance 16 (including interest) on November 20, 2012. (FAC ¶¶ 17-18, 28.) Plaintiff alleges the sale, at a 17 "29% discount off of market value," resulted from a scheme involving GMAC, Ally Bank, Orange 18 Coast, the buyer, and the real estate agents involved in the transaction—including plaintiff's 19 family friend who approached her and served as the listing agent. (FAC ¶¶ 19-21.) Plaintiff 20 claims the non-judicial foreclosure process pressured her to complete the transaction. (FAC ¶ 18.) 21 Attached to the complaint is a November 5, 2012 loan payoff statement regarding the subject 22 23 "fraudulent," having purportedly been filed without her consent in those proceedings. (Dkt. No. 67.) In another, she claims a grant deed was "signed under duress." (Id.) Nevertheless, she does 24 not claim the documents submitted are not accurate copies of the public records in question. Thus, the Court GRANTS the requests for judicial notice. See Lee v. City of Los Angeles, 250 F.3d 668, 25 689 (9th Cir. 2001) ("[A] court may take judicial notice of 'matters of public record.'"). While noting the existence of the documents in the public record, the Court does not necessarily accept 26 the truth of the matters asserted therein. 3 27 For purposes of this motion, the Court generally accepts as true the factual allegations— but not the legal conclusions—of the FAC, and also considers matters properly subject to judicial 28 notice. 2 1 property that is signed as "read and approved" by plaintiff, "with Reservation of All Rights," 2 indicating the total payoff amount as $1,050,022.76, with interest accruing on a daily basis at the 3 rate of $26.11. (FAC, Exh. A.) 4 On April 23, 2015, plaintiff filed this action, requesting the Court "confirm and validate 5 that rescission was complete by operation of law on June 29, 2009." (FAC ¶ 10.) After 6 preliminary motion practice, she amended her complaint and the instant motions followed. 7 II. LEGAL STANDARD 8 A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal 9 sufficiency of the claims alleged in the complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 10 (9th Cir. 2003). All allegations of material fact are taken as true. Johnson v. Lucent Techs., Inc., 11 653 F.3d 1000, 1010 (9th Cir. 2011). To withstand a motion to dismiss, "a complaint must 12 contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its Northern District of California United States District Court 13 face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 14 544, 570 (2007)). 15 Pursuant to Rule 12(b)(6), a complaint may be dismissed against a defendant for failure to 16 state a claim upon which relief may be granted against that defendant. Dismissal may be based on 17 either "the lack of a cognizable legal theory or the absence of sufficient facts alleged under a 18 cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990) 19 (citing Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir. 1984)). For 20 purposes of evaluating a motion to dismiss, the court "must presume all factual allegations of the 21 complaint to be true and draw all reasonable inferences in favor of the nonmoving party." Usher 22 v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). Any existing ambiguities must be 23 resolved in favor of the pleadings. Walling v. Beverly Enters., 476 F.2d 393, 396 (9th Cir. 1973). 24 However, mere conclusions couched as factual allegations are not sufficient to state a 25 cause of action. Papasan v. Allain, 478 U.S. 265, 286 (1986); see also McGlinchy v. Shell Chem. 26 Co., 845 F.2d 802, 810 (9th Cir. 1988). The complaint must plead "enough facts to state a claim 27 [for] relief that is plausible on its face." Twombly, 550 U.S. at 570. A claim is plausible on its 28 face "when the plaintiff pleads factual content that allows the court to draw the reasonable 3 1 inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. Thus, 2 "for a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and 3 reasonable inferences from that content, must be plausibly suggestive of a claim entitling the 4 plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). 5 III. DISCUSSION 6 A. Orange Coast's Motion 7 Defendant Orange Coast moved to dismiss pursuant to Federal Rule of Civil Procedure 8 12(b)(6) and Rule 8, which specifies that pleadings must contain "a short and plain statement" of 9 the grounds for jurisdiction, the claim, and the relief sought. 10 As to the TILA claims (Counts I and II), the FAC does not appear to allege those claims 11 against Orange Coast, which was not a creditor based on the facts alleged. See 15 U.S.C. § 12 1602(g). Thus, the Court need not reach the substance of Orange Coast's argument as to these Northern District of California United States District Court 13 counts. 14 As to "Count III,"4 for breach of fiduciary duty and violation of the UCL, the factual 15 allegations in the complaint do not plausibly support the claims. As a preliminary matter, plaintiff 16 concedes she executed a payoff statement that, on its face, implicitly authorized escrow agent 17 Orange Coast to transfer the funds in question to the lender. Moreover, plaintiff's bare allegation 18 that Orange Coast and the other defendants were involved in a conspiracy against her with the 19 assistance of her family friend and real estate agent without specific supporting factual allegations 20 is not plausible. To the extent the amended allegations suggest "a unified course of fraudulent 21 conduct and rel[ies] entirely on that course of conduct as the basis of a claim[,] . . . the claim is 22 said to be 'grounded in fraud' or to 'sound in fraud,' and the pleading of that claim as a whole 23 must satisfy the particularity requirement of Rule 9(b)." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 24 1097, 1103-04, 1106 (9th Cir. 2003) (holding "the circumstances constituting the alleged fraud 25 [must] be specific enough to give defendants notice of the particular misconduct [alleged] so that 26 they can defend against the charge and not just deny that they have done anything wrong" (internal 27 4 28 As noted above, the Court construes "Count III" as two counts. 4 1 quotations and citations omitted)). 2 Plaintiff alternatively contends that her vague notation of "Reservation of All Rights" upon 3 signing the payoff statement should have informed Orange Coast that she was not in fact 4 authorizing the payment.5 This argument does not persuade nor does it support the cause of action 5 actually alleged. "[T]he fiduciary relationship between plaintiff [purchaser] and defendant 6 [escrow holder] is limited to defendant carrying out the escrow instructions." Lee v. Escrow 7 Consultants, Inc., 210 Cal. App. 3d 915, 921 (Cal. Ct. App. 1989); see also Lee v. Title Ins. & 8 Trust Co., 264 Cal. App. 2d 160, 163 (1968) ("[I]t is generally held that no liability attaches to the 9 escrow holder for his failure to do something not required by the terms of the escrow or for a loss 10 incurred while obediently following his escrow instructions."). Here, plaintiff has not alleged a 11 failure by Orange Coast to follow any specific instructions. 12 Thus, Orange Coast's motion is GRANTED. Leave to amend is liberally granted. Foman Northern District of California United States District Court 13 v. Davis, 371 U.S. 178, 182 (1962); Chodos v. West Pub. Co., 292 F.3d 992, 1003 (9th Cir. 2002). 14 One exception to this general rule of permissiveness, however, is where amendment would be 15 futile. Foman, 371 U.S. at 182; Smith v. Pac. Props. & Dev. Corp., 358 F.3d 1097, 1101 (9th Cir. 16 2004). In light of the allegations in the FAC, plaintiff cannot amend the complaint so as to 17 properly assert Counts I or II against Orange Coast. Because it would be futile to grant leave to 18 amend as to these claims, the dismissal is WITH PREJUDICE. As to "Count III," the Court cannot 19 determine at this time that leave to amend would be futile, but the Court declines to entertain those 20 state law claims in the absence of any surviving federal claims where, as here, the suit is before 21 this Court on federal-question jurisdiction. See Wade v. Reg'l Credit Ass'n, 87 F.3d 1098, 1101 22 (9th Cir. 1996) ("Where a district court dismisses a federal claim, leaving only state claims for 23 resolution, it should decline jurisdiction over the state claims and dismiss them without 24 prejudice."). Consequently, "Count III" as asserted against Orange Coast is DISMISSED WITHOUT 25 PREJUDICE. Plaintiff can decide whether to assert the state law claims of "Count III" in state 26 27 5 Plaintiff's allegation that she "disputed" the payoff demand is apparently premised solely 28 on the "reservation of all rights" proviso and not any other communication to Orange Coast. 5 1 court. 2 B. Ally Defendants' Motion 3 The Ally Defendants moved, pursuant to Rule 12(b)(6), to dismiss the FAC on the grounds 4 that it fails to state a claim against them. (Dkt. No. 52.)6 Specifically, they argue plaintiff 5 unsuccessfully raised her current claim in bankruptcy court and is therefore now barred under the 6 doctrine of res judicata from further pursuing the claim before this Court. (See Dkt. No. 53 ("Ally 7 RJN"), Exh. 2.) 8 Res judicata, or claim preclusion, operates to bar subsequent litigation "whenever there is 9 (1) an identity of claims, (2) a final judgment on the merits, and (3) identity or privity between 10 parties." Owens v. Kaiser Found. Health Plan, Inc., 244 F.3d 708, 713 (9th Cir. 2001) (internal 11 quotations omitted). "California, as most states, recognizes that the doctrine of res judicata will 12 bar not only those claims actually litigated in a prior proceeding, but also claims that could have Northern District of California United States District Court 13 been litigated." Castle v. Mortgage Elec. Registration Sys., Inc., CV 11-00538, 2011 WL 14 3626560 (C.D. Cal. Aug. 16, 2011) (citing Palomar Mobilehome Park Ass'n v. City of San 15 Marcos, 989 F.2d 362, 364 (9th Cir. 1993)); see also Pey v. Wachovia Mortg. Corp., CV 11-2922, 16 2011 WL 5573894, * 8 (N.D. Cal. Nov. 15, 2011) (res judicata bars "any subsequent suit on 17 claims that. . . could have been raised in a prior action.") (citing Cell Therapueutics, Inc. v. Lash 18 Group, Inc., 586 F.3d 1204, 1212 (9th Cir. 2010)). If the claims arise out of the "same 19 transactional nucleus of fact" as litigated in the prior matter res judicata precludes re-litigating 20 those claims. Int'l Union v. Karr, 994 F.2d 1426, 1430 (9th Cir. 1993). Pursuing new legal 21 theories does not create a new cause of action sufficient to avoid res judicata. Boateng v. 22 Interamerican Univ., Inc., 210 F.3d 56, 62 (1st Cir. 2000). Res judicata "has the dual purpose of 23 protecting litigants from the burden of relitigating an identical issue with the same party or his 24 25 6 The Ally Defendants also argue the Court lacks subject matter jurisdiction over this case 26 due to a bankruptcy case in the Southern District of New York that purportedly resulted in an injunction against actions such as the plaintiff's against the Ally Defendants. However, other than 27 citing to the bankruptcy court's orders, the Ally Defendants point to no legal authority in support of their proposition that the bankruptcy court's actions deprive this Court of subject matter 28 jurisdiction over the instant dispute. The Court need not conduct legal research for the defendants. 6 1 privy and of promoting judicial economy by preventing needless litigation." Parklane Hosiery 2 Co. v. Shore, 439 U.S. 322, 326 (1979). Because "[r]es judicata prevents litigation of all grounds 3 for, or defenses to, recovery that were previously available to the parties, regardless of whether 4 they were asserted or determined in the prior proceeding[, it] thus encourages reliance on judicial 5 decisions, bars vexatious litigation, and frees the courts to resolve other disputes." Brown v. 6 Felsen, 442 U.S. 127, 131 (1979) (internal citations omitted). Finally, "[t]here is no compelling 7 reason, however, for requiring that the party asserting the plea of res judicata must have been a 8 party, or in privity with a party, to the earlier litigation." Bernhard v. Bank of Am. Nat. Trust & 9 Sav. Ass'n, 19 Cal. 2d 807, 812 (Cal. 1942). 10 Here, the bankruptcy court addressed in detail and dismissed claims arising from the same 11 transactions at issue in the instant complaint; indeed, the court addressed the same claims asserted 12 here. (See generally Ally RJN, Exh. 2.) Plaintiff does not explain the basis for her Northern District of California United States District Court 13 characterization of the bankruptcy decision as "expunged" and "moot," but she is perhaps 14 referring to a subsequent decision by the Supreme Court that in her view calls into question the 15 basis for the bankruptcy court's decision. Nevertheless, while such an occurrence might be 16 grounds to seek reconsideration in the court in question, it does not automatically moot the earlier 17 decision. Thus, the Ally Defendants' motion is GRANTED. See United States v. Coast Wineries, 18 131 F.2d 643, 648 (9th Cir. 1942) ("[A]n order disallowing a claim in bankruptcy is binding and 19 conclusive on all parties or their privies, and being in the nature of a final judgment, furnishes a 20 basis for a plea of res judicata."). Because leave to amend as to these defendants would be futile, 21 the dismissal is WITH PREJUDICE. See Siegel v. Fed. Home Loan Mortgage Corp., 143 F.3d 525, 22 528-29 (9th Cir. 1998) (holding a borrower's action against a lender was barred by the res judicata 23 effect of a related bankruptcy proceeding). To the extent plaintiff seeks reconsideration of the 24 bankruptcy court's order in light of subsequent developments in the law, such a motion should be 25 directed, if in accordance with applicable rules, to that court. 26 C. CMG's Motion 27 CMG's Rule 12(b)(6) motion to dismiss is premised primarily on two grounds: (1) that 28 judicial estoppel bars plaintiff's claim where she affirmed in her personal bankruptcy proceedings 7 1 under penalty of perjury that she had no claims against her creditors; and (2) that her claims are 2 barred by the doctrine of res judicata based on the Southern District of New York decision 3 discussed above. Because dismissal is proper under the second ground for the same reasons noted 4 with respect to the analysis of the Ally Defendants' motion, CMG's motion is GRANTED and the 5 claims against CMG are DISMISSED WITH PREJUDICE. 6 IV. CONCLUSION 7 For the foregoing reasons, the Court GRANTS defendants' motions and the FAC is 8 DISMISSED WITHOUT LEAVE TO AMEND. The federal law TILA claims (Counts I and II) are 9 DISMISSED WITH PREJUDICE and the remaining claims ("Count III"), arising under state law, are 10 DISMISSED WITHOUT PREJUDICE. Plaintiff may attempt to assert her state law claims in state 11 court. Defendants shall submit a joint proposed form of judgment by December 3, 2015. 12 This Order terminates Docket Numbers 46, 52, 55. Northern District of California United States District Court 13 IT IS SO ORDERED. 14 Dated: November 24, 2015 15 ______________________________________ YVONNE GONZALEZ ROGERS 16 UNITED STATES DISTRICT COURT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 8