Lawrence v. Cenlar F.S.B.

1

JAMES LAWRENCE, MARILYN MELLIES, Plaintiffs, v. CENLAR F.S.B., CITIBANK, N.A., and DOES 1 through 10, Defendants.

No. 1:22-cv-01627-JLT-CDB

United States District Court, E.D. California

September 4, 2024

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT CENLAR'S MOTION TO DISMISS AND GRANTING IN PART AND DENYING IN PART DEFENDANT CITIBANK'S MOTION TO DISMISS

(DOCS. 10, 13.)

I. INTRODUCTION

This case concerns the foreclosure of the residence owned by James Lawrence and Marilyn Mellies' in Ridgecrest, California. Before the Court are motions to dismiss brought by Citibank, N.A. (“Citibank”) and Cenlar FSB (“Cenlar”) (collectively “Defendants”). (Docs. 10, 13.) For the reasons set forth below, the Court grants in part and denies in part Citibank's motion to dismiss (Doc. 10), and grants in part and denies in part Cenlar's motion to dismiss (Doc. 13).^[1]///

II. BACKGROUND

On November 7, 2022, Plaintiffs filed this action against Defendants in the Superior Court of the State of California, Kern County, Case No. BCV-22-102977. (Doc. 1-1 at 2.) Defendants removed this action to this Court on December 20, 2022, based on federal question jurisdiction. (Doc. 1-1 at 3-4.)

In August 2007, Plaintiffs obtained a mortgage loan on the real property located at 1039 W. Beston Ave., Ridgecrest, CA 93555 for $100,000 by deed of trust from Citibank. (Doc. 1-4, ¶ 10.) On May 5, 2022, Defendants recorded a notice of default and election to sell under a deed of trust. (Doc. 1-4, ¶ 11.) The notice of default included a declaration from Cenlar dated March 16, 2022, and signed on March 21, 2022, which detailed Defendant Cenlar's assertion that it unsuccessfully attempted to contact Plaintiffs by mail and telephone. (Doc. 1-4 at 25-26.) A notice of trustee's sale was recorded on August 3, 2022. (Doc. 1-4, ¶ 12.) Plaintiffs contend the property was unlawfully sold on September 7, 2022. (Doc. 1-4, ¶ 12.)

III. JUDICIAL NOTICE

Defendants request this Court take judicial notice of three documents: (1) a deed of trust recorded on August 7, 2007, in the Kern County Recorder's Office; (2) a substitution of trustee recorded on May 5, 2022, in the Kern County Recorder's Office; and (3) a trustee's deed upon sale recorded on October 28, 2022, in the Kern County Recorder's Office. (Docs. 11, 14.) The deed of trust and the trustee's deed upon sale are also attached and incorporated in Plaintiffs' complaint. (Doc. 1-4 at 15-20; 1-3 at 2-4.)

“[C]ourts do not take judicial notice of documents, they take judicial notice of facts. The existence of a document could be such a fact, but only if the other requirements of Rule 201 are met.” Cruz v. Specialized Loan Servicing, LLC, No. SACV 22-01610-CJC-JDEX, 2022 WL 18228277, at *2 (C.D. Cal. Oct. 14, 2022) (internal citation and quotations omitted). Generally, judicial notice may be taken of recorded instruments because they are public records whose accuracy cannot reasonably be questioned. Fed.R.Evid. 201; see Perez v. Am. Home Mortg. Servicing, Inc., No. 12-cv-009323-WHA, 2012 WL 1413300, at *2 (N.D. Cal. Apr. 23, 2012) (taking judicial notice of a deed of trust, notice of default, assignment of deed of trust, and substitution of trustee recorded with the Alameda County Recorder's Office). However, a court may not take judicial notice of a fact within a public record that is “subject to reasonable dispute.” Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001).

Under Rule 201, the Court may take judicial notice that the substitution of trustee were recorded with the Kern County Recorder's Office on the dates indicated by the receipt stamp. However, the Court's judicial notice “extends only to the existence of these documents and not to their substance, which may contain disputed or irrelevant facts.” Givens v. Newsom, 629 F.Supp.3d 1020, 1024 (E.D. Cal. 2022). Accordingly, the Court grants judicial notice limited to the point that the three documents exist and were publicly filed in the Kern County Recorder's Office on the respective dates reflected on each document. Because Plaintiffs attached the deed of trust and the trustee's deed upon sale as exhibits to the complaint, they have incorporated by reference certain facts contained in the documents, rendering Defendants' requests for judicial notice unnecessary. See Lee, 250 F.3d at 688 (“[A] court may consider material which is properly submitted as part of the complaint on a motion to dismiss without converting the motion to dismiss into a motion for summary judgment.”)

IV. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a party may file a motion to dismiss on the grounds that a complaint “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In deciding a motion to dismiss, “all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party.” In re Facebook, Inc. Internet Tracking Litig., 956 F.3d 589, 601 (9th Cir. 2020). In assessing the sufficiency of a complaint, all well-pleaded factual allegations must be accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009).

A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. A complaint that offers mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do.” Id.; see also Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). “Dismissal is proper only where there is no cognizable legal theory or an absence of sufficient facts alleged to support a cognizable legal theory.” Navarro, 250 F.3d at 732.

If the court dismisses the complaint, it “should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In making this determination, the court should consider factors such as “the presence or absence of undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previous amendments, undue prejudice to the opposing party and futility of the proposed amendment.” Moore v. Kayport Package Express, 885 F.2d 531, 538 (9th Cir. 1989).

V. DISCUSSION

In their complaint, Plaintiffs allege eight causes of action: violations of the California Homeowner Bill of Rights under California Civil Code §§ 2923.5, 2924(a)(1), and 2924.9; negligence; wrongful foreclosure; interpleader; violation of California's Unfair Competition Law under California Business and Professions Code § 17200; and cancellation of instruments.

A. Count One: Violation of California Civil Code § 2923.5

Plaintiffs allege that Defendants violated California Civil Code § 2923.5(a)(2), which requires a “mortgagee, beneficiary or authorized agent” to “contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure” prior to recording a notice of default. Defendants argue that Plaintiffs' first cause of action should be dismissed for two reasons: (1) Plaintiffs fail to state a cognizable claim because Cenlar's March 2022 declaration confirms that Defendants fully complied with § 2923.5 and (2) Plaintiffs' claim fails as a matter of law because the Property has already been sold and the only remedy for a violation of § 2923.5 is postponement of an impending foreclosure. (Docs. 10-1 at 12-31; 13-1 at 8-9.)

1. March 2022 Declaration

Plaintiffs allege that Defendants violated § 2923.5(a)(2), because despite residing at the property when the notice of default was recorded on May 5, 2022, they “received no mail or messages” from Defendants to assess the financial situation and explore options to avoid foreclosure. (Doc. 1-4, ¶ 19.) In response, Defendants point to the March 2022 declaration- which was both recorded with the notice of default on May 5, 2022, and attached as an exhibit to Plaintiffs' complaint-on which the assigned mortgage servicer attests, by checking a line next to pre-prepared language, that she took certain steps to contact Plaintiffs in conformance with § 2923.5. (Doc. 1-2 at 30-31.) Defendants argue that Plaintiffs fail to state a claim under § 2923.5(a)(2) because Plaintiffs' allegations that they did not receive proper notice is contradicted by the recorded March 2022 declaration.

Defendant Citibank cites to Wyman v. First Am. Title Ins. Co., No. C-16-07079-WHA, 2017 WL 1508864, at *3 (N.D. Cal. Apr. 27, 2017), and Major v. Wells Fargo Bank, No. 14-CV-998-LAB-RBB, 2014 WL 4103936, at *3 (S.D. Cal. Aug. 18, 2014), to support its proposition that a declaration recorded with a notice of default is sufficient to satisfy a defendant's obligations under § 2923.5. (Doc. 10-1 at 13.) The Major court only found the declaration to be sufficient because the plaintiff did not allege sufficient facts to indicate any lack of communication and only made conclusory allegations that the declaration was false. See Major, 2014 WL 4103936, at *3. Wyman held that, only in light of plaintiff's inability to allege a specific violation regarding the notice of default and the declaration, the declaration was prima facie evidence of an attempt to contact plaintiffs. See Wyman, 2017 WL 1508864, at *3. Plaintiffs have specifically alleged in their complaint that they “received no mail or messages” while indirectly challenging the content-not the existence-of the declaration.

The Court finds Defendants'...