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Jalene Gilbert and Tom Gilbert v. Bank of America Corporation; A Corporation of

September 26, 2012

JALENE GILBERT AND TOM GILBERT, PLAINTIFFS,
v.
BANK OF AMERICA CORPORATION; A CORPORATION OF UNKNOWN ORIGIN; BANK OF
AMERICA, N.A. AS SUCCESSOR TO COUNTRYWIDE HOME LOANS, INC., A DELAWARE CORPORATION; BAC HOME LOANS SERVICING, L.P., LIMITED PARTNERSHIP OF UNKNOWN ORIGIN AND A WHOLLY-OWNED SUBSIDIARY OF BANK OF AMERICA, N.A.; BAC GP, LLC, A LIMITED LIABILITY COMPANY OF UNKNOWN ORIGIN AND A WHOLLY-OWNED SUBSIDIARY OF BANK OF AMERICA, N.A.; RECONTRUST COMPANY, N.A., A CORPORATION OF UNKNOWN ORIGIN AND A WHOLLY- OWNED SUBSIDIARY OF BANK OF AMERICA, N.A.; MORTGAGE ELECTRONIC REGISTRATION SYSTEM, INC., A DELAWARE CORPORATION; FEDERAL NATIONAL MORTGAGE ASSOCIATION, A FEDERALLY CHARTERED CORPORATION; AND DOES 1-10 AS INDIVIDUALS OR ENTITIES WITH AN INTEREST IN THE PROPERTY COMMONLY KNOWN AS: 11772 PURPLE SAGE ROAD, MIDDLETON, IDAHO 83644, DEFENDANTS.



The opinion of the court was delivered by: B. Lynn Winmill Chief Judge United States District Court

MEMORANDUM DECISION AND ORDER

Before the Court are Defendants' Motion to Dismiss the First Amended Complaint (Dkt. 13), Defendants' Motion to Take Judicial Notice re: Motion to Dismiss (Dkt. 14), Defendants' Motion to Take Judicial Notice re: Reply Memorandum (Dkt. 22), and Plaintiffs' Second Motion to Amend Complaint (Dkt. 26). The matters are briefed, and the Court has determined that oral argument would not significantly assist the decisional process. Based on the record and pleadings before it, the Court will grant the Motions for Judicial Notice and Motion to Dismiss, and deny the Motion to Amend Complaint.

BACKGROUND

On September 21, 2007, Plaintiffs obtained a $405,000 mortgage loan to refinance their property at 11772 Purple Sage Road in Middleton, Idaho, 83644. The loan was memorialized in a promissory note and secured by a Deed of Trust, naming Capital One Home Loans, LLC as lender, Lawyers Title Realty Service as trustee, and MERS as the beneficiary and "nominee for Lender and Lender's successors and assigns." Ex. B to Dina Aff., Dkt. 14-3 at 3. Plaintiffs acknowledge that at some point, they defaulted on their mortgage payments. First Am. Compl., Dkt. 11 ¶ 43.

On December 28, 2010, the beneficial interest in the Deed of Trust was assigned to BAC Home Loans Servicing, LP (BACHLS) -- now known as BANA. Ex. C to Dina Aff., Dkt. 14-5. Some months later, Plaintiffs received notice that BANA was the loan servicer, and that "FNMA" -- otherwise known as Fannie Mae - was the creditor to whom the debt was owed. Ex. A to First Am. Compl., Dkt. 11-1. A Notice of Default was issued December 28, 2010, indicating that Plaintiffs' account was $14,497.56 in arrears. Ex. A to Compl., Dkt. 1-1. Also on December 28, ReconTrust was appointed successor trustee. Ex. C to Compl., Dkt. 1-3. The corporation assignment of deed, Notice of Default, and appointment of corporate successor were all recorded on December 29, 2010. There is no evidence of a recorded assignment to FNMA. On January 12, 2011, Plaintiffs were served with a Notice of Trustee's Sale, upon failure to cure their default; the Notice was recorded on March 29, 2011. Ex. E to Compl., Dkt. 1-5. A foreclosure sale has yet to take place.

Plaintiffs filed this action June 10, 2011, with a single claim to quiet title to the property. According to Plaintiffs, the "owner" of the loan is unknown, thus no party has authority to foreclose on the property. This Court granted Defendants' Motion to Dismiss on September 15, 2011, but with leave to amend within 14 days. Mem. Dec. & Ord., Dkt. 9. Plaintiffs filed a First Amended Complaint on September 22, 2012, amending their quiet title claim and adding the following claims: (1) violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692; (2) mail fraud in violation of 18 U.S.C. § 1341; (3) fraud; (4) breach of fiduciary duty and the covenant of good faith and fair dealing; and (6) intentional infliction of emotional distress. First Am. Compl., Dkt. 11.

Defendants move to dismiss the First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6). Defendants also ask the Court to take judicial notice of documents supporting their opening and reply memoranda in support of the Motion to Dismiss. Plaintiffs oppose dismissal, and object to judicial notice of the promissory note only. In addition, Plaintiffs move for leave to file a second Amended Complaint, to which Defendants object.

DISCUSSION

Although Plaintiffs raise several causes of action and claims for relief in their First Amended Complaint, the essence of the suit challenges the securitization of their mortgage, which Plaintiffs allege clouded title to their property. Plaintiffs ask the Court to find that the securitization of their mortgage and procedural irregularities in the foreclosure process amounted to fraud. Among other claims for relief, Plaintiffs further ask that the Court order Defendants to produce the original note, and that the Court determine each of the parties' interests in the property.

1. Motions to Take Judicial Notice

The Court first addresses Defendants' requests that the Court take judicial notice of the following documents: (1) Promissory Note, (2) Deed of Trust, (3) Corporation Assignment of Deed of Trust, (4) Notice of Default, (5) Affidavit of Service by Mail, (6) Report and Recommendation on Motion to Dismiss, Case No. 1:10-cv-000632-EJL-REB, (7) Report and Recommendation, Case No. 1:11-cv-00193-EJL-CWD, and (8) Home Affordable Modification Agreement, dated January 29, 2010. Mots. to Take Jud. Not., Dkts. 14, 22. Under Rule 12(b)(6), the Court may consider matters that are subject to judicial notice. Mullis v. United States Bank, 828 F.2d 1385, 1388 (9th Cir. 1987). The Court may take judicial notice "of the records of state agencies and other undisputed matters of public record" without transforming the motions to dismiss into motions for summary judgment. Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866 (9th Cir. 2004).

The Court may also examine documents referred to in the complaint, although not attached thereto, without transforming the motion to dismiss into a motion for summary judgment. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). Any documents not attached to a complaint, however, may be considered only if their authenticity is not questioned and the complaint necessarily relies on the documents. Harris v. County of Orange, 682 F.3d 1126, 1131-32 (9th Cir. 2012) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001)). Of particular relevance here, a court may consider recorded real estate documents. United States v. Richie, 342 F.3d 903, 907-08 (9th Cir. 2003).

Plaintiffs in this case have not objected to the Deed of Trust, the Assignment of Deed of Trust, the Notice of Default, the Affidavit of Service, the Report and Recommendations from Case Nos. 1:10-cv-000632-EJL-REB and 1:11-cv-00193-EJLCWD, or the Home Affordable Modification Agreement. Opp. To Jud. Not., Dkt. 18. Also, these documents meet the criteria for judicial notice in that each is either in the public record or was attached and referred to in Plaintiffs' initial or amended complaints. Thus, the Court will take judicial notice of those seven documents.

Plaintiffs have objected to judicial notice of the Promissory Note. However, Plaintiffs reference the Note in their initial complaint, alleging that "[o]n or about September 21, 2007, [Plaintiffs] executed a Promissory Note payable to the order of Capital One Home Loans, LLC. Compl., Dkt. 1¶ 10. In opposing judicial notice of the Note, Plaintiffs do not contend that any of the terms of the Note are inaccurate, or that it does not bear their signatures. And notably, they do not object to judicial notice of the Deed of Trust which specifically refers to the Note. Dina Aff., Ex. B, Dkt. 14-3.

Instead, Plaintiffs' objection to -- or unwillingness to admit -- the authenticity of the Note appears to be related to their contention that Bank of America must produce the original Note to proceed with the foreclosure. As will be discussed further below, this argument has been repeatedly rejected by the courts. Trotter v. New York Mellon, 275 P.3d 857, 862 (Idaho 2012); Cherian v. Countrywide Home Loans, Inc. et. al., No. 1:12-cv-00110-BLW, 2012 WL 2865979, *3 (D. Idaho July 11, 2012); Hofhines v. BAC Home Loans Servicing, L.P., 2012 WL 3440458 (D. Idaho June 1, 2012) adopted by 2012 WL 3438327 (D. Idaho Aug. 15, 2012). Therefore, the Court will also take judicial notice of the Note (Dkt. 5-2).

2. Motion to Dismiss

A. Legal Standard

Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964 (2007). While a complaint attacked by a Rule 12(b)(6) motion to dismiss "does not need detailed factual allegations," it must set forth "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555. To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Id. at 570.

In a more recent case, the Supreme Court identified two "working principles" that underlie Twombly. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). First, the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Id. Second, only a complaint that states a plausible claim for relief survives a motion to dismiss. Id. at 1950. 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. Bell Atlantic Corp., 550 U.S. at 556. The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Id.

B. Quiet Title

As discussed in the Court's Order dismissing the initial complaint (Dkt. 9), a plaintiff must allege he can and will satisfy the remaining balance on the debt obligation in order to have a court quiet title in his favor in Idaho. See Trusty v. Ray, 73 Idaho 232, 236, 249 P. 2d 814, 817 (1952) ("A mortgagor cannot without paying his debt quiet title as against the mortgagee."); see also Kelley v. Mortg. Elec. Registration Sys., Inc., 642 F. Supp. 2d 1048, 1057 (N.D. Cal. 2009) (To maintain a quiet title action, plaintiffs must allege they are the rightful property owners, "i.e.that they have satisfied their obligations under the Deed of Trust."). The Court gave Plaintiffs leave to amend their complaint to allege tender of their outstanding loan debt. Order, Dkt. 9 at 6.

In their First Amended Complaint, Plaintiffs allege that they "could tender payment in good faith, but they do not know the true owner or party in interest." First Am. Compl., Dkt. 11 ¶ 11. Plaintiffs explain that they "believe [the] creditor is FNMA, but no assignment was ever recorded in Ada County, Idaho transferring any interest to FNMA." Id. ¶ 12. ...


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