ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND re 13 , 11 , 17 , 14 . Signed by Judge Ronald M. Whyte on December 16, 2011. (rmwlc2, COURT STAFF) (Filed on 12/16/2011)
1 2 3 4 E-FILED on 12/16/11 5 6 7 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 United States District Court For the Northern District of California 8 SAN JOSE DIVISION 11 12 VICTORINA RODRIGUEZ and RIGNALDO RODRIGUEZ, individuals, No. 11-cv-05172 RMW 13 Plaintiffs, 14 v. 15 16 WELLS FARGO BANK, N.A., a business entity, NDex WEST, L.L.C., a business entity, and DOES 1 through 50, inclusive, ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND 17 Defendants. [Re Docket Nos. 11, 13, 14, 17] 18 19 20 21 Plaintiffs Victorina Rodriguez and Rignaldo Rodriguez ("plaintiffs") bring this action for 22 quiet title against defendants Wells Fargo Bank, N.A. ("Wells Fargo") and NDex West, L.L.C. 23 ("NDex"). Wells Fargo moves to dismiss plaintiffs’ complaint, to strike plaintiffs’ request for 24 punitive damages, and to expunge lis pendens. Plaintiffs move to remand the action to the Santa 25 Clara County Superior Court. For the reasons below, the court (1) converts the motion to dismiss 26 into a motion for summary judgment; (2) GRANTS the motion to strike; (3) DENIES the motion to 27 expunge lis pendens without prejudice; and (4) DENIES the motion to remand. 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 1 2 I. BACKGROUND On September 19, 2011, Plaintiffs filed a complaint in Santa Clara County Superior Court 3 asserting a claim for quiet title to residential property in San Jose, California (the "subject 4 property"). Dkt. No. 1, Ex. 1 (Compl.) at 2. The sparsely drafted pleading alleges only that: (1) 5 plaintiffs are the owners of and hold title to the subject property, (2) defendants claim an interest in 6 the subject property and have issued a Notice of Trustee’s Sale, and (3) defendants have no valid 7 interest in the subject property. See id. ¶¶ 9,10,13. Plaintiffs sought, among other remedies, 8 punitive damages, compensatory damages in the amount of $62,453.41, an injunction preventing 9 defendants from interfering with plaintiffs’ possession of the subject property, and a determination United States District Court For the Northern District of California 10 11 of title in plaintiffs’ favor. See id. at 3. On October 21, 2011, Wells Fargo removed the action to this court on diversity grounds. See 12 Dkt. No. 1 (Notice of Removal). On November 10, 2011, Wells Fargo filed the above-mentioned 13 motions. Wells Fargo also requested that the court take judicial notice of materials related to its 14 purported interest in the subject property. These materials include: (1) the Certificate of Corporate 15 Existence of World Savings Bank, FSB, issued by the Office of Thrift Supervision ("OTS") on April 16 21, 2006; (2) a Deed of Trust granting a security interest in the subject property to World Savings 17 Bank, FSB, dated August 23, 2007; (3) a letter on OTS letterhead authorizing a name change from 18 World Savings Bank, FSB to Wachovia Mortgage, FSB, dated November 19, 2007; (4) the Official 19 Certification of the Comptroller of the Currency ("OCC") stating that effective November 1, 2009, 20 Wachovia Mortgage, FSB converted to Wells Fargo Bank Southwest, N.A., which then merged with 21 and into Wells Fargo Bank, N.A.; (5) a Notice of Default and Election to Sell the subject property, 22 dated March 9, 2010; (6) a Notice of Trustee’s Sale, dated August 29, 2011; and (7) a Notice of 23 Pendency of Action ("Lis Pendens"), recorded on August 31, 2011. See Dkt. No. 12 (RJN), Exs. A, 24 B, C, E, G, H and I. 25 Wells Fargo argues that these documents "conclusively establish" that it has a security 26 interest in the subject property. Dkt. No. 13 at 3. Wells Fargo also contends that the materials show 27 that plaintiffs’ claim for quiet title is meritless because plaintiffs have not alleged that they have 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 2 1 satisfied their obligations under the Deed of Trust. Id. at 2. Plaintiffs, however, dispute the 2 "authenticity" of the documents and the validity of Wells Fargo’s property interest. Dkt. No. 29 at 2. 3 In essence, plaintiffs argue that Wells Fargo is not the current beneficiary under the Deed of Trust, 4 and therefore lacks standing to foreclose on the subject property. 5 On November, 18, 2011, plaintiffs moved to remand this action back to Santa Clara County 6 Superior Court, and asked the court the postpone ruling on the substantive motions pending a 7 determination of whether this action "belong[s] in federal court." Dkt. No. 29 at 2. 8 9 United States District Court For the Northern District of California 10 11 II. DISCUSSION A. Judicial Notice In considering a motion to dismiss, courts may take judicial notice of adjudicative facts that 12 are "not subject to reasonable dispute." Fed. R. Evid. 201(b). "Facts are indisputable, and thus 13 subject to judicial notice, only if they are either 'generally known' under Rule 201(b)(1) or 'capable 14 of accurate and ready determination by resort to sources whose accuracy cannot be reasonably 15 questioned' under Rule 201(b)(2)." United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). 16 Wells Fargo argues that the Deed of Trust, Notice of Default, Notice of Trustee’s Sale and 17 Lis Pendens are judicially noticeable because they are "true and correct copies of Official Records of 18 the Santa Clara County Recorder." Dkt. No. 12 at 2. It is well established that courts may take 19 judicial notice of publicly recorded documents, including deeds of trust and court filings. See, e.g., 20 Western Federal Sav. & Loan Ass'n v. Heflin Corp., 797 F. Supp. 790, 792 (N.D. Cal. 1992) (taking 21 judicial notice of various deeds of trust and a state court foreclosure action file). The court therefore 22 grants Wells Fargo’s request for judicial notice as to these materials. 23 Wells Fargo also maintains that the documents establishing the conversion of World Savings 24 Bank, FSB into a division of Wells Fargo are noticeable as "documents reflecting official acts of the 25 executive branch of the United States." Dkt. No. 12 at 3. However, Wells Fargo does not contend 26 that such documents are publicly recorded or otherwise "capable of accurate and ready 27 determination by resort to sources whose accuracy cannot be reasonably questioned." Fed. R. Evid. 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 3 201(b). While Wells Fargo cites other district court cases taking judicial notice of the same or 2 similar materials, none of those cases involved an objection by the plaintiff. See Hite v. Wachovia 3 Mortgage, No. 09-cv-02884, 2010 U.S. Dist. LEXIS 57732, at *7 (E.D. Cal. June 10, 2010) (taking 4 notice of documents demonstrating World Savings Bank, FSB’s conversion into a division of Wells 5 Fargo where request for judicial notice was unopposed); Paralyzed Veterans of Am. v. McPherson, 6 No. C 06-4670, 2008 U.S. Dist. LEXIS 69542, at *17-19 (N.D. Cal. Sept. 8, 2008) (taking judicial 7 notice of information appearing on official government websites and a letter from defendant’s 8 counsel "to the extent it is unopposed"). Furthermore, Wells Fargo did not attach an affidavit 9 certifying the authenticity of the documents or argue that such materials are self-authenticating. 10 United States District Court For the Northern District of California 1 Compare Justman v. Imperial County Sheriff-Coroner’s Office, No. 97-55079, 1997 U.S. App. 11 LEXIS 23303 (9th Cir. Sept. 4, 1997) (noting that a declaration submitted under penalty of perjury 12 stating that an attached document is a "true and correct copy" is sufficient to authenticate the 13 document). The court therefore declines to take judicial notice of the documents purporting to show 14 the relationship between World Savings Bank, FSB and Wells Fargo at this time. 15 B. Subject Matter Jurisdiction 16 Plaintiffs argue that removal of this action on diversity grounds was improper because the 17 amount in controversy is less than $75,000. See 28 U.S.C. § 1332(a) (diversity jurisdiction exists 18 only "where the matter in controversy exceeds the sum or value of $ 75,000"). Plaintiffs claim that 19 because the total amount of damages requested in the complaint is $62,453.41, "this case does not 20 belong in federal court." Dkt. No. 29 at 2. As plaintiffs’ contention calls into question the court’s 21 subject matter jurisdiction, the court will address this issue before considering the substantive 22 motions. 23 "In actions seeking declaratory or injunctive relief, it is well established that the amount in 24 controversy is measured by the value of the object of the litigation." Hunt v. Washington State 25 Apple Advertising Comm'n, 432 U.S. 333, 347 (1977). If the primary purpose of a lawsuit is to 26 enjoin a bank from selling or transferring property, the amount in controversy may be the original 27 loan amount, the outstanding balance at the time the sale is contemplated, or the market value of the 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 4 1 property. See Garfinkle v. Wells Fargo Bank, 483 F.2d 1074, 1076 (9th Cir. 1973); Phat Ngoc 2 Nguyen v. Wells Fargo Bank, N.A., 749 F. Supp. 2d 1022, 1028 (N.D. Cal. 2010); Cabriales v. 3 Aurora Loan Servs., No. C 10-161, 2010 U.S. Dist. LEXIS 24726, at *12-13 (N.D. Cal. Mar. 2, 4 2010). Similarly, where a plaintiff seeks to quiet title against a bank that claims to hold an interest 5 in the subject property, at least one court in this circuit has found that the amount in controversy is 6 the "full value of the loan." Craver v. National City Bank, No. CIV S-09-1276, 2009 U.S. Dist. 7 LEXIS 98333, *3 (E.D. Cal. Oct. 22, 2009). 8 9 Here, Wells Fargo has submitted judicially noticeable evidence that the amount of the loan secured by the subject property was $506,260.00, and the outstanding balance at the time of the United States District Court For the Northern District of California 10 Notice of Trustee’s Sale was $605,166.63. See Dkt. No. 12, Ex. A (Deed of Trust); Ex. H (Notice of 11 Trustee’s Sale). However, plaintiffs argue that because "they do not seek to invalidate the deed of 12 trust or obtain their home for free," the amount in controversy should be determined solely by their 13 prayer for damages. Dkt. No. 29 at 2. The court disagrees. While plaintiffs do not expressly seek to 14 invalidate the deed of trust, the complaint requests that the court enjoin the foreclosure sale and 15 determine title in plaintiffs’ favor against Wells Fargo. See Compl. at 3. It is thus clear that "the 16 whole purpose of this action is to foreclose the Bank from selling this property in the manner 17 contemplated." Garfinkle, 483 F.2d at 1076. 18 The court therefore finds Wells Fargo has met its burden to show that the amount in 19 controversy exceeds $75,000 and DENIES plaintiffs’ motion to remand this action to state court. In 20 addition, because Wells Fargo clearly had an objectively reasonable basis for seeking removal, the 21 court DENIES plaintiff's request for attorney's fees under 28 U.S.C § 1447(c). 22 C. Motion to Dismiss 23 "When ruling on a Rule 12(b)(6) motion to dismiss, if a district court considers evidence 24 outside the pleadings, it must normally convert the 12(b)(6) motion into a Rule 56 motion for 25 summary judgment, and it must give the nonmoving party an opportunity to respond." Ritchie, 342 26 F.3d at 908; Fed. R. Civ. P. 12(d). 27 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 5 1 Wells Fargo’s motion to dismiss is based primarily on the argument that plaintiffs have failed to plead a tender of their debt obligations under the Deed of Trust. However, the cases cited by 3 Wells Fargo hold that dismissal of plaintiffs’ claims on such grounds is required only if Wells Fargo 4 is the valid beneficiary under the Deed of Trust. See, e.g., Shimpones v. Stickney, 219 Cal. 637, 649 5 (Cal. 1934) ("[A] mortgagor cannot quiet his title against the mortgagee without paying the debt 6 secured.") (emphasis added). Given Wells Fargo’s heavy reliance on materials outside the pleadings 7 to demonstrate that it has an interest in the subject property, it is appropriate for the court to convert 8 the motion to dismiss into a motion for summary judgment pursuant to Fed. R. Civ. P. 12(d). Under 9 that provision, the parties must be given a "reasonable opportunity to present all the material that is 10 United States District Court For the Northern District of California 2 pertinent to the motion." Id. Plaintiffs may therefore file a response to the motion within thirty days 11 of the date of this order. Within the same time frame, Wells Fargo may also submit additional 12 evidence intended to authenticate the challenged documents and establish the validity of its property 13 interest. 14 D. Motion to Expunge Lis Pendens 15 "A lis pendens is recorded by someone asserting a real property claim, to give notice that a 16 lawsuit has been filed which may, if that person prevails, affect title to or possession of the real 17 property described in the notice." Federal Deposit Ins. Corp. v. Charlton, 17 Cal.App.4th 1066, 18 1069 (Cal. Ct. App. 1993) (citing Cal. Code Civ. Proc. §§ 405.2, 405.4, 405.20). "Once a lis 19 pendens is filed, it clouds the title and effectively prevents the property's transfer until the litigation 20 is resolved or the lis pendens is expunged." BGJ Associates, LLC v. Superior Court of Los Angeles, 21 75 Cal.App.4th 952, 967 (Cal. Ct. App. 1999). A lis pendens is a provisional remedy which should 22 be applied narrowly. Id. 23 A court must expunge a lis pendens upon a finding that the claimant failed to establish by a 24 preponderance of the evidence the probable validity of the real property claim. Cal Code Civ. Proc. 25 § 405.32. "It is the party who opposes the expungement of a notice of lis pendens, rather than the 26 party seeking expungement, who bears the burden of proof at the expungement hearing." 27 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 6 1 Malcolm v. Superior Court, 29 Cal. 3d 518, 525-26 (Cal. 1981) Although the court postpones a final determination of the parties’ rights under the Deed of 3 Trust until there has been an opportunity to submit further evidence, the court finds that plaintiffs 4 have failed to meet their burden of proving the "probable validity" of their real property claim. Cal 5 Code Civ. Proc. § 405.32. Plaintiffs have not pled a tender of their debt obligations, and judicially 6 noticeable evidence suggests that they defaulted on their loan. Further, the court is not persuaded by 7 the unsubstantiated, conclusory challenge to the authenticity of Wells Fargo's chain of title 8 documents that plaintiffs are more likely than not to prevail in showing that Wells Fargo is not the 9 proper beneficiary under the Deed of Trust. See Wolf v. Wells Fargo Bank, N.A., 2011 U.S. Dist. 10 United States District Court For the Northern District of California 2 LEXIS 114331, 6-7 (N.D. Cal. Oct. 4, 2011) ("Probable validity 'means that it is more likely than 11 not that the claimant will obtain a judgment against the defendant on the claim.' ") (citing Cal. Code 12 Civ. Proc. § 405.3). Accordingly, the court GRANTS the motion to expunge lis pendens. 13 Because Wells Fargo has prevailed on its expungement motion, it is entitled to reasonable 14 attorney's fees and costs "unless the court finds that the other party acted with substantial 15 justification or that other circumstances make the imposition of attorney's fees and costs unjust." 16 Cal. Civ. Proc. Code § 405.38. On the record before the court, plaintiffs' claim does not fall within 17 the exception provided by section 405.38. Compare Cruz v. Wachovia Mortg., 775 F. Supp. 2d 18 1188, 1191 (C.D. Cal. 2011) (attorney's fees award not justified where underlying allegations of 19 lender abuse and non-disclosure by defendant were "never . disproved" but were dismissed due to a 20 technicality). Accordingly, the court GRANTS Wells Fargo's motion for reasonable attorney's fees 21 and costs. 22 E. Motion to Strike 23 Under Fed. R. Civ. P. 12(f), a court may strike "from a pleading an insufficient defense or 24 any redundant, immaterial, impertinent, or scandalous matter." Defendants request that this order 25 strike plaintiffs' "prayer" for punitive damages on the grounds that plaintiffs have not satisfied the 26 requirements of California Civil Code section 3294. 27 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 7 1 California law permits punitive damages to be awarded only where "it is proven by clear and 2 convincing evidence that the defendant has been guilty of oppression, fraud, or malice." Cal. Civ. 3 Code § 3294(a). A corporate employer is not liable for punitive damages based on the actions of a 4 corporate employee unless a corporate official "authorized or ratified the wrongful conduct." Cal. 5 Civ. Code § 3294(b). 6 Here, the complaint contains no facts supporting a claim that defendants have been guilty of 7 oppression, fraud, or malice, let alone that any Wells Fargo official authorized or ratified such 8 conduct. Indeed, apart from the assertion that Wells Fargo recorded a Notice of Trustee’s Sale, the 9 complaint includes no factual allegations whatsoever regarding Wells Fargo’s actions. Accordingly, United States District Court For the Northern District of California 10 the court GRANTS the motion to strike plaintiffs’ claim for punitive damages. 11 12 III. ORDER 13 For the foregoing reasons the court (1) converts the motion to dismiss into a motion for 14 summary judgment; (2) GRANTS the motion to strike; (3) DENIES the motion to expunge lis 15 pendens WITHOUT PREJUDICE; and (4) DENIES the motion to remand. Plaintiffs have thirty 16 days from the date of this order to respond to the converted motion for summary judgment. During 17 that time, Wells Fargo may submit additional evidence intended to authenticate the documents 18 submitted as part of its Request for Judicial Notice. 19 20 21 22 DATED: 12/16/11 RONALD M. WHYTE United States District Judge 23 24 25 26 27 28 ORDER CONVERTING MOTION TO DISMISS INTO MOTION FOR SUMMARY JUDGMENT, GRANTING MOTION TO STRIKE, GRANTING MOTION TO EXPUNGE LIS PENDENS AND DENYING MOTION TO REMAND No. 11-cv-05172 RMW EDM 8
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