Beatriz Carbajal v. Hsbc Bank USA, N.A., et al

NOTICE OF MOTION AND MOTION to Dismiss Case First Amended Complaint

C.D. Cal.February 28, 2017

1 CASE NO.: 8:16-CV-01782-JVS-AFM NOTICE OF MOTION AND MOTION TO DISMISS COMPLAINT 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 McGLINCHEY STAFFORD Brian A. Paino (SBN 251243) Dhruv M. Sharma (SBN 279545) 18201 Von Karman Avenue, Suite 350 Irvine, California 92612 Telephone: (949) 381-5900 Facsimile: (949) 271-4040 Email: bpaino@mcglinchey.com dsharma@mcglinchey.com Attorneys for Defendants OCWEN LOAN SERVICING, LLC and HSBC BANK USA, N.A., as trustee on behalf of ACE Securities Corp. Home Equity Loan Trust and for the registered holders of ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE5, Asset Backed Pass-Through Certificates UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA - WESTERN DIVISION BEATRIZ CARBAJAL, Plaintiff, v. HSBC BANK USA, N.A., AS TRUSTEE ON BEHALF OF ACE SECURITIES CORP. HOME EQUITY LOAN TRUST AND FOR THE REGISTERED HOLDERS OF ACE SECURITIES CORP. HOME EQUITY LOAN TRUST, SERIES 2007- HE5, ASSET BACKED, PASS-THROUGH CERTIFICATES; OCWEN LOAN SERVICING, LLC, a Delaware limited liability company; ALTISOURCE SOLUTIONS, INC., a Delaware Corporation; PENNYMAC HOLDINGS, LLC, a Delaware limited liability company; and DOES 1 through 10, inclusive, Defendants. Case No.: 2:16-cv-09297-PSG-FFM Hon. District Judge Philip S. Gutierrez DEFENDANTS OCWEN LOAN SERVICING, LLC, and HSBC BANK USA, N.A., AS TRUSTEE ’S NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED COMPLAINT FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED; MEMORANDUM OF POINTS AND AUTHORITIES [Filed concurrently with Request for Judicial Notice and [Proposed] Order] Hearing: Date: April 24, 2017 Time:1:30 p.m. Ctrm: 6A Action Filed: March 22, 2016 Trial Date: NA TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on April 24, 2017, at 1:30 p.m., or as soon thereafter as the matter may be heard before the Honorable Phillip S. Gutierrez in Courtroom 6A of the U.S. District Court for the Central District of California, Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 1 of 28 Page ID #:1476 2 CASE NO.: 8:16-CV-01782-JVS-AFM NOTICE OF MOTION AND MOTION TO DISMISS COMPLAINT 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Western Division, located at 350 W. 1st Street, Los Angeles, CA 90012, defendants Ocwen Loan Servicing, LLC (“Ocwen”) and HSBC Bank USA, N.A., as trustee on behalf of ACE Securities Corp. Home Equity Loan Trust and for the registered holders of ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE5, Asset Backed Pass-Through Certificates (“HSBC,” and together with Ocwen, the “Defendants”), will, and hereby do, move the Court to dismiss this action pursuant to Federal Rule of Civil Procedure Rule 12(b)(1) and Rule 12(b)(6). As set forth more fully in the accompanying Memorandum of Points and Authorities (the “Memorandum”), this motion (the “Motion”) is made on the grounds that the First Amended Complaint (the “FAC”) of plaintiff Beatriz Carbajal (“Plaintiff”) is not ripe for adjudication, and otherwise fails to state a claim against Defendants upon which relief can be granted. This Motion is based on the attached Memorandum, the request for judicial notice filed concurrently herewith, the pleadings and papers on file herein, and upon such oral and documentary evidence as may be presented by the parties at the hearing. DATED: February 28, 2017 McGLINCHEY STAFFORD By: /s/ Dhruv M. Sharma DHRUV M. SHARMA BRIAN A. PAINO Attorneys for Defendants OCWEN LOAN SERVICING, LLC and HSBC BANK USA, N.A., as trustee on behalf of ACE Securities Corp. Home Equity Loan Trust and for the registered holders of ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE5, Asset Backed Pass-Through Certificates LOCAL CIVIL RULE 7-3 CERTIFICATION This Motion is made following multiple conferences between counsel pursuant to Local Rule 7-3. The parties were unable to reach a resolution that eliminates the need for this Motion. The Motion is directed to those substantive issues requiring resolution by the Court. Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 2 of 28 Page ID #:1477 i CASE NO.: 2:16-CV-09297-PSG-FFM TABLE OF CONTENTS 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS I. INTRODUCTION ................................................................................................ 1 II. FACTUAL BACKGROUND .............................................................................. 1 A. The Soliman Transactions .......................................................................... 1 B. The Aldana Transactions ............................................................................ 2 C. The REO Sale ............................................................................................. 3 D. The Lawsuit ................................................................................................ 5 III. LEGAL AUTHORITY ......................................................................................... 5 IV. ANALYSIS .......................................................................................................... 7 A. PLAINTIFF’S CLAIMS ARE NOT RIPE FOR ADJUDICATION ........ 7 B. PLAINTIFF FAILS TO STATE A CLAIM FOR NEGLIGENT MISREPRESENTATION .......................................................................... 8 1. The Claim is Time-barred ................................................................ 9 a. Standard of Review ............................................................... 9 b. Plaintiff’s Claim is Facially Time Barred ........................... 10 c. Delayed Discovery Rule is Inapplicable due to Plaintiff’s Admitted Actual Notice...................................... 10 d. Delayed Discovery Rule is Inapplicable Because Plaintiff is Charged with Inquiry or Constructive Notice ................................................................................... 11 2. The Exculpatory Clause ................................................................. 12 3. Plaintiff Waived Any Defects in Title to the Property .................. 12 4. Missing Elements ........................................................................... 13 a. No Misrepresentations ......................................................... 13 b. No Justifiable Reliance ........................................................ 14 c. No Damages ........................................................................ 15 C. PLAINTIFF FAILS TO STATE A CLAIM FOR BREACH OF CONTRACT ............................................................................................ 15 1. Plaintiff’s Claim is Barred by the Exculpatory Clause ................. 16 Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 3 of 28 Page ID #:1478 ii CASE NO.: 2:16-CV-09297-PSG-FFM TABLE OF CONTENTS 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. Plaintiff Waived Her Title-Based Breach of Contract Claim ........ 16 3. Plaintiff’s Claim is Time-Barred ................................................... 17 4. No Breach of Contract ................................................................... 18 5. No Damages ................................................................................... 19 V. CONCLUSION .................................................................................................. 19 Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 4 of 28 Page ID #:1479 iii CASE NO.: 2:16-CV-09297-PSG-FFM TABLE OF AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES Federal Cases Ashcroft v. Iqbal, 556 U.S. 662 (2009) .................................................................................................... 5 Balistreri v. Pacifica Police Dep’t, 901 F.2d 696 (9th Cir.1990) ........................................................................................ 6 Bell Atlantic v. Twombly, 550 U.S. 544 (2007) .......................................................................................... 5, 6, 15 Bova v. City of Medford, 564 F.3d 1093 (9th Cir. 2009) ..................................................................................... 7 Branch v. Tunnell, 14 F.3d 449 (9th Cir. 1994) ................................................................................... 6, 11 Cutler v. Rancher Energy Corp., 2014 WL 1153054 (C.D. Cal. 2014) ........................................................................... 9 Emrich v. Touche Ross & Company, 846 F.2d 1190 (9th Cir. 1988) ..................................................................................... 6 Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167 (2000) .................................................................................................... 8 Harris v. Amgen, Inc., 788 F.3d 916 (9th Cir. 2015) ....................................................................................... 6 In re Elias, 215 B.R. 600 (9th Cir. 1997) ...................................................................................... 6 Knievel v. ESPN, 393 F.3d 1068 (9th Cir. 2005) ..................................................................................... 7 Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) .................................................................................................... 6 Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580 (9th Cir. 2008) ....................................................................................... 6 Leadsinger, Inc. v BMG Music Publ’g, 512 F.3d 522 (9th Cir. 2008) ....................................................................................... 7 Love v. United States, 915 F.2d 1242 (9th Cir.1990) ...................................................................................... 6 Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992) .................................................................................................... 7 Rhoades v. Avon Products, Inc., 504 F.3d 1151 (9th Cir. 2007) ..................................................................................... 7 Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 5 of 28 Page ID #:1480 iv CASE NO.: 2:16-CV-09297-PSG-FFM TABLE OF AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 S. California Inst. of Law v. TCS Educ. Sys., 2011 WL 1296602 (C.D. Cal. 2011) ......................................................................... 13 Southern Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498 (9th Cir. 1990) ................................................................................... 7, 8 Sprewell v. Golden State Warriors, 266 F.3d 979 (9th Cir. 2001) ....................................................................................... 6 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 US 308 (2007) ...................................................................................................... 7 Texas v. United States, 523 U.S. 296 (1998) ................................................................................................ 7, 8 State Cases Alfaro v. Cmty. Hous. Imp. Sys. & Planning Ass'n, Inc., 171 Cal.App.4th 1356 (2009) ....................................................................... 11, 14, 17 Allan v. Martin, 117 Ariz. 591 (1978) ........................................................................................... 13, 18 Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal.App.4th 226 (2007) ....................................................................................... 9 Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal.App.4th 1375 (2004) ................................................................................... 15 Baker Pac. Corp. v. Suttles, 220 Cal.App.3d 1148 (1990) ..................................................................................... 12 Baker v. Beech Aircraft Corp., 96 Cal.App.3d 321 (1979) ............................................................................. 10, 11, 14 Bustamante v. Intuit, Inc., 141 Cal.App.4th 199 (2006) ..................................................................................... 16 Cmty. Cause v. Boatwright, 124 Cal.App.3d 888 (1981) ................................................................. 9, 10, 11, 14, 17 Easton v. Montgomery, 90 Cal. 307 (1891) ..................................................................................................... 13 First Commercial Mortgage Co. v. Reece, 89 Cal.App.4th 731 (2001) ................................................................................. 15, 19 Fox v. Pollack, 181 Cal.App.3d 954 (1986) ......................................................................................... 8 Krieger v. Nick Alexander Imports, Inc., 234 Cal.App.3d 205 (1991) ....................................................................................... 17 Levy v. State Farm Mut. Auto. Ins. Co., 150 Cal.App.4th 1 (2007) ......................................................................................... 15 Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 6 of 28 Page ID #:1481 v CASE NO.: 2:16-CV-09297-PSG-FFM TABLE OF AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Murphy v. Stowe Club Highlands, 761 A.2d 688 (Vt. 2000) ..................................................................................... 13, 18 Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal.3d 176 (1971)................................................................................................... 17 Niles v. Louis H. Rapoport & Sons, 53 Cal.App.2d 644 (1942) ......................................................................................... 17 Rossmoor Sanitation, Inc. v. Pylon, Inc., 13 Cal.3d 622 (1975) .......................................................................................... 12, 16 Royal Thrift and Loan Co. v. County Escrow, Inc., 123 Cal.App.4th 24 (2004) ......................................................................................... 9 Secrest v. Sec. Nat. Mortgage Loan Trust 2002-2, 167 Cal.App.4th 544 (2008) ............................................................................... 13, 18 Swanson v. Thurber, 132 Cal.App.2d 171 (1955) ................................................................................. 12, 16 Ventura Cnty. Nat. Bank v. Macker, 49 Cal.App.4th 1528 (1996) ....................................................................................... 9 Wilson v. Century 21 Great W. Realty, 15 Cal.App.4th 298 (1993) ....................................................................................... 13 Wolf v. Price, 244 Cal.App.2d 165 (1966) ........................................................................... 13, 14, 18 State Statutes Cal. Civ. Code § 1213 ............................................................................................. 11, 14 Cal. Code Civ. Proc. § 337 ........................................................................................... 17 Federal Rules Fed. R. Civ. P. 8 .............................................................................................................. 5 Fed. R. Civ. P. 12 .................................................................................................... 5, 6, 7 Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 7 of 28 Page ID #:1482 1 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION This case has its origins in a Real Estate Owned (“REO”) sale transaction and is brought by Plaintiff’s title insurance company on her behalf nearly six years after the transaction was completed. Plaintiff, the purchaser of the subject property, alleges that Defendants misrepresented, or failed to disclose, the existence of a prior, senior priority lien before completing the sale. Despite her representations to the contrary, Plaintiff specifically acknowledged the existence of the lien before the sale, and failed to raise any objections before completing the sale. She was otherwise charged with constructive notice of the publicly-recorded document. Her failure to raise objections regarding the state of title constituted a waiver under the terms of the purchase agreement, and her acknowledgement of the purported title defect in 2011 bars her from asserting her claims nearly six years later under the applicable statutes of limitations. Further, because Plaintiff was on notice of the lien, she also cannot establish that she justifiably relied on any representations in the sale agreement, which, in any event, did not misrepresent the state of title. Moreover, the governing purchase agreement included an express exculpatory clause that bars Plaintiff’s claims. Finally, Plaintiff has not established that she has yet suffered any actual damages due to the purported wrongdoing. In addition to being an essential element of her claims, her failure to demonstrate any present, actual injury also renders her claims unripe for adjudication and divests the Court of subject matter jurisdiction. As discussed in detail below, the Court should dismiss Plaintiff’s FAC. II. FACTUAL BACKGROUND A. The Soliman Transactions In May of 2004, Jennifer D. Soliman (“Soliman”) acquired the real property commonly known as 18032 Flynn Drive, Unit 5404, Canyon Country, CA 91387 (the “Property”). (See FAC, ¶ 10, Exhibit 2). To finance her acquisition of the Property, Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 8 of 28 Page ID #:1483 2 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Soliman obtained a loan from First City Funding dba Credit Corp. (“Credit Corp.”), which was secured by a deed of trust recorded against the Property on May 26, 2004. (See FAC, ¶ 11, Exhibit 3). Approximately a year later, in April of 2005, Soliman obtained a second loan from Credit Corp., which was secured by a second priority deed of trust (the “Second Credit Corp. DOT”) recorded against the Property on April 20, 2005. (See FAC, ¶ 13, Exhibit 5). Co-defendant PennyMac Holdings, LLC (“PennyMac”) is the successor beneficiary under the Second Credit Corp. DOT. (See FAC, ¶ 18, Exhibit 8). At or about the time Soliman obtained the second loan from Credit Corp., she also obtained a third loan from Credit Corp., which was secured by a third priority deed of trust (the “Third Credit Corp. DOT”) recorded against the Property on April 22, 2005. (See FAC, ¶ 19, Exhibit 9). The beneficial interest under the Third Credit Corp. DOT was assigned to Automated Finance Corporation (“Automated Finance”). (See FAC, ¶ 20, Exhibit 10). Thereafter, on January 25, 2007, Automated Finance exercised the power of sale provisions under the Third Credit Corp. DOT and sold the Property at a public auction. (See FAC, ¶ 21). Automated Finance was the successful bidder at the auction and acquired title to the Property pursuant to a Trustee’s Deed Upon Sale recorded against the Property on February 6, 2007. (See FAC, ¶ 21, Exhibit 11). B. The Aldana Transactions Shortly after its foreclosure sale, on February 5, 2007, Automated Finance transferred title to the Property to WaveSound, Inc. (“WaveSound”). (See FAC, ¶ 22, Exhibit 12). WaveSound then sold the Property to Mariana Sanchez-Aldana (“Aldana”) on February 22, 2007. (See FAC, ¶ 23, Exhibit 13). To finance her purchase of the Property, Aldana obtained a mortgage loan (the “HSBC Loan”) from Automated Finance in the original principal sum of $440,000.00, which was reflected in a promissory note secured by a deed of trust (the “HSBC /././ Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 9 of 28 Page ID #:1484 3 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DOT”) encumbering the Property. (See FAC, ¶ 24, Exhibit 14). The beneficial interest under the HSBC DOT was assigned to HSBC. (See FAC, ¶ 25, Exhibit 15). Following Aldana’s default on the HSBC Loan, in December of 2009, HSBC foreclosed on the Property and was the successful bidder at the foreclosure sale. (See FAC, ¶ 26). HSBC acquired title to the Property pursuant to a Trustee’s Deed Upon Sale recorded against the Property on December 24, 2009. (See FAC, ¶ 26, Exhibit 16). C. The REO Sale On June 7, 2011, Plaintiff entered into a Purchase and Sale Agreement (“Purchase Agreement”) with Ocwen, which acted as HSBC’s attorney-in-fact and authorized agent. (See FAC, ¶ 27, Exhibit 17). Pursuant to the Purchase Agreement, Plaintiff agreed to purchase the Property for $160,199.00. (See id.). The Purchase Agreement provided, in pertinent part: 8.1. Transfer of Title. Insurable title shall be delivered to Buyer by deed on a form acceptable to Seller at Seller’s sole and absolute discretion. The deed to be delivered by Seller at Closing shall be a deed that covenants the grantor grants only that title which grantor may have and that grantor will only defend title against persons claiming by, through, or under the grantor, but not otherwise… 8.3. Title Defects. 8.3.1 Notice of Defects. Buyer shall have five (5) days from the date of Buyer’s receipt of [a commitment or opinion issued by a title insurance company] to examine title and raise any objections which, if valid, would make title to the Property uninsurable. Buyer’s objections must be made in writing and delivered to Seller by 3:00 p.m. ET on the last day of the aforementioned five (5) day period or Buyer’s objections will be deemed waived. 8.3.2 Seller’s Response, Buyer’s Options. If Buyer raises such an objection, Seller shall have the right to extend the Closing Date…to resolve the title objection… 12.5. LIMITATION OF LIABILITY. BUYER AGREES THAT SELLER SHALL NOT BE LIABLE TO BUYER FOR ANY SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES WHATSOEVER, WHETHER IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY) OR ANY OTHER LEGAL OR EQUITABLE PRINCIPLE, OR ANY OTHER SUCH EXPENSE OR COST Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 10 of 28 Page ID #:1485 4 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ARISING FROM OR RELATED TO THIS AGREEMENT OR A BREACH OF THIS AGREEMENT. 14. INDEMNIFICATION. In consideration of the sale of the Property to Buyer, and/or in consideration of Seller paying the title examination fee, the premium for the Owner’s Policy and/or any payment contemplated by this Agreement, receipt of which is hereby acknowledged, upon the Effective Date,1 Buyer does hereby release and agrees to indemnify, hold harmless and fully protect, defend, hold and forever discharges the Seller…from and against any and all claims, costs, liens, loss, damages, attorney’s fees and expenses of every kind and nature that may be sustained by or made against Seller [] arising from or arising out of: (a) Any provision of this Agreement, its exhibits, schedules, addenda or amendments; (b) Title inspections or repairs made by Buyer or Buyer’s agents, employees, contractors, successor or assigns… 16.3. Entire Agreement. This Agreement…constitutes the entire agreement between Buyer and Seller concerning the subject matter hereof and supersedes all previous communications, understandings, representations, warranties, covenants or agreements, either written or oral and there are no oral or other written agreements between Buyer and Seller. NO ORAL PROMISES, REPRESENTATIONS (EXPRESS OR IMPLIED), WARRANTIES OR AGREEMENTS MADE BY SELLER AND/OR BROKERS OR ANY PERSON ACTING ON BEHALF OF SELLER SHALL BE DEEMED VALID OR BINDING UPON SELLER UNLESS EXPRESSLY INCLUDED IN THIS AGREEMENT. All negotiations are merged into this Agreement. Seller is not obligated by any other written or verbal statements made by Seller, Seller’s representatives, or any real estate licensee. (See FAC, Exhibit 17). In accordance with the terms of the Purchase Agreement, HSBC conveyed title to the Property to Plaintiff pursuant to a grant deed, which was recorded against the Property on July 18, 2011 (the “Sale”). (See FAC, ¶ 32, Exhibit 19). Following Plaintiff’s acquisition of the Property, on March 28, 2014, PennyMac caused a Notice of Default and Election to Sell Under Deed of Trust (the “Notice of Default”) to be 1 The Effective Date of the Purchase Agreement was June 4, 2011, which is the date it was signed by Ocwen. (See Purchase Agreement, ¶ 16.20). Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 11 of 28 Page ID #:1486 5 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 recorded against the Property. (See FAC, ¶ 33, Exhibit 20). The Notice of Default is based on Soliman’s default under the Second Credit Corp. DOT. (See id.) D. The Lawsuit On March 22, 2016, Plaintiff commenced this action by filing a complaint (the “Complaint”) against HSBC, Ocwen and Altisource. In December of 2016, after Plaintiff identified the correct Altisource entity, the parties stipulated to dismiss Altisource and add Altisource Solutions, Inc. (“ASI”). Upon being served with the Complaint, ASI removed the case to this Court. Following the removal, the parties met and conferred regarding the claims in the Complaint and stipulated to permit Plaintiff to file the FAC, which also named PennyMac as a new defendant. The FAC alleges four claims, of which only two are asserted against HSBC and Ocwen. III. LEGAL AUTHORITY Pursuant to Federal Rule of Civil Procedure 8, a complaint “must contain a short and plain statement of the claim showing that the pleader is entitled to relief…” Fed. R. Civ. P. 8(a)(2). While the Federal Rules adopt a flexible pleading policy, every complaint must, at a minimum, “give the defendant fair notice of what the…claim is and the grounds upon which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). Although a complaint does not need detailed factual allegations, “a plaintiff’s obligation to provide the ‘grounds’ for his ‘entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citation omitted). Indeed, a complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 570). Rule 12(b)(1) of the Federal Rules of Civil Procedure authorizes a party to challenge the extent of a federal court’s subject-matter jurisdiction by motion. See Fed. R. Civ. P. 12(b)(1). Subsection (h) of Rule 12 further provides that, “[i]f the court determines at any time that it lacks subject matter jurisdiction, the court must dismiss Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 12 of 28 Page ID #:1487 6 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the action.” Fed. R. Civ. P. 12(h)(3) (emphasis added). The burden of establishing jurisdiction ultimately rests upon the party asserting jurisdiction. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994); see also In re Elias, 215 B.R. 600, 604 (9th Cir. 1997). Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” See Fed. R. Civ. P. 12(b)(6). A complaint may be dismissed as a matter of law for failure to state a claim for two reasons: (1) lack of a cognizable legal theory; or (2) insufficient facts under a cognizable legal theory. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.1990). In determining whether the complaint states a claim on which relief may be granted, its allegations of material fact must be taken as true and construed in the light most favorable to plaintiffs. See Love v. United States, 915 F.2d 1242, 1245 (9th Cir.1990); see also Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 588 (9th Cir.2008). If the factual allegations in a complaint do not raise the “right to relief above the speculative level,” the complaint may be dismissed for failure to state a claim under Rule 12(b)(6). See Twombly, 550 U.S. at 555. The court may properly look beyond the complaint only to items in the record of the case or to matters of general public record. See Emrich v. Touche Ross & Company, 846 F.2d 1190, 1198 (9th Cir. 1988). It may disregard allegations in the complaint if contradicted by facts established by reference to documents attached as exhibits to the complaint. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Documents attached to the complaint and incorporated therein by reference are treated as part of the complaint when ruling on a Rule 12(b)(6) motion. See Harris v. Amgen, Inc., 788 F.3d 916, 934 (9th Cir. 2015). To the extent necessary, a defendant may attach to a Rule 12(b)(6) motion the documents referred to in the complaint but not attached to show that they do not support plaintiff's claim. See Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) (overruled on other grounds by Galbraith v. County of Santa Clara 307 F.3d 1119, 1127(9th Cir. 2002)); see also Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 13 of 28 Page ID #:1488 7 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 US 308, 322, (2007) (court ruling on motion to dismiss must consider entire complaint and other sources incorporated by reference as well as judicially noticeable matters). This “incorporation by reference” doctrine allows the court to look beyond the pleadings without converting the 12(b)(6) motion into a motion for summary judgment. See Knievel v. ESPN, 393 F.3d 1068, 1076-1077 (9th Cir. 2005). Finally, where amendment would unduly prejudice the opposing party, cause undue delay, or be futile, or if the moving party has acted in bad faith, leave to amend should be denied. See Leadsinger, Inc. v BMG Music Publ’g, 512 F.3d 522, 532 (9th Cir. 2008). IV. ANALYSIS A. PLAINTIFF’S CLAIMS ARE NOT RIPE FOR ADJUDICATION As an initial matter, Plaintiff is precluded from raising her claims against Defendants because the FAC has not established that they are ripe for adjudication. Article III of the Constitution limits the jurisdiction of federal courts to consideration of actual cases and controversies, and federal courts are not permitted to render advisory opinions. See Rhoades v. Avon Products, Inc. 504 F.3d 1151, 1157 (9th Cir. 2007). “Ripeness is more than a mere procedural question; it is determinative of jurisdiction. If a claim is unripe, federal courts lack subject matter jurisdiction and the complaint must be dismissed.” Southern Pac. Transp. Co. v. City of Los Angeles, 922 F.2d 498, 502 (9th Cir. 1990). “A claim is not ripe for adjudication if it rests upon contingent future events that may not occur as anticipated, or indeed may not occur at all.” Texas v. United States, 523 U.S. 296, 300 (1998). That is so because, if the contingent events do not occur, the plaintiff likely will not have suffered an injury that is concrete and particularized enough to establish the first element of standing. See Bova v. City of Medford, 564 F.3d 1093, 1096 (9th Cir. 2009) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992)). /././ Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 14 of 28 Page ID #:1489 8 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiff’s claims are not ripe for adjudication because she has not yet suffered a concrete and particularized injury. More specifically, she has not yet lost the Property to foreclosure and remains the record owner. The FAC does not otherwise establish that she has suffered any actual damages. It instead relies on conjecture to seek speculative damages “in the amount necessary to pay off or otherwise satisfy the loans secured by the [Second Credit Corp. DOT].” (See FAC, Prayer for Relief, ¶ 5). Notwithstanding this contention, Plaintiff makes the inconsistent allegation that the Second Credit Corp. DOT is unenforceable. (See FAC, ¶ 36-37, 44-46). Regardless, even if the instrument is deemed enforceable, none of the allegations in the FAC establish that Plaintiff has actually paid any moneys to PennyMac. At best, Plaintiff’s purported harm is contingent on a future event (i.e., the determination that the Second Credit Corp. DOT is valid, PennyMac actually foreclosing on the Property, and/or Plaintiff satisfying PennyMac’s purported lien). For this reason, her claims against Defendants fail for lack of ripeness. See Texas v. United States, 523 U.S. 296, 300 (1998); see also Southern Pac. Transp. Co., 922 F.2d at 502.2 B. PLAINTIFF FAILS TO STATE A CLAIM FOR NEGLIGENT MISREPRESENTATION Assuming Plaintiff’s claims were ripe for adjudication, they otherwise fail as a matter of fact and law. Under California law, the elements of a claim for negligent misrepresentation are: (1) a misrepresentation of a past or existing material fact; (2) without reasonable grounds for believing it to be true; (3) with intent to induce another’s reliance on the fact misrepresented; (4) ignorance of the truth and justifiable reliance thereon by the party to whom the misrepresentation was directed; and (5) damages. See Fox v. Pollack, 181 Cal.App.3d 954, 962 (1986). “Negligent misrepresentation requires a positive assertion to show a misrepresentation of a 2 Notably, Plaintiff is required to demonstrate her standing separately for each form of relief she seeks. See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 185 (2000). Since Plaintiff seeks only monetary relief from Defendants, there is no need for Defendants to analyze Plaintiff’s standing to seek injunctive or declaratory relief. Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 15 of 28 Page ID #:1490 9 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 material fact; an omission or an implied assertion will not suffice.” Cutler v. Rancher Energy Corp., 2014 WL 1153054, at *7 (C.D. Cal. 2014) (citing Apollo Capital Fund, LLC v. Roth Capital Partners, LLC, 158 Cal.App.4th 226, 243 (2007)). The statute of limitations for a claim of negligent misrepresentation is two years. See Ventura Cnty. Nat. Bank v. Macker, 49 Cal.App.4th 1528, 1531 (1996). Pursuant to the Complaint, Plaintiff alleges that Defendants are liable for the tort of negligent misrepresentation due to either: (i) their failure to disclose the existence of the Second Credit Corp. DOT; or (ii) their purported representation in written escrow instructions dated June 13, 2011 (the “Escrow Instructions”) that the Property would be sold free from encumbrances except the deed of trust securing Plaintiff’s purchase money loan. By virtue of this purported omission and/or misrepresentation, Plaintiff has allegedly suffered damages in an amount of no less than $25,000. For the reasons discussed below, Plaintiff cannot state a viable claim for negligent misrepresentation. 1. The Claim is Time-barred a. Standard of Review One of the most fundamental defects with Plaintiff’s claim is that it is time- barred. As noted above, the statute of limitations for a claim for negligent misrepresentation is two years. The general rule is that a statute of limitations is triggered on the date of the injury and a plaintiff’s ignorance of the injury does not toll the statute. See Royal Thrift and Loan Co. v. County Escrow, Inc., 123 Cal.App.4th 24, 43 (2004) (citation omitted). Admittedly, the fraudulent concealment by the defendant of a cause of action tolls the relevant statute of limitations, which does not begin to run until the aggrieved party discovers the existence of the cause of action. See Cmty. Cause v. Boatwright, 124 Cal.App.3d 888, 899 (1981). When a plaintiff alleges “delayed discovery” due to fraudulent concealment, the same pleading and proof is required as in fraud cases: the plaintiff must show (1) the substantive elements of fraud, and (2) an excuse for late discovery of the facts. See id. at 900. However, Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 16 of 28 Page ID #:1491 10 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 when a plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to his investigation (such as public records or corporation books), the statute applicable to the cause of action commences to run. See id. at 902; see also Baker v. Beech Aircraft Corp., 96 Cal.App.3d 321, 327-328 (1979). b. Plaintiff’s Claim is Facially Time Barred Applying the foregoing principles to this case, there can be no dispute that Plaintiff’s claim is time-barred. Indeed, Plaintiff admits that she entered into the Purchase Agreement in June of 2011. (See FAC, ¶ 27). Since the Second Credit Corp. DOT was in existence at the time Plaintiff entered the Purchase Agreement, her purported injury is fairly traceable to the original purchase transaction, which closed on July 18, 2011. (See FAC, ¶ 32). Because the transaction was indisputably completed more than two years before she commenced this action, Plaintiff’s claim is time-barred. c. Delayed Discovery Rule is Inapplicable due to Plaintiff’s Admitted Actual Notice To the extent that Plaintiff relies on the delayed discovery rule, her assertion has no merit. While she alleges that she “did not discover, and could not reasonably have discovered, [Defendants]’ false representations, or that any lien represented by the [Second Credit Corp. DOT], encumbered or potentially encumbered the [Property] until April 16, 2014, when she received [the NOD],” her allegation is contradicted by her own judicially-noticeable admissions. (See FAC, ¶ 55). More specifically, on June 16, 2011, Plaintiff executed a document entitled “Receipt of Preliminary Title Report,” acknowledging receipt of the May 20, 2011, preliminary title report (the “May 2011 Title Report”) issued by Premium Title of California, Inc. (“Premium Title”).3 Plaintiff admits that the May 2011 Title Report explicitly disclosed the 3 A true and correct copy of the complete May 2011 Title Report is attached to Defendants’ Request for Judicial Notice (“RJN”) as Exhibit 1. This document is judicially-noticeable because Plaintiff included an incomplete copy of the document Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 17 of 28 Page ID #:1492 11 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 existence of the Second Credit Corp. DOT and identified it as an exception to title coverage. (See FAC, ¶ 49(e); Exhibit 24; see also RJN, Exhibit 1). Thus, Plaintiff indisputably had actual notice of the existence of the Second Credit Corp. DOT, and of its deleterious impact on title to the Property, as of June 16, 2011.4 See also Alfaro v. Cmty. Hous. Imp. Sys. & Planning Ass'n, Inc., 171 Cal.App.4th 1356, 1389-90 (2009) (recognizing that a purchaser is presumed to have actual notice of encumbrances disclosed on preliminary title report). d. Delayed Discovery Rule is Inapplicable Because Plaintiff is Charged with Inquiry or Constructive Notice Further, the fact that the Second Credit Corp. DOT was a publically recorded document prevents Plaintiff from establishing that she could not have reasonably discovered the document before completing her purchase of the Property in July of 2011. See Cmty. Cause, 124 Cal.App.3d at 902 (“When a plaintiff has notice or information of circumstances to put a reasonable person on inquiry, or has the opportunity to obtain knowledge from sources open to his investigation (such as public records or corporation books), the statute applicable to the cause of action commences to run.”); see also Baker, 96 Cal.App.3d at 327-328; Alfaro, 171 Cal.App.4th at 1389-90; Cal. Civil Code § 1213 (“Every conveyance of real property or an estate for years therein acknowledged or proved and certified and recorded as prescribed by law from the time it is filed with the recorder for record is constructive notice of the contents thereof to subsequent purchasers and mortgagees.”). In sum, Plaintiff’s claim was not brought within the statutory period and there are no grounds for tolling the period. The Court should dismiss this claim on these grounds alone. as an exhibit to the FAC and its contentions are not reasonably disputed. (See RJN, Exhibit 1; cf. FAC, Exhibit 24); see also Branch v. Tunnell, 14 F.3d at 454. 4 Notably, Plaintiff acknowledged her receipt of the May 2011 Title Report after the effective date of both the Purchase Agreement and the Escrow Instructions. While Plaintiff complains that she was presented with a subsequent report that omitted the Second Credit Corp. DOT, that document post-dated the Purchase Agreement. As a consequence, Plaintiff’s contention that Defendants’ misrepresentation induced her to enter into the Purchase Agreement is implausible. Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 18 of 28 Page ID #:1493 12 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. The Exculpatory Clause Even if Plaintiff’s claim was not time-barred, it is nevertheless barred by the Purchase Agreement itself. This is because the Purchase Agreement contained an exculpatory clause in favor of Defendants. As a general rule, a release, indemnity, or other exculpatory provision is binding on the parties and enforceable as long as it is clear, explicit, and comprehensible in the essential details. See Rossmoor Sanitation, Inc. v. Pylon, Inc., 13 Cal.3d 622, 628 (1975); see also Baker Pac. Corp. v. Suttles, 220 Cal.App.3d 1148, 1153 (1990); 1 Cal. Real Est. § 1:172 (4th ed.). The exculpatory clause in the Purchase Agreement satisfies these criteria. Indeed, the language in the Purchase Agreement clearly provides that Plaintiff released all claims against Defendants, including claims based on title. (See FAC, Exhibit 17, ¶ 14). Moreover, Plaintiff agreed that Defendants would not be liable for any tort-based claims arising from the Purchase Agreement. (See FAC, Exhibit 17, ¶ 12.5). By virtue of these exculpatory provisions, Plaintiff is precluded from bringing her claim against Defendants. 3. Plaintiff Waived Any Defects in Title to the Property Moreover, Plaintiff waived any defects in the state of title to the Property. Indeed, the Purchase Agreement specifically required Plaintiff to obtain a title insurance commitment or opinion, and to notify Defendants of any objection to the state of title within five days of receiving such insurance commitment or opinion. (See FAC, Exhibit 17, ¶ 8.3.1). The purpose of this provision was to give the Defendants the opportunity to address the title defect. (See FAC, Exhibit 17, ¶ 8.3.2). Importantly, the Purchase Agreement specifically provided that any objections to title not raised in the manner described would render such objections waived. (See FAC, Exhibit 17, ¶ 8.3.1). This requirement to disclose is consistent with California law. See Swanson v. Thurber, 132 Cal.App.2d 171, 181 (1955)(“It is the part of common sense and fair dealing that a buyer should announce any objection he may have to the state of the title, and he has a duty to do so if the contract gives the seller the right to perfect it Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 19 of 28 Page ID #:1494 13 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 within a given time, or a reasonable time.”); see also Easton v. Montgomery, 90 Cal. 307, 312-313 (1891); 1 Cal. Real Est. § 2:17 (4th ed.). The FAC does not establish that Plaintiff raised any objections concerning the state of title to the Property before completing the sale transaction. Accordingly, under the terms of the Purchase Agreement and as a matter of law, Plaintiff waived any claims based on a defect in title to the Property. 4. Missing Elements a. No Misrepresentations Assuming arguendo that Plaintiff could overcome the foregoing deficiencies, her claim is substantively defective. It is well-established in California that an omission of fact does not give rise to a negligent misrepresentation claim as a matter of law. See S. California Inst. of Law v. TCS Educ. Sys., No. CV 10-8026 PSG AJWX, 2011 WL 1296602, at *6 (C.D. Cal. 2011) (citing Wilson v. Century 21 Great W. Realty, 15 Cal.App.4th 298, 306 (1993)). Thus, to the extent that Plaintiff’s claim is based on Defendants’ failure to disclose the existence of the Second Credit Corp. DOT, it is improper. Further, to the extent that Plaintiff’s claim relies on the representations made in the Escrow Instructions, such reliance is improper. As an initial matter, the Escrow Instructions do not satisfy the statute of frauds. This is because the Escrow Instructions were not subscribed to by the party to be charged or by the party’s agent. (See FAC, Exhibit 18); see also Secrest v. Sec. Nat. Mortgage Loan Trust 2002-2, 167 Cal.App.4th 544, 552 (2008).5 Even if they did, any representations therein were overridden by the Purchase Agreement, which was the sole and entire agreement between the parties regarding the sale of the Property. (See FAC, Exhibit 17, ¶ 16.3). 5 It is also generally understood that escrow instructions are not considered to be part of the underlying real estate sales contract and the terms of the instructions cannot alter or modify the sales contract. See e.g., Murphy v. Stowe Club Highlands, 761 A.2d 688, 694 (Vt. 2000); Allan v. Martin, 117 Ariz. 591, 592 (1978); see also Wolf v. Price, 244 Cal.App.2d 165, 171 (1966) (noting that escrow instructions do not supplant the actual agreement of sale). Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 20 of 28 Page ID #:1495 14 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Purchase Agreement explicitly provided that “the grantor grants only that title which grantor may have.” (See FAC, Exhibit 17, ¶ 8.1). In other words, HSBC agreed to convey only that title which it held in the Property. Because the Purchase Agreement comprised the entire agreement between Plaintiff and Defendants, and because Plaintiff expressly agreed that there were “no oral or other written agreements,” the Court may only properly look to the Purchase Agreement to determine what representations were made to Plaintiff regarding title to the Property. (See id.) It follows that Defendants did not make any affirmative misrepresentations to Plaintiff regarding title to the Property. b. No Justifiable Reliance Plaintiff cannot otherwise establish that she justifiably relied on the statements made in the Escrow Instructions. On the contrary, Plaintiff was on actual notice of the existence of the Second Credit Corp. DOT and of its impact on title to the Property, a fact that she acknowledged after the Escrow Instructions were issued. (See RJN, Exhibit 1). Even if she had not acknowledged having actual notice, she was charged with constructive notice of the Second Credit Corp. DOT as of the closing of the sale transaction. See Cmty. Cause, 124 Cal.App.3d at 902; see also Baker, 96 Cal.App.3d at 327-328; Alfaro, 171 Cal.App.4th at 1389-90; Cal. Civil Code § 1213. Moreover, by contract, Plaintiff assumed the risk of any defects in the state of title to the Property. Indeed, she was advised to examine title and raise any objections within five days of the effective date of the Purchase Agreement. (See FAC, Exhibit 17, ¶ 8.3.1). It is otherwise standard practice for a buyer to verify that title is clear at the time of the sale by obtaining a title insurance policy, which insures the title effective on the date the deed of sale is recorded, thereby requiring that the policy be physically issued on a date after the date the escrow closes. See 1 Cal. Real Est. § 2:17 (4th ed.), § 2:17. Consistent with this practice, Plaintiff was explicitly encouraged to obtain a title insurance policy. (See FAC, Exhibit 17, ¶ 8.2.1). In short, it was not reasonable or justifiable for Plaintiff to rely on the Escrow Instructions to determine Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 21 of 28 Page ID #:1496 15 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the state of title to the Property since they necessarily did not make any representations regarding title. Rather, she would only be justified in relying on a title insurance policy, or some other representation by a title insurer, before the sale closed in July of 2011. Reasonable due diligence and, in fact, the Purchase Agreement itself, required Plaintiff to review the public record before closing the sale. Absent demonstrating such diligence, not only has Plaintiff waived any defects in title, but she cannot establish that her reliance on the Escrow Instructions was justifiable. c. No Damages In addition to the misrepresentation and reliance elements of her claim, Plaintiff also fails to establish the damage element of the claim. She summarily contends that Defendants’ conduct entitles her to compensatory damages “in the amount necessary to pay off or otherwise satisfy the loans secured by the [Second Credit Corp. DOT].” (See FAC, Prayer for Relief, ¶ 5). What Plaintiff does not allege is that PennyMac has actually foreclosed its lien or that she actually expended any moneys to pay off PennyMac’s lien. Because Plaintiff has failed to allege facts demonstrating that she actually incurred the damages referenced in the FAC, she has not properly pled the damage element of her claim. See Twombly, 550 U.S. at 555. C. PLAINTIFF FAILS TO STATE A CLAIM FOR BREACH OF CONTRACT Plaintiff’s claim for breach of contract suffers from similar deficiencies. Under California law, the elements of a claim for breach of contract are: (1) the existence of a contract; (2) performance by the plaintiff or excuse for nonperformance; (3) breach by the defendant; and (4) damages. See First Commercial Mortgage Co. v. Reece, 89 Cal.App.4th 731, 745 (2001). “Facts alleging a breach, like all essential elements of a breach of contract cause of action, must be pleaded with specificity.” Levy v. State Farm Mut. Auto. Ins. Co., 150 Cal.App.4th 1, 5 (2007). Absent a valid and enforceable contract, a plaintiff’s cause of action for breach of contract fails. See Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal.App.4th 1375, Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 22 of 28 Page ID #:1497 16 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1391, n. 6 (2004); see also Bustamante v. Intuit, Inc., 141 Cal.App.4th 199, 209 (2006). In the FAC, Plaintiff alleges that Defendants breached the Purchase Agreement and/or the Escrow Instructions by selling the Property encumbered by the Second Credit Corp. DOT. (See FAC, ¶¶ 58-59). Her assertion lacks merit, as discussed below. 1. Plaintiff’s Claim is Barred by the Exculpatory Clause Like her claim for negligent misrepresentation, Plaintiff’s claim for breach of contract is also barred by the exculpatory provisions of the Purchase Agreement. As discussed above, the Purchase Agreement clearly provides that Plaintiff released all claims against Defendants, including claims based on title. (See FAC, Exhibit 17, ¶ 14). This provision is clear, explicit, and comprehensible in the essential details, and therefore enforceable. See Rossmoor Sanitation, 13 Cal.3d at 628. Accordingly, Plaintiff’s breach of contract claim is precluded by the Purchase Agreement and should be dismissed on these grounds alone. 2. Plaintiff Waived Her Title-Based Breach of Contract Claim Moreover, Plaintiff specifically waived any claim based on title defects by failing to give Defendants notice of the defect before completing the Sale transaction, as required by the provisions of the Purchase Agreement. (See FAC, Exhibit 17, ¶ 8.3.1). As discussed previously, the Purchase Agreement required that Plaintiff raise any objections based on title with Defendants prior to completing the Sale, so as to allow Defendants the opportunity to cure any defects. (See FAC, Exhibit 17, ¶¶ 8.3.1, 8.3.2). The FAC does not establish that Plaintiff raised any such objections. By failing to do so, she waived any claims against Defendants based on defective title, including her claim for breach of contract. (See FAC, Exhibit 17, ¶ 8.3.1). Her claim is therefore precluded by the Purchase Agreement itself, and, as a matter of law. See Swanson, 132 Cal.App.2d at 181 (“It is the part of common sense and fair dealing that a buyer should announce any objection he may have to the state of the title, and he has a duty Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 23 of 28 Page ID #:1498 17 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 to do so if the contract gives the seller the right to perfect it within a given time, or a reasonable time.”). 3. Plaintiff’s Claim is Time-Barred Further, like her claim for negligent misrepresentation, Plaintiff’s breach of contract claim is barred by the applicable statute of limitations. In California, a claim for breach of contract based on a written agreement must be brought within four years of the alleged non-performance. See Cal. Civ. Proc. Code § 337; see also Krieger v. Nick Alexander Imports, Inc., 234 Cal.App.3d 205, 220-21 (1991). A cause of action for breach of contract accrues at the time of the breach, and the statute of limitations begins to run at that time regardless of whether any damage is apparent or whether the injured party is aware of his right to sue. See Niles v. Louis H. Rapoport & Sons, 53 Cal.App.2d 644, 651 (1942); Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal.3d 176, 187 (1971) ( “The plaintiff’s ignorance of the cause of action ... does not toll the statute.”). Plaintiff alleges that Defendants breached the Purchase Agreement when they sold her the Property encumbered by the Second Credit Corp. DOT. As stated above, the Sale was completed on or about July 18, 2011. (See FAC, ¶ 32). Thus, Plaintiff was required to bring her claim within four years of this date. See Cal. Civ. Proc. Code § 337. Because Plaintiff failed to do so, her claim is time-barred. Moreover, as discussed above, the delayed discovery rule is inapplicable to the circumstances of this case because: (i) Plaintiff admitted to having actual notice of the existence of the Second Credit Corp. DOT by acknowledging receipt of the May 2011 Title Report on June 16, 2011, (see RJN, Exhibit 1; see also Alfaro, 171 Cal.App.4th at 1389-90); and (ii) Plaintiff was otherwise on constructive notice of the existence of the Second Credit Corp. DOT at the time of the Sale. See Cmty. Cause, 124 Cal.App.3d at 902. Accordingly, Plaintiff’s claim is barred by the statute of limitations. /././ Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 24 of 28 Page ID #:1499 18 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 4. No Breach of Contract Turning to the elements of her claim, Plaintiff fails to establish that Defendants breached any contract. In the FAC, she alleges that the Purchase Agreement and the Escrow Instructions together constituted the applicable contract. (See FAC, ¶ 58). However, the Purchase Agreement is clear in its terms that it constitutes the entire agreement between the parties. (See FAC, Exhibit 17, ¶ 16.3). The Purchase Agreement explicitly states that “there are no oral or other written agreements” between Plaintiff and Defendants, and that Defendants are “not obligated by any other written or verbal statements made by [them], [their] representatives, or any real estate licensee.” (See id.) The terms of the Purchase Agreement thus indicate that it was not the parties’ intention to include any further terms or representations in the purchase contract, such as the Escrow Instructions. Relatedly, the Escrow Instructions do not satisfy the statute of frauds, as they were not subscribed to by the party to be charged or by the party’s agent. (See FAC, Exhibit 18); see also Secrest, 167 Cal.App.4th at 552. Regardless, it is well settled that escrow instructions do not serve to supplement a real estate purchase agreement. See Murphy, 761 A.2d at 694; Allan, 117 Ariz. at 592; Wolf, 244 Cal.App.2d at 171. Having established that the Escrow Instructions were not a part of the purchase contract, the analysis turns on the terms of the Purchase Agreement. Notably, the Purchase Agreement covenanted that Defendants would grant to Plaintiff “only that title which grantor may have.” (See FAC, Exhibit 17, ¶ 8.1). It is clear that, at the time of the Sale, Defendants’ title to the Property was subject to the Second Credit Corp. DOT. Thus, pursuant to the terms of the Purchase Agreement, Defendants’ transfer of encumbered title was not a breach of the Purchase Agreement. Accordingly, Plaintiff has not established that Defendants breached any contract that they entered into with her. /././ /././ Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 25 of 28 Page ID #:1500 19 CASE NO.: 2:16-CV-09297-PSG-FFM MEMORANDUM OF POINTS AND AUTHORITIES 843603.1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5. No Damages Further, as previously discussed, Plaintiff also fails to sufficiently establish that she has suffered damages as a result of the purported breach. Her summary contention that she has suffered damages “in the amount necessary to pay off or otherwise satisfy the loan secured by the [Second Credit Corp. DOT]” is conclusory and speculative. (See FAC, ¶ 60). This is because the FAC does not allege that PennyMac has foreclosed on the Property or that Plaintiff has actually expended funds to pay off the Second Credit Corp. DOT. Because Plaintiff has failed to allege facts demonstrating that she actually incurred the damages referenced in the FAC, she has not properly pled the damage element of her claim. See First Commercial Mortgage Co., 89 Cal.App.4th at 745. Based upon the foregoing, the Court should dismiss her breach of contract claim. V. CONCLUSION For the reasons set forth herein, Plaintiff’s FAC should be dismissed. As amendment would be futile, the dismissal should be without leave to amend. DATED: February 28, 2017 McGLINCHEY STAFFORD By: /s/ Dhruv M. Sharma DHRUV M. SHARMA BRIAN A. PAINO Attorneys for Defendants OCWEN LOAN SERVICING, LLC and HSBC BANK USA, N.A., as trustee on behalf of ACE Securities Corp. Home Equity Loan Trust and for the registered holders of ACE Securities Corp. Home Equity Loan Trust, Series 2007-HE5, Asset Backed Pass-Through Certificates Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 26 of 28 Page ID #:1501 2 3 4 5 6 7 8 9 10 1 I 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE STATE OF CALIFORNIA COUNTY OF ORANGE l ss. I, Carol Rico, declare: I am employed in the County of Orangel State of California. I am over the age of 18 and not a party to the within action. My ousiness address is 18201 Von Karman Ave., Suite 350, lrvme, California 92612. On February 28, 2017, I served the document(s) described as: 1) DEFENDANTS OCWEN LOAN SERVICING, LLC, and HSBC BANK USA, N.A., AS TRUSTEE 'S NOTICE OF MOTION AND MOTION TO DISMISS FIRST AMENDED COMPLAINT FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED; MEMORANDUM OF POINTS AND AUTHORITIES; 2) REQUEST FOR JUDICIAL NOTICE IN SUPPORT OF DEFENDANTS' MOTION TO DISMISS FIRST AMENDED COMPLAINT FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED; and 3) rPRO. POSED) ORDER GRANTING DEFENDANTS' MOTION TO J)ISMlSS PLAINTfFF'S FIRST AMENDED COMPLAINT as follows: D BY MAIL: As follows: n FEDERAL - I deposited such envelope in the U.S. mail at Irvine, california, with postage thereon fu lly prepaid, BY CMIECF NOTICE OF ELECTRONIC FILING: I caused said document(s) to be served by means of this Court's Electronic transmission of the Notice of Electronic Filing through the Court's transmission facilities, to the parties and/or counsel who are registered CMIECF users set forth in the service list obtained from this Court. Pursuant to Electronic Filing Court Order, I hereby certify that the above documents(s) was uploaded to the website and will be posted on the website by the close of the next business day and the webmaster will give e-mail notification to all parties. FEDERAL: I declare that I am employed in the office of a member of the State Bar of this Court at whose direction the service was made. Executed on February 28, 2017, at Irvine, California. ~ _, A-~------~> GrOIRico 813090 .1 Case 2:16-cv-09297-PSG-FFM Document 31 Filed 02/28/17 Page 27 of 28 Page ID #:1502 2 3 4 5 6 7 8 9 10 II 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SERVICE LIST USDC, Central District Case No. 2:16-cv-09297-PSG-FFM BEATRIZ CARBAJAL v. HSBC BANK USA, N.A., et al. File# 104938.1893 Daniel R. Salas, Esg. Bobby B. Ashrafi, Esq. BOSS LAW FIRM, APLC 409 Camino Del Rio South, Suite 201 San Diego, CA 92108 Babak Lalezari , Esq. REDEFINE LAW FIRM, INC. 4311 Wilshire Blvd. , Suite 205 Los Angeles, CA 90010 Cheryl S. Chang, Esq. Andrea L. Voelker, Esq. BLANK ROME LLP 2029 Century Park East, 6th Floor Los Angeles, CA 90067 813090. 1 Attorneys for Plaintiff, BEA TRIZ CARBAJAL Tel. : {619) 234-1776 Fax: 858) 444-3817 Emai : bashrafi@bosslawfinn.com Attorney for Defendant, AL TISOURCE HOLDINGS, LLC Tel.: {31~ 571-5297 Fax: 310 684-5793 Emai : B alezari@redefinelawfirm.com Attorneys for Third Party, PENNYMAC HOLDINGS, LLC Tel.: {424) 239-3400 Fax: 424) 239-3434 Emai : Chang@BlankRome.com A Voell