(PS) Avila v. NewRez LLC

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8 UNITED STATES DISTRICT COURT

9 FOR THE EASTERN DISTRICT OF CALIFORNIA

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11 DAVID AVILA, et al., Case No. 2:24-cv-02264-TLN-CSK

12 Plaintiffs, ORDER DENYING REQUEST FOR E-

FILING ACCESS, AND FINDINGS AND

13 v. RECOMMENDATIONS GRANTING

DEFENDENTS’ MOTION TO DISMISS

14 NEWREZ, LLC D/B/A SHELLPOINT

MORTGAGE SERVICING, et al.,

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Defendants.

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(ECF Nos. 17, 21)

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18 Plaintiffs David Avila and John Hayne are proceeding in this action pro se. (ECF

19 No. 1.)1 Pending before the Court is Defendants Newrez LLC d/b/a Shellpoint Mortgage

20 Servicing (“Shellpoint”) and JP Morgan Mortgage Acquisition Corporation’s (“Chase”)

21 motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), which is fully

22 briefed. (ECF Nos. 17, 22, 27.) For the reasons stated below, the Court recommends

23 GRANTING Defendants’ motion to dismiss and recommends sua sponte dismissal of the

24 action for lack of federal jurisdiction. Plaintiff Avila’s motion for e-filing access (ECF No.

25 21) is DENIED.

26 / / /

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1 This matter was referred to the undersigned pursuant to Local Rule 302(c)(21) and

28 28 U.S.C. § 636(b)(1).

1 I. BACKGROUND

2 A. Factual Background2

3 Plaintiffs initiated this action to challenge a mortgage foreclosure of real property

4 located at 8651 Crane Road, Oakdale, California (“Subject Property”). Compl. (ECF No.

5 1). Plaintiffs allege diversity and federal question as basis for federal court jurisdiction.

6 Id. at 3-4. Plaintiffs allege that despite making timely regular mortgage payments and

7 having valid homeowners’ insurance, Defendants rejected Plaintiffs’ mortgage payment

8 “alluding” the Subject Property did not have homeowners’ insurance. Id. at 2. Plaintiffs

9 allege they always had private homeowners’ insurance coverage and sent proof and

10 documentation of that coverage to Defendants. Id. Plaintiffs further allege Defendants

11 “unlawfully and erroneously insisted Plaintiffs pay a second insurance.” Id. In addition,

12 Plaintiffs allege “Defendants are not qualified to receive any payments” because “new

13 evidence suggests based on a defective Assignment of Deed of Trust that this

14 assignment failed to include both the note and deed of trust.” Id. at 2-3. Plaintiffs seek to

15 “void all subsequent documents and actions taken by Defendants, including Substitution

16 of Trustee and foreclosure sale due to the invalid and fatally defective assignment.” Id. at

17 3. Plaintiffs also seek “injunctive and declaratory relief to stop the unlawful actions to

18 foreclose.” Id.

19 B. Procedural Background

20 On August 21, 2024, Plaintiffs filed their Complaint alleging the following ten

21 claims: (1) violation of the Fair Debt Collection Practices Act; (2) trespass; (3) breach of

22 contract; (4) common law fraud; (5) statutory fraud and misrepresentation; (6) breach of

23 fiduciary duty; (7) promissory estoppel; (8) action to quiet title; (9) action to quiet title;3

24 and (10) unfair business practices in violation of California Business & Professions Code

25 2 These facts derive from the Complaint (ECF No. 1), which are construed in the light

26 most favorable to Plaintiffs as the non-moving party. Faulkner v. ADT Sec. Servs., 706

F.3d 1017, 1019 (9th Cir. 2013). However, the Court does not assume the truth of any

27 conclusory factual allegations or legal conclusions. Paulsen v. CNF Inc., 559 F.3d 1061,

1071 (9th Cir. 2009).

28 3 The Complaint alleges two quiet title claims. Compl. at 34-38.

1 § 17200. Id. at 19-39.

2 On September 5, 2024, Plaintiffs filed a motion for preliminary injunction seeking

3 to enjoin a foreclosure sale of the Subject Property, which was rejected by the Court on

4 September 10, 2024 as procedurally deficient. (ECF Nos. 4, 5.) On September 23, 2024,

5 Plaintiffs filed an Amended Motion for Preliminary Injunction, which was construed as an

6 Amended Motion for Temporary Restraining Order seeking to enjoin the foreclosure sale

7 of the Subject Property. (ECF No. 6.) The district court denied Plaintiffs’ TRO on October

8 3, 2024 for failing to establish irreparable injury. (ECF No. 15.) On October 23, 2024,

9 Plaintiffs filed their second TRO motion seeking to again enjoin the foreclosure sale of

10 the Subject Property. (ECF No. 19.) On November 4, 2024, this Court issued Findings

11 and Recommendations recommending Plaintiffs’ second TRO be denied due to

12 procedural deficiencies and failure to establish irreparable injury. (ECF No. 26.) The

13 November 4, 2024 Findings and Recommendations were adopted on December 5,

14 2024. (ECF No. 35.)

15 On October 9, 2024, Defendants Shellpoint and Chase filed a motion to dismiss

16 pursuant to Federal Rules of Civil Procedure 12(b)(6). Defs. Mot. (ECF No. 17-1).

17 Defendants Shellpoint and Chase move to dismiss all claims asserted in Plaintiffs’

18 Complaint for failure to state a claim. Id. Defendants also argue Plaintiff Avilla lacks

19 standing to bring any claim asserted in the Complaint because he is not a borrower

20 under the Note and not a signatory to the Deed of Trust from which all claims arise. Id. at

21 10. In support of their motion to dismiss, Defendants request that the Court take judicial

22 notice of various documents. Defs. Req. for Judicial Notice (“RJN”) (ECF No. 17-2).

23 Plaintiffs filed an opposition (Pls. Opp’n (ECF No. 22)), and Defendants filed a reply (Def.

24 Reply (ECF No. 27)). After briefing on the motion to dismiss was fully complete, on

25 November 12, 2024, Plaintiffs filed a sur-reply and request for judicial notice. (ECF Nos.

26 28, 29.)

27 A hearing was held on November 19, 2024. Plaintiff Avila appeared pro se and

28 attorney Jonathan Cahill appeared on behalf of Defendants Shellpoint and Chase. (ECF

1 No. 31.) Plaintiff Hayne was not present at the hearing. Plaintiff Hayne’s absence was

2 improper as he did not request leave to excuse his appearance or to appear remotely.

3 To date, Defendant Peak Foreclosure Services Inc. has not appeared in this

4 action.

5 II. LEGAL STANDARDS

6 Federal courts are courts of limited jurisdiction and may hear only those cases

7 authorized by federal law. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994).

8 Jurisdiction is a threshold inquiry, and “[f]ederal courts are presumed to lack jurisdiction,

9 ‘unless the contrary appears affirmatively from the record.’” Casey v. Lewis, 4 F.3d 1516,

10 1519 (9th Cir. 1993) (quoting Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 546

11 (1986)); see Morongo Band of Mission Indians v. Cal. State Bd. of Equalization, 858

12 F.2d 1376, 1380 (9th Cir. 1988). Without jurisdiction, the district court cannot decide the

13 merits of a case or order any relief and must dismiss the case. See Morongo, 858 F.2d

14 at 1380. A federal court's jurisdiction may be established in one of two ways: actions

15 arising under federal law or those between citizens of different states in which the

16 alleged damages exceed $75,000. 28 U.S.C. §§ 1331, 1332. “Subject-matter jurisdiction

17 can never be waived or forfeited,” and “courts are obligated to consider sua sponte”

18 subject matter jurisdiction even when not raised by the parties. Gonzalez v. Thaler, 565

19 U.S. 134, 141 (2012).

20 A claim may be dismissed because of the plaintiff's “failure to state a claim upon

21 which relief can be granted.” Fed. R. Civ. P. 12(b)(6). A complaint fails to state a claim if

22 it either lacks a cognizable legal theory or sufficient facts to support a cognizable legal

23 theory. Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015). When considering

24 whether a claim has been stated, the court must accept the well-pleaded factual

25 allegations as true and construe the complaint in the light most favorable to the non-

26 moving party. Id. Further, pro se pleadings are to be liberally construed and afforded the

27 benefit of any doubt. Chambers v. Herrera, 78 F.4th 1100, 1104 (9th Cir. 2023).

28 However, the court is not required to accept as true conclusory factual allegations

1 contradicted by documents referenced in the complaint, or legal conclusions merely

2 because they are cast in the form of factual allegations. Paulsen, 559 F.3d at 1071.

3 When reviewing a motion to dismiss, courts may consider undisputed facts

4 contained in judicially noticeable documents under Federal Rule of Evidence 201 without

5 converting the motion to one for summary judgment. U.S. v. Ritchie, 342 F.3d 903, 908

6 (9th Cir. 2003). This includes undisputed facts from documents attached to the complaint

7 or those on which the complaint “necessarily relies.” Marder v. Lopez, 450 F.3d 445, 448

8 (9th Cir. 2006); see Harris v. Cnty. of Orange, 682 F.3d 1126, 1132 (9th Cir. 2012)

9 (approving judicial notice of documents from judicial proceedings); King v. California

10 Dep't of Water Res., 561 F. Supp. 3d 906, 910 (E.D. Cal. 2021) (taking judicial notice of

11 administrative agency records, including decisional documents).

12 Upon dismissal of any claims, the court must tell a pro se plaintiff of the

13 complaint's deficiencies and provide an opportunity to cure such defects. Garity v.

14 APWU Nat'l Lab. Org., 828 F.3d 848, 854 (9th Cir. 2016). However, if amendment would

15 be futile, no leave to amend need be given. Lathus v. City of Huntington Beach, 56 F.4th

16 1238, 1243 (9th Cir. 2023). To determine the propriety of a dismissal motion, the court

17 may not consider facts raised outside the complaint (such as in an opposition brief), but

18 it may consider such facts when deciding whether to grant leave to amend. Broam v.

19 Bogan, 320 F.3d 1023, 1026 n.2 (9th Cir. 2003).

20 III. DISCUSSION

21 Prior to addressing Defendants’ motion to dismiss, the Court will first address

22 Plaintiffs’ sur-reply and the parties’ requests for judicial notice.

23 A. Plaintiffs’ Sur-Reply

24 On November 12, 2024, Plaintiffs filed a sur-reply without seeking or receiving

25 leave of court to do so. (ECF No. 28.) Plaintiffs do not have a right to file a sur-reply

26 under the Local Rules or the Federal Rules of Civil Procedure. See E.D. Cal. Local Rule

27 230(m). In addition, Defendants’ reply did not raise any new arguments or evidence that

28 would justify granting a request to file a sur-reply. The Court therefore declines to

1 consider Plaintiffs’ sur-reply.

2 B. Requests for Judicial Notice

3 Defendants request the Court take judicial notice of five exhibits. (ECF No. 17-2.)

4 Plaintiffs do not oppose the request. See Docket. Defendants’ request consists of

5 recorded notices related to the loan, deed of trust, and foreclosure proceedings. The

6 request is granted in its entirety. “The court may judicially notice a fact that is not subject

7 to reasonable dispute because it ... can be accurately and readily determined from

8 sources whose accuracy cannot reasonably be questioned.” Fed. R. Evid. 201(b)(c). In

9 the Ninth Circuit, “court filings and other matters of public record” are sources whose

10 accuracy cannot reasonably be questioned for the purposes of Rule 201 of the Federal

11 Rules of Evidence. Reyn's Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6

12 (9th Cir. 2006); see also Gamboa v. Tr. Corps, 2009 WL 656285, at *3 (N.D. Cal. Mar.

13 12, 2009) (taking judicial notice of recorded documents related to a foreclosure sale,

14 including grant deed and deed of trust, as they were “part of the public record and []

15 easily verifiable”).

16 After briefing deadlines for the motion to dismiss, Plaintiffs filed a request that the

17 Court take judicial notice of two exhibits. (ECF No. 29.) Defendants did not file an

18 opposition to the request. See Docket. Plaintiffs’ request consists of a letter from Plaintiff

19 Avila sent to Defendant Shellpoint regarding insurance coverage on the Subject Property

20 (Exhibit A) and two signature pages of Plaintiff Hayne’s signatures (Exhibit B). Pls. RJN

21 at 5-10. The Court declines to take judicial notice of Plaintiffs’ exhibits because they are

22 not proper subjects of judicial notice. See Fed. R. Evid. 201(b)(2). Exhibit B is an

23 incomplete document with missing pages. Exhibit A is a document that is attached to the

24 Complaint. See Compl. at 54-55. Although the Court declines to take judicial notice of

25 this document, the Court may consider this document in its determination of the pending

26 motion to dismiss because a district court may still “consider certain materials—

27 documents attached to the complaint, documents incorporated by reference in the

28 complaint, or matters of judicial notice—without converting the motion to dismiss into a

1 motion for summary judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir.

2 2003).

3 C. Motion to Dismiss

4 Defendants seek dismissal of the Complaint for failure to state a claim as to all

5 claims pursuant to Rule 12(b)(6). Defs. Mot. Because the Court finds Plaintiffs’ singular

6 federal claim for violation of the Fair Debt Collection Practices Act (“FDCPA”) should be

7 dismissed, the Court will not address Defendants’ alternative grounds for dismissal.4

8 However, the Court will first address whether Plaintiff Avila has standing to bring a claim

9 under the FDCPA before addressing whether a valid claim under the FDCPA exists.

10 1. Plaintiff Avila Lacks Standing

11 Defendants assert that Plaintiff Avila lacks standing to bring any claims related to

12 the Subject Property because Plaintiff Avila is not a “borrower” on the Subject Property’s

13 Grant Deed and Deed of Trust. Defs. Mot. at 10-11. To have Article III standing, a party

14 must show (1) it has suffered an “injury in fact,” (2) its injury is “fairly traceable” to the

15 defendant's actions, and (3) its injury will likely be “redressed” by the action. Lujan v.

16 Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).

17 It is evident from the Subject Property’s documents that Plaintiff Avila does not

18 have a personal interest in the Subject Property. See RJN at Exhs. 1, 2; see also Gospel

19 Missions of America v. City of Los Angeles, 328 F.3d 548, 554 (2003) (citing Lujan, 504

20 U.S. at 560-61)). Because Plaintiff Avila is not a signatory to the Grant Deed and Deed

21 of Trust and because Plaintiff Avila has not been able to establish he has suffered a

22 legal “injury in fact,” Plaintiff Avila does not have standing to bring the claims asserted in

23 the Complaint. Plaintiff Avila’s additional standing arguments made at the hearing also

24 lack merit. The Court therefore recommends Plaintiff Avila be dismissed with prejudice.

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27 4 At the hearing, Plaintiff Avila raised new arguments not made in Plaintiffs’ opposition,

and that go beyond Defendants’ motion to dismiss and the claims raised in the

28 Complaint. Plaintiff Avila’s new arguments will therefore not be considered.

1 2. Failure to State a Claim under FDCPA

2 Defendants also assert Defendant Shellpoint is not a “debt collector” as defined

3 by the FDCPA and therefore this claim necessarily fails. Defs. Mot. at 11. Plaintiffs argue

4 Defendant Shellpoint is a debt collector as defined by the FDCPA because it is servicing

5 a loan in default and enforcing an “invalid debt” through foreclosure proceedings and its

6 demand of insurance payments all qualify as debt collection activity under the FDCPA.

7 Pls. Opp’n at 4. The Court finds neither of the Defendants are “debt collectors” as

8 required to bring a claim under the FDCPA.

9 Under the FDCPA, a “debt” is “any obligation or alleged obligation of a consumer

10 to pay money arising out of a transaction in which the money, property, insurance, or

11 services which are the subject of the transaction are primarily for personal, family, or

12 household purposes, whether or not such obligation has been reduced to judgment.”

13 McNair v. Maxwell & Morgan PC, 893 F.3d 680, 682 (9th Cir. 2018) (citing 15 U.S.C.

14 § 1692a(5)). A “debt collector’ is anyone who “regularly collects or attempts to collect ...

15 debts owed or due ... another.” Henson v. Santander Consumer USA Inc., 582 U.S. 79,

16 79 (2017) (citing 15 U.S.C. § 1692a(6)). “[T]hose who engage in only nonjudicial

17 foreclosure proceedings are not debt collectors within the meaning of the Act.” Obduskey

18 v. McCarthy & Holthus LLP, 586 U.S. 466, 477 (2019) (holding a business engaged in

19 nonjudicial foreclosure proceedings simply engaged in enforcing a security interest was

20 not a “debt collector” within the meaning of the FDCPA). Here, Plaintiffs’ Complaint fails

21 to establish Defendants’ principal purpose is debt collection. See Schlegel v. Wells

22 Fargo Bank, NA, 720 F.3d 1204 (9th Cir. 2013) (home mortgagors failed to sufficiently

23 allege in their Complaint that mortgagee’s principal purpose of business is debt

24 collection and therefore a debt collector, as would be required to state a claim under

25 FDCPA). On the contrary, the Subject Property’s documents related to the Deed of Trust

26 and foreclosure documents clearly establish that all Defendants are engaged in

27 nonjudicial foreclosure proceedings on the Subject Property under a Deed of Trust. See

28 RJN at Exhs. 4; 5; see also Vien-Phuong Thi Ho v. ReconTrust Co., NA, 858 F.3d 568,

1 574 (9th Cir. 2017) (notices of default and of trustee sale in order to facilitate nonjudicial

2 foreclosure are not attempts to collect “debt” by a “debt collector” under the FDCPA); De

3 Dios v. Int'l Realty & Invs., 641 F.3d 1071, 1074 (9th Cir. 2011) (“the person who

4 originated the debt, such as a creditor to whom the debt was originally owed, is not

5 considered a debt collector” under the FDCPA). Because Defendants are not “debt

6 collectors” within the meaning of the FDCPA, the Court recommends that this claim be

7 dismissed without leave to amend.

8 D. Lack of Federal Jurisdiction

9 Federal courts are courts of limited jurisdiction. The court must sua sponte

10 dismiss the case if, at any time, it determines that it lacks subject matter jurisdiction. Fed.

11 R. Civ. P. 12(h)(3). “Without jurisdiction the court cannot proceed at all in any cause.

12 Jurisdiction is power to declare the law, and when it ceases to exist, the only function

13 remaining to the court is that of announcing the fact and dismissing the cause.” Steel Co.

14 v. Citizens for a Better Env't, 523 U.S. 83, 94 (1998) (internal quotation marks and

15 citation omitted). Federal courts are under a continuing obligation to confirm their

16 jurisdictional power and must “inquire sua sponte whenever a doubt arises as to the

17 existence of federal jurisdiction.” Mt. Healthy City Sch. Dist. Bd. of Educ. v. Doyle, 429

18 U.S. 274, 278 (1977).

19 Plaintiffs’ Complaint alleges diversity and federal question as bases for federal

20 court jurisdiction. See Compl. 3-4. As to diversity jurisdiction, the Complaint alleges that

21 all parties are diverse (id. at 3) and the amount in controversy exceeds $75,000 (ECF

22 No. 1-1). However, Defendant Peak Foreclosure Services, Inc. and Plaintiffs are all

23 citizens of California. On its own motion, the Court takes judicial notice of Defendant

24 Peak Foreclosure Services’s Statement of Information filed with the California Secretary

25 of State on March 18, 2024. See Eden Env't Citizen's Grp. LLC v. Laptalo Enters., Inc.,

26 2019 WL 2423417, at *1 n.3 (N.D. Cal. June 10, 2019) (taking judicial notice of several

27 public records, including statements of information filed with the Secretary of State).

28 Defendant Peak Foreclosure Services’s Statement of Information filed with the California

1 Secretary of State on March 18, 2024, which can be found on the Secretary of State's

2 website, identifies Defendant Peak Foreclosure Services was formed in and has its

3 principal office in California. Because Plaintiffs and Defendant Peak Foreclosure

4 Services are not diverse citizens, diversity jurisdiction is destroyed. Section “1332(a)

5 requires complete diversity, whereby ‘[i]n a case with multiple plaintiffs and multiple

6 defendants, the presence in the action of a single plaintiff from the same State as a

7 single defendant deprives the district court of original diversity jurisdiction over the entire

8 action.’” Abrego Abrego v. The Dow Chem. Co., 443 F.3d 676, 679 (9th Cir. 2006) (citing

9 Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546 (2005)).

10 Finally, in light of the recommendation to dismiss the sole federal claim, the

11 remaining nine claims are all state law claims and this Court recommends declining to

12 exercise supplemental jurisdiction over these state law claims.5 A court may decline to

13 exercise supplemental jurisdiction over state law claims if it “has dismissed all claims

14 over which it has original jurisdiction.” 28 U.S.C. § 1367(c)(3). In addition, the Supreme

15 Court has stated that if “the federal claims are dismissed before trial...the state claims

16 should be dismissed as well.” United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966).

17 E. Motion for E-Filing Access

18 Plaintiff Avila requests access to the Court’s electronic case filing system. (ECF

19 No. 21.) The Local Rules are clear that “any person appearing pro se may not utilize

20 electronic filing except with the permission of the assigned Judge or Magistrate Judge.”

21 See Local Rule 133(b)(2). Plaintiff Avila’s motion for e-filing access does not provide

22 good cause to deviate from this Local Rule. Thus, Plaintiff Avila’s motion is denied. In

23 addition, in light of the recommendation that this action be dismissed, Plaintiff Avila’s

24 motion for e-filing access is also moot.

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5 The remaining nine state law claims are for trespass, breach of contract, common law

27 fraud, statutory fraud and misrepresentation, breach of fiduciary duty, promissory

estoppel, action to quiet title, action to quiet title; and unfair business practices in

28 violation of California Business & Professions Code § 17200. See Compl. at 19-39.

1 | IV. CONCLUSION

2 HEREBY ORDERED that Plaintiff Avila’s Motion for E-Filing Access (ECF No.

3 | 21) is DENIED.

4 It is FURTHER HEREBY RECOMMENDED that:

5 1. Defendants’ motion to dismiss (ECF No. 17) be GRANTED;

6 2. Plaintiffs’ Complaint (ECF No. 1) be DISMISSED without leave to amend;

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8 3. The Clerk of the Court be directed to CLOSE this case.

9 These findings and recommendations are submitted to the United States District

10 | Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Within

11 | 14 days after being served with these findings and recommendations, any party may file

12 | written objections with the Court and serve a copy on all parties. This document should

13 | be captioned “Objections to Magistrate Judge’s Findings and Recommendations.” Any

14 | reply to the objections shall be served on all parties and filed with the Court within 14

15 | days after service of the objections. Failure to file objections within the specified time

16 | may waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449,

17 | 455 (9th Cir. 1998); Martinez v. Yist, 951 F.2d 1153, 1156-57 (9th Cir. 1991).

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19 | Dated: December 9, 2024 CO i S \U

20 CHI SOO KIM

UNITED STATES MAGISTRATE JUDGE

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