Lincoln V. Cal-western Re Conveyance Corporation, Et Al.

Case 8:08-cv-01334-DOC-E

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UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA CIVIL MINUTES - GENERAL Case No. SACV 08-1334 DOC (Ex)

Date: July 13, 2009

Title: LINCOLN V. CAL-WESTERN RECONVEYANCE CORPORATION, ET AL. DOCKET ENTRY [I hereby certify that this document was served by first class mail or Government messenger service, postage prepaid, to all counsel (or parties) at their respective most recent address of record in this action on this date.] Date:____________ Deputy Clerk: ___________________________________

PRESENT: THE HONORABLE DAVID O. CARTER, JUDGE Kristee Hopkins Courtroom Clerk

Not Present Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS: NONE PRESENT

NONE PRESENT

PROCEEDING (IN CHAMBERS): GRANTING, IN PART MOTION FOR RECONSIDERATION AND LEAVE TO FILE SECOND AMENDED COMPLAINT Before the Court is Plaintiff Charles Edward Lincoln, III’s (“Plaintiff”) “Suggestion of Bankruptcy Objections to Dismissal of First Amended Complaint Motion to Reconsider Document 20 Order Of Dismissal and Motion for Leave to File Second Amended Complaint [sic]”. After reading the briefing, the Court finds that Plaintiff is actually presenting a Motion for Reconsideration and Leave to File Second Amended Complaint (the “Motion”). The Court finds this matter appropriate for decision without oral argument. FED. R. CIV. P. 78; Local R. 7-15. After reviewing the moving, opposing, and replying papers, and for the reasons set forth below, the Court hereby GRANTS, IN PART the Motion. I. BACKGROUND Plaintiff filed the instant lawsuit on November 21, 2008. Plaintiff requested leave to file an amended complaint on February 18, 2009, which was granted on February 26, 2009. In his First Amended Complaint, Plaintiff seeks to quiet title to 4 Via Corbina, Rancho Santa Margarita, California 92688 (“4 Via Corbina”) and 7433 Apache Trail, Yucca Valley, California 92284, as well as, MINUTES FORM 11 DOC CIVIL - GEN

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apparently, properties in Idaho and Florida; and for a series of declaratory judgments under 42 U.S.C. §§ 1981, 1982, 1983, and 1988(a) that California Civil Code §§ 2924-2924i; as well as Idaho General Laws, Mortgages & Deeds §45-1506; and Florida Statutes §§ 673.3021 & 673.3091 have been applied and allowed to be exercised in such a way that the common law rights to limit collection and enforcement to “holders in due course” and other privileges inherent in the common law doctrine of “privity of contract” have been “all but obliterated”. The allegations supporting Plaintiff’s Second Amended Complaint are as follows: On or about June 24, 2005 Hal Kuder, Jr. (“Kuder”) allegedly executed and delivered a note (“California Note”) in return for a loan he received in the principal amount of $322,699.00 from Wells Fargo Bank, N.A. (“Wells Fargo”), secured by a deed of trust (“California Deed of Trust”) encumbering certain real property located at 4 Via Corbina. (Wells Fargo avers that a review of its property records establishes that it did not make loans to Kuder secured by the other California properties that Plaintiff references.) On or about February 11, 2005, Kuder allegedly executed and delivered a note (“Florida Note”) in return for a loan he received in the principal amount of $193,200.00 from Wells Fargo, secured by a mortgage (“Florida Mortgage”) encumbering certain real property located at 1632 Espanola Avenue in Holly Hill, Florida 32117 (“Florida Property”). On or about March 23, 2005, Kuder executed and delivered a note (“Idaho Note”) in return for a loan he received in the principal amount of $73,920.00 from Wells Fargo, secured by deeds of trust (“Idaho Deeds of Trust”) encumbering certain real property located at 402-404 Andrew Court in Caldwell, Idaho 83605. Between May and June of 2008, Plaintiff purports to have entered into several contracts with Kuder to acquire title to the California, Florida and Idaho properties (the “Subject Properties”) and assume Kuder’s repayment obligations under the California, Idaho, and Florida deeds of trust (the “Subject Loans”). Plaintiff admits that he caused the Subject Loans to enter into default as he didn’t meet his repayment obligations under the Subject Loans. Plaintiff also admits that Wells Fargo delivered the funds to Kuder, but asserts that Wells Fargo did not “own the funds” and therefore suffered no detriment. Further, Plaintiff argues that he set out to “verify that the servicing entities were actually ‘holders in due course’” and demanding proof of “privity of contract” status. Wells Fargo does not contest this, but states that this inquiry was unnecessary since Wells Fargo was the named lender and beneficiary under each of the Subject Loans. However, Plaintiff states that this Court should quiet title in him because Wells Fargo encumbered his property based on Kuder’s obligation, yet Kuder’s obligation was not secured by consideration as Wells Fargo did not transfer its own money to Kuder (rather, it transferred money of a either Fannie Mae or Freddie Mac). That is, Plaintiff argues that loan documents pertaining to the Subject Loans do not state that Wells Fargo was the lawful owner of the money that it was delivering to Kuder, “nor even that the money was advanced against the credit of Wells Fargo, nor any other indication of detrimental action promised or undertaken by Wells Fargo Bank.” Alternatively, Plaintiff argues that Wells Fargo securitized the mortgages at issue, thereby causing it to no longer be the holder in due course of Kuder’s note with no right title or interest in the enforcement or collection of that note.

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On May 6, 2009, Defendants’ Cal-Western Reconveyance Corporation and Wells Fargo Bank, N.A. (“Defendants”) filed a Motion to Dismiss Plaintiff’s Complaint as Plaintiff lacked standing to pursue this instant lawsuit and as Plaintiff had failed to state a claim for which relief can be granted under FED. R. CIV. P. 12(b)(6) (the “Motion to Dismiss”). Plaintiff never filed an opposition to the Motion to Dismiss. On May 20, 2009, the Court granted the Motion to Dismiss as Unopposed (the “May 20 Order”). II. LEGAL STANDARD Federal Rule of Civil Procedure 60(b) “provides for reconsideration only upon a showing of (1) mistake, surprise, or excusable neglect; (2) newly discovered evidence; (3) fraud; (4) a void judgment; (5) a satisfied or discharged judgment; or (6) ‘extraordinary circumstances’ which would justify relief.” School Dist. No. 1J, Multnomah County v. Acands, Inc., 5 F.3d 1255, 1263 (9th Cir. 1993) (quoting Fuller v. M.G. Jewelry, 950 F.2d 1437, 1442 (9th Cir. 1991)). These grounds are further limited by the Local Rules. Local Rule 7-18 provides that a motion for reconsideration of a decision on any motion may be made only on the following grounds: “(a) a material difference in fact or law from that presented to the Court before such decision that in the exercise of reasonable diligence could not have been known to the party moving for reconsideration at the time of such decision, or (b) the emergence of new material facts or a change of law occurring after the time of such decision, or (c) a manifest showing of a failure to consider material facts presented to the Court before such decision.” L.R. 7-18. Finally, the Local Rule states that “[n]o motion for reconsideration shall in any manner repeat any oral or written argument made in support of or in opposition to the original motion.” Id. III. DISCUSSION Plaintiff argues that the May 20 Order was in error as Cal. Code Civ. P. §764.010 “prohibits judgment by default in quiet title cases without qualification or exception.” Under Cal. Code Civ. P. 764.010: The court shall examine into and determine the plaintiff's title against the claims of all the defendants. The court shall not enter judgment by default but shall in all cases require evidence of plaintiff's title and hear such evidence as may be offered respecting the claims of any of the defendants, other than claims the validity of which is admitted by the plaintiff in the complaint. The court shall render judgment in accordance with the evidence and the law. Plaintiff argues that this provision of the California Code should apply because “it is not really a procedural rule but a subject specific rule of decision providing special status for actions to quiet title” MINUTES FORM 11 DOC CIVIL - GEN

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and, therefore, it must be applied as a substantive rule, rather than a procedural rule, under the rule of Erie R. Corp. v. Tompkins, 304 U.S. 64 (1938). The May 20 Order was based on Local Rule 7-12, which states: “The Court may decline to consider any memorandum or other paper not filed within the deadline set by order or local rule. The failure to file any required paper, or the failure to file it within the deadline, may be deemed consent to the granting or denial of the motion.” Though Plaintiff is correct that the Court essentially terminated his suit under a rule of default, technically “default judgment” is granted only where the defendant has failed to plead or otherwise respond to the complaint within the time required by the Federal Rules, New York Life Ins. Co. v. Brown, 84 F.3d 137 (1996), rather than for a failure to respond to a motion. The Court need not resolve the issue of whether granting the Motion to Dismiss was improper under Cal. Code Civ. P. §764.010, as the Motion to Dismiss should be upheld based on the merits of the arguments made in the moving papers. Thus, Plaintiff grants Plaintiff’s Motion only to the extent that it expressly states that Plaintiff’s Second Amended Complaint must be dismissed based on the arguments asserted in the Motion to Dismiss. Further, in his Motion, Plaintiff requests relief in the form of the opportunity to file a Second Amended Complaint, which the Court grants for the foregoing reasons. Leave to amend lies within the sound discretion of the trial court, which “must be guided by the underlying purpose of Rule 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities.” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981). Thus, Rule 15’s policy of favoring amendments to pleadings should be applied with “extreme liberality.” Id. (citation omitted); see Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989). As this case is not an exception to such general principles, Plaintiff is granted leave to amend his complaint a second time. In amending his complaint, Plaintiff should be mindful of the arguments made in Defendant’s Motion to Dismiss so as to ensure that his Second Amended Complaint states claims upon which to be granted and outlines why he has standing to present his suit. Further, if Plaintiff’s third complaint fails, yet again, to state viable claims for relief, he will not be given leave to amend, as such relief would be futile under Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230 (1962) (identifying undue delay, bad faith or dilatory motive, futility of amendment, and prejudice to the opposing party)(emphasis supplied). Accordingly, the May 20 Order remains and will not be vacated, and Plaintiff is given 30 days to file a second amended complaint. IV. OUTCOME For the foregoing reasons, the Motion is GRANTED IN PART. Plaintiff is given until August 3, 2009 to file an amended complaint. The Clerk shall serve this minute order on all parties to the action.

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