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Petheram v. Wells Fargo Bank

United States District Court, Ninth Circuit

September 3, 2013

WELLS FARGO BANK (WFB), et al., Defendants.


JAMES L. ROBART, District Judge.

Before the court are two motions to dismiss brought by Defendants Wells Fargo Bank N.A., Mortgage Electronic Registration Systems, Inc. ("MERS"), and Northwest Trustee Services, Inc. ("NWTS"). (Mot. (Dkt. # 11); Joinder in Mot. (Dkt. # 15).) Plaintiff William Petheram alleges five claims related to non-judicial foreclosure of his Auburn, Washington property. Having reviewed the motion, the declarations of Plaintiff's attorney filed in opposition to the motion (Dkt. ## 17, 21), Plaintiff's untimely response (Dkt. # 20), Defendants' replies (Dkt. ## 18, 19, 23), and all related papers, the court GRANTS the motions and DISMISSES this action.


In January 2008, Mr. Petheram executed a promissory note for $345, 000.00, which he secured with a deed of trust on property in Auburn, Washington. (Compl. (Dkt. # 1-2) at 4.) The deed of trust was recorded in the King County Auditor's Office on January 24, 2008. (Roesch Decl. (Dkt. # 14) Ex. 1.)[1] The deed of trust listed Mr. Petheram as the borrower, Homelink Mortgage, Inc. as the lender, MERS as the beneficiary, and Ticor Title Company as the trustee. ( Id. ) An assignment of the deed of trust in March of 2009 identified Wells Fargo as the new beneficiary. ( Id. Ex. 4.) That same month, Wells Fargo executed and recorded an appointment of successor trustee, appointing NWTS as successor trustee. ( Id. Ex. 5.)

Mr. Petheram defaulted on the loan. NWTS issued two notices of trustee sales in 2009 and 2010, but both were discontinued before the sale dates. ( Id. Exs. 6-10.) In 2011, Mr. Petheram and Wells Fargo agreed to a loan modification. ( Id. at 11.) An additional assignment of deed of trust was executed and recorded by MERS, listing Wells Fargo as the beneficiary on the deed of trust. ( Id. Ex 12.) Another appointment of successor trustee was recorded in January 2014 and NWTS was appointed successor trustee. ( Id. at 13.)

On February 5, 2013, NWTS issued a notice of trustee sale identifying a $44, 561.01 default on the loan. ( Id. at 14.) It listed a sale date of June 7, 2013, but the sale date was continued to July 12, 2013.

On June 3, 2013, Mr. Petheram brought this action in King County Superior Court, seeking injunctive relief to restrain the trustee sale. ( See Compl.) He also asked the court to quiet title to the Auburn property in his name and asserted claims against Wells Fargo, MERS, and NWTS for violations of the Washington Consumer Protection Act, fraud, and slander of title.

Mr. Petheram failed to enjoin the sale and his property was sold in a trustee sale on July 12, 2013. Five days after the sale, Mr. Petheram filed for Chapter 13 Bankruptcy protection in the U.S. Bankruptcy Court for the Western District of Washington. (Sandlin Decl. (Dkt. # 17) at 2.) Defendants now move to dismiss the complaint.


A. Standard on a Motion to Dismiss

Under Federal Rule of Civil Procedure 12(b)(6), a court should dismiss a complaint if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). In determining whether to grant a Rule 12(b)(6) motion, the court must accept as true all "well-pleaded factual allegations" in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To sufficiently state a claim and survive a motion to dismiss, the complaint "does not need detailed factual allegations" but the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The complaint must contain "sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 556 U.S. at 663 (internal quotation marks omitted); see also Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010).

B. Plaintiff's Bankruptcy Filing Does Not Stay This Action

As a threshold matter, Mr. Petheram argues that his filing of a Chapter 13 bankruptcy petition automatically stays this action and precludes any ruling on the motions to dismiss. (Sandlin Decl. (Dkt. # 17) at 2.) Although section 362 of the Bankruptcy code does generally stay the commencement or continuation of a judicial proceeding "against the debtor" commenced prior to the filing of bankruptcy, it does not apply in this case. See 11 U.S.C. § 362(a)(1). Where the debtor filed a pre-petition offensive action against creditors, defendants may seek dismissal of the claims, and the court may rule on dispositive motions to dismiss. See In re Way, 229 B.R. 11, 13 (9th Cir. B.A.P. 1998); In re White, 186 B.R. 700, 703 (9th Cir. B.A.P. 1995); In re Merrick, 175 B.R. 333, 336 (9th Cir. B.A.P. 1994). Here, Mr. Petheram filed this offensive action against Defendants before filing for bankruptcy, and Defendants now seek to dismiss the complaint under Civil Rule 12(b)(6). Accordingly, Defendants are not barred from seeking dismissal nor is this court stayed from ruling on an action initiated by Mr. Petheram even though he has filed for Bankruptcy protection.

C. The Court Has Subject Matter Jurisdiction

Next, Mr. Petheram claims this court lacks subject matter jurisdiction because the parties are not completely diverse as required by 28 U.S.C. §1332. (Resp. (Dkt. # 20) at 5.) NWTS has Washington citizenship for diversity purposes. Thus, Mr. Petheram argues that if the court does not consider the ...

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