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Case 5:16-cv-01518-JGB-DTB Document 52-1 Filed 12/15/16 Page 1 of 10 Page ID #:637

McCARTHY & HOLTHUS, LLP


1 Melissa Robbins Coutts, Esq. (SBN: 246723)
Leticia “Tia” Butler, Esq. (SBN: 253345)
2 1770 Fourth Avenue
San Diego, CA 92101
3 Telephone: (619) 685-4800
Facsimile: (619) 685-4811
4 E-mail: lbutler@mccarthyholthus.com
5 Attorneys for Defendant,
Quality Loan Service Corporation, erroneously sued as Quality Loan Servicing
6

8 UNITED STATES DISTRICT COURT


9 CENTRAL DISTRICT OF CALIFORNIA
10

11 Socorro Diaz and Francisco Diaz


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12 Plaintiffs, MEMORANDUM IN SUPPORT


OF MOTION TO DISMISS
ATTORNEYS AT LAW
SAN DIEGO, CALIFORNIA 92101

13 v. PLAINTIFFS’ FIRST
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AMENDED COMPLAINT
14 The Bank of New York Mellon as trustee
for Structured Asset Mortgage Investment Date: January 23, 2017
15 II, Inc. Mortgage Pass through certificated Time: 9:00 a.m.
Series 2005-AR8; Nationstar Mortgage, a Ctrm: 1
16 Texas Corporation; Quality Loan Servicing, Judge: Hon. Jesus G. Bernal
a California Corporation; All Persons
17 Unknown, Claiming any Legal or Equitable
Right, Title, Estate, Lien, or Interest in the
18 Property Described in the Complaint
Adverse to Plaintiff’s Title or Any Cloud on
19 Plaintiff’s Title Thereto; and Does 1 through
50, inclusive
20
Defendants.
21

22 Quality Loan Service Corporation (“Quality”) respectfully submits the


23 following Memorandum of Points and Authorities in Support of its Motion to
24 Dismiss Plaintiffs’ First Amended Complaint (“FAC”).
25 INTRODUCTION
26 The FAC fails to allege any specific wrongdoing by Quality. Instead,
27 Plaintiffs merely identify Quality as the foreclosure trustee and make generic
28 conclusory allegations against “all Defendants.” Plaintiffs FAC is woefully
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POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
PLAINTIFFS’ FIRST AMENDED COMPLAINT
Case 5:16-cv-01518-JGB-DTB Document 52-1 Filed 12/15/16 Page 2 of 10 Page ID #:638

1 inadequate and fails to state a claim upon which relief can be granted. Pursuant to
2 Federal Rule of Civil Procedure Rule 12(b)(6), the FAC should be dismissed.
3 PERTINENT FACTUAL BACKGROUND
4 On or about April 21, 2005, Plaintiff obtained a $288,000.00 loan secured by
5 a Deed of Trust against property located at 3891 Fox Trail Lane, Riverside,
6 California 92509 (“Subject Property”). (FAC, Exh. 4.) The Deed of Trust was
7 recorded in the Riverside County Recorder’s Office on May 3, 2005 as Instrument
8 Number 2005-0350325. (Id.) On January 5, 2015, a Substitution of Trustee was
9 recorded which substituted Quality in as Trustee of the Deed of Trust. (FAC, Ex.
10 9.)
11 Plaintiffs failed to repay the indebtedness secured by the Deed of Trust.
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12 Consequently, Quality nonjudicially foreclosed against the Subject Property. The


property was sold at public auction on March 4, 2015. (FAC, Ex. 10.)
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14 Plaintiffs filed their original complaint in pro-per. Thereafter, Plaintiffs


15 retained counsel and filed the instant amended pleading. The FAC attempts – but
16 fails – to state causes of action against the Defendants for: Wrongful Foreclosure;
17 Cancellation of Deed; Quiet Title; Negligence; Declaratory Relief; and Accounting.
18 POINTS & AUTHORITIES
19 Rule 12(b)(6) of FRCP allows a Defendant to bring a motion to test the legal
20 sufficiency of the allegations in a complaint. Such a motion should be granted
21 when the Plaintiff’s allegations, taken as true, do not entitle the Plaintiff to the relief
22 sought in the complaint. A dismissal pursuant to Rule 12(b)(6) is required where
23 the complaint lacks a “cognizable legal theory” or does not plead facts sufficient to
24 support a cognizable theory. Balistreri v. Pacifica Police Dept., 901 F. 2d 696, 699
25 (9th Cir. 1990). The complaint must provide “more than labels and conclusions,
26 and a formulaic recitation of the elements of a cause of action will not do . . . .”
27 Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (citing Papasan v. Allain, 478
28 U.S. 265, 286 (1986)). Instead, the complaint’s “factual allegations must be enough
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PLAINTIFFS’ FIRST AMENDED COMPLAINT
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1 to raise a right to relief above the speculative level . . .” Id.


2 In ruling on a 12(b)(6) motion to dismiss, the Court may consider
3 “allegations contained in the pleadings, exhibits attached to the complaint, and
4 matters properly subject to judicial notice.” Swartz v. KPMG LLP, 476 F. 3d 756,
5 763 (9th Cir. 2007). But, the Court need not accept unreasonable inferences or
6 “conclusory, unwarranted deductions of fact” cast in the form of factual allegations.
7 Sprewell v. Golden State Warriors, 266 F. 3d 979, 988 (9th Cir. 2001).
8 I. The Motion to Dismiss Must Be Granted Because Plaintiff Fails to
Plead Sufficient Facts to Support Any of the Six Causes of Action.
9

10 Quality preliminary argues that Plaintiffs’ FAC is so sparse on facts that it is


11 appropriate for this Court to grant the Motion to Dismiss on this basis alone. The
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12 FAC is nothing more than conclusions which lack factual support. Quality is
identified by name a mere five (5) times in the FAC. Importantly, not one of those
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14 times is Quality mentioned with respect to its conduct or actions. Instead, the only
15 time Quality is mentioned is for the sake of identifying it as a defendant and
16 indicating it was substituted in as Trustee of the Deed of Trust. The allegations in
17 the FAC simply fall short of what is necessary to survive a Motion to Dismiss; the
18 Motion to Dismiss should be granted.
19
II. Quality’s Motion to Dismiss Should be Granted In Full Because
20 the Litigation Privilege Prevents Imposition of Liability.
21 Since Plaintiffs do not allege otherwise, Quality can only assume it is named
22 in the FAC for actions conducted in its capacity as Trustee of the Deed of Trust.
23 However, Quality’s advancement of the nonjudicial foreclosure is statutorily
24 protected under Civil Code section 47 and accordingly, this conduct cannot form the
25 basis of any tort cause of action.
26 The legislature has codified the manner and procedure for conducting
27 nonjudicial foreclosures in Civil Code section 2920 through 2944.5. These sections
28 comprise a comprehensive regulation of the nonjudicial foreclosure process by the
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PLAINTIFFS’ FIRST AMENDED COMPLAINT
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1 legislature. Moeller v. Lien, 25 Cal.App.4th 822, 834 (1994). California Civil


2 Code section 2924(b) provides: “[I]n performing acts required by this article, the
3 trustee shall incur no liability for any good faith error resulting from reliance on
4 information received in good faith from the beneficiary regarding the nature and the
5 amount of the default under the secured obligation, deed of trust, or mortgage.”
6 Cal. Civ. Code § 2924(b) (emphasis added). Thus, when a Trustee such as Quality
7 records a Notice of Default at the direction of the beneficiary, the Trustee incurs no
8 liability for such recordation. The same litigation privilege applies to all foreclosure
9 notices. California Civil Code section 2924(d) provides that the mailing,
10 publication, and delivery of the foreclosure notices as required by this section and
11 performance of procedures described in this article “shall constitute privileged
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12 communications” within the meaning of Civil Code section 47. Cal. Civ. Code §
2924(d). This includes the procedures for substitution of trustee (section 2934a),
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14 for posting and publication of the notices of default and sale (section 2924b), and
15 for conduct of a Trustee’s Sale (section 2924g).
16 The litigation privilege is appropriate given the Trustee’s limited role in the
17 loan. “A Trustee has no claim to ownership of the property, but acts as the agent to
18 the Trustor and Beneficiary for the limited purpose of conducting a sale in the event
19 of the Trustors’ default, or reconveys the property upon satisfaction of the debt
20 owed.” Ainsa v. Mercantile Trust Co. of San Francisco, 174 Cal. 504, 510 (1917).
21 It is for that reason a Trustee reasonably relies upon the information it is provided,
22 and cannot take any action beyond the scope of its limited authority. Quality was
23 included as a defendant solely because it was named as the substitute Trustee under
24 the subject Deed of Trust and recorded the foreclosure documents against the
25 Subject Property.
26 The effect of the litigation privilege is to bar any tort action based on a
27 protected communication when the publication was made without malice. The only
28 exception is for suit based on malicious prosecution – which is not being alleged in
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PLAINTIFFS’ FIRST AMENDED COMPLAINT
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1 this case. Kachlon v. Markowitz, 168 Cal.App.4th 316, 336 (2008); Rubin v. Green,
2 4 Cal. 4th 1187, 1193-94 (1993). To qualify for the common interest privilege, the
3 communication must be made without malice and Plaintiff has failed to allege that
4 Quality acted with malice when advancing the nonjudicial foreclosure. Malice
5 requires that the publication be motivated by hatred or ill will toward the plaintiff or
6 lack of reasonable belief in the truth of the publication. Kachlon, 168 Cal.App.4th
7 at 336. There are no facts asserted by the Plaintiffs that Quality recorded the
8 foreclosure notices out of hatred toward the Plaintiffs or that Quality, opposed to
9 other defendants, had reason to believe that Plaintiffs’ loan was not in default.
10 Thus, each and every cause of action based on the recordation of the foreclosure
11 notices is barred by the litigation privilege. Kachlon, 168 Cal.App.4th at 336;
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12 Rubin, 4 Cal. 4th at 1187, 1193-94. Upon these grounds alone, there is sufficient
basis to conclude that Plaintiffs improperly named Quality in this action and the
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14 First Amended Complaint should be dismissed as to this Defendant.


15 III. Quality’s Motion to Dismiss Must Be Granted In Full Because the
Statutes Governing Nonjudicial Foreclosures are Exhaustive and
16 Do Not Impose Separate Duties or Give Rise to Separate Claims
Against the Trustee.
17

18 As discussed above, foreclosure is statutorily driven in California, and


19 California Civil Code sections 2924 – 2924i is the statutory framework established
20 to govern nonjudicial foreclosure sales. This District has stated “the Legislature
21 intended to cover the entire subject area of nonjudicial foreclosures by statute and
22 leave nothing for the courts.” Residential Capital v. Cal-Western Reconveyance
23 Corp., 108 Cal.App.4th 807, 826 (2003). The California Supreme Court has
24 provided the courts with guidance to avoid parties’ attempts to add requirements
25 into the comprehensive foreclosure statutes as follows:
26 “The statutory provisions regulating the nonjudicial foreclosure of
deeds of trust are contained in sections 2924-2924i. These provisions
27 cover every aspect of exercise of the power of sale contained in a deed
of trust . . .
28
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PLAINTIFFS’ FIRST AMENDED COMPLAINT
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In short, there is no authority for the proposition that a trustee under


1 a deed of trust owes any duties with respect to exercise of the power of
sale beyond those specified in the deed and the statutes. There are,
2 moreover, persuasive policy reasons which militate against a judicial
expansion of those duties. The nonjudicial foreclosure statutes – an
3 alternative to judicial foreclosure – reflect a carefully crafted balancing
of the interests of beneficiaries, trustors, and trustees.”
4

5 I.E. Associates v. Safeco Title Ins. Co., 39 Cal. 3d 281, 285, 288 (1985) (emphasis
6 added).
7 A Trustee such as Quality exercising its duties under California’s nonjudicial
8 foreclosure laws, cannot be subject to claims outside the scope of the nonjudicial
9 foreclosure statutes. Plaintiffs entirely fail to offer any explanation as to how
10 Quality acted in a manner that removes it from the protection it is afforded by the
11 applicable exhaustive statutory framework. Instead, Plaintiffs merely rely upon
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12 conclusory and factually unsupported claims against “all defendants” on each cause
of action. Quality is unequivocally protected by the nonjudicial foreclosure scheme,
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14 Plaintiffs do not even attempt to plead around it, and it is not the Court’s job to
15 manufacture or impose additional duties on this party without authority
16 demonstrating it would be appropriate to do so. For this reason, Plaintiffs causes of
17 action fail as against Quality and the Motion to Dismiss should be granted.
18 IV. Plaintiffs’ Wrongful Foreclosure Claim Fails For Failure to Allege
Specific Facts and Failure to Invoke Authority For This Claim.
19

20 “Wrongful Foreclosure” is not a separate claim under any statutory or


21 common law authority. Fortaleza v. PNC Fin. Servs. Group, Inc., (N.D. Cal. July
22 27, 2009) 642 F. Supp 2d 1012. For this reason alone, it is proper for this Court to
23 Dismiss the claim. Id. Additionally, and also as the Court noted in Fortaleza, where
24 Plaintiffs fail to allege any specific claim against any specific defendant, the
25 complaint fails to put the parties on notice of the claim being asserted against them
26 which serves as a separate basis for granting the Motion. See, Id.
27 ///
28 ///
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V. Plaintiffs’ Cancellation of Deed Cause of Action Fails as Plaintiffs’


1 Have Failed to Tender the Amount of Secured Indebtedness.
2 California Courts have specifically held that a cause of action which seeks to
3 set aside a trustee's sale and/or the resulting Trustee’s Deed Upon Sale for
4 irregularities “should be accompanied by an offer to pay the full amount of the debt
5 for which the property was security" and further that “a valid and viable tender of
6 payment of the indebtedness owing is essential to an action to cancel a voidable sale
7 under a deed of trust." FPCIRE-HAB 01 v. E & G Investments, Ltd., 207
8 Cal.App.3d 1018, 1021 (1989). As stated in Lopez v. Chase Home Financial:
9
An action to set aside a foreclosure sale, unaccompanied by an offer
10 to redeem, does not state a cause of action which a court of equity
recognizes. Karlsen v. American Sav. & Loan Assn., 15 Cal.App.3d
11 112, 117(1971). The basic rule is that an offer of performance is of no
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effect if the person making it is not able to perform. Karlsen, 15


12 Cal.App.3d at 118 (citing Cal. Civ. Code, § 1495.) Simply put, if the
offeror "is without the money necessary to make the offer good and
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13 knows it" the tender is without legal force or effect. Karlsen, 15


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Cal.App.3d at 118.
14

15 Lopez v. Chase Home Financial, LLC, (E.D. Cal. April 24, 2009) 2009 U.S. Dist.
16 LEXIS 34647.
17 Here, Plaintiffs have failed to allege or make actual tender. Further, as in
18 Lopez, Plaintiffs’ inability to make monthly payments on the promissory note is
19 indicative of their lack of any future ability to pay the balance owed. As such,
20 Plaintiffs fail to state any cause of action and this cause must be dismissed.
21 VI. Plaintiffs Cause of Action to Quiet Title Fails in that There are
Insufficient Facts and Plaintiffs Lack Standing to Bring the Claim.
22

23 Plaintiffs’ Third Cause of Action asserts a claim of Quiet Title against all
24 Defendants. However, in order to state a viable cause of action for Quiet Title, a
25 Complaint must include: “(a) A description of the property that is the subject of the
26 action; (b) The title of the plaintiff as to which a determination under this chapter is
27 sought and the basis of the title; (c) The adverse claims to the title of the plaintiff
28 against which a determination is sought; (d) The date as of which the determination
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1 is sought; (e) A prayer for the determination of the title of the plaintiff against the
2 adverse claims.” See Wong v. First Magnus Fin. Corp., 2009 U.S. Dist. LEXIS
3 74113 citing California Code of Civil Procedure § 761.020. Further, “a basic
4 requirement of an action to quiet title is an allegation that plaintiffs "are the rightful
5 owners of the property, i.e., that they have satisfied their obligations under the Deed
6 of Trust." Gaitan v. [name Redacted by the Court] Mortg. Elec., 2009 U.S. Dist.
7 LEXIS 97117 (2009) citing Kelley v. Mortgage Elec. Reg. Sys., Inc., 2009 U.S.
8 Dist LEXIS 70796, at *7 (2009). "[A] mortgagor cannot quiet his title against the
9 mortgagee without paying the debt secured." Watson v. MTC Financial, Inc., 2009
10 U.S. Dist. LEXIS 63997 (2009), quoting Shimpones v. Stickney, 219 Cal. 637, 649
11 (1934).
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12 Plaintiffs entirely failed to plead the required elements for his claim. In
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13 addition, as discussed above, Plaintiffs have not tendered the loan principle. As
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14 such, Plaintiffs’ claim fails and this Third Cause of Action should be dismissed.
15 VII. Plaintiffs’ Fourth Cause of Action for Negligence Fails as to This
Defendant Which Owes No Special Duty to Plaintiffs.
16

17 To maintain a cause of action for negligence, a plaintiff must show: (1) a


18 legally cognizable duty owed by defendant to plaintiff; (2) breach of that duty; (3)
19 causation; and (4) resulting injury to the plaintiff. Merrill v. Navegar, 26 Cal.4th
20 465, 500 (2001). The existence of a duty is an essential element of a claim for
21 negligence, which can be determined as a matter of law in ruling on a motion to
22 dismiss. See, e.g., Artiglio v. Corning Inc., 18 Cal. 4th 604, 614 (1998); Software
23 Design & Application Ltd. v. Hoefer & Arnett, Inc., 49 Cal.App.4th 472, 478
24 (1996).
25 Plaintiffs failed to plead facts regarding any duty that Quality owed to them
26 (much less that Quality breached the duty or that Plaintiff suffered damages as a
27 result thereof). Further, a negligence cause of action is an improper response to a
28
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PLAINTIFFS’ FIRST AMENDED COMPLAINT
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1 nonjudicial foreclosure, which – as discussed above - is comprehensively regulated


2 by statute. Consequently, Quality’s Motion should be granted.
3 VIII. Plaintiff’s Fifth Cause of Action for Declaratory Relief Fails to
State a Claim Upon Which Relief May Be Granted.
4

5 A district court may exercise its jurisdiction over a claim pursuant to the
6 Declaratory Judgment Act (“DJA”), “[i]n a case of actual controversy within its
7 jurisdiction.” 28 U.S.C. § 2201. The DJA is merely procedural; it does not provide
8 a theory of recovery. Rendon v. Countrywide Home Loans, 2009 U.S. Dist.
9 LEXIS 88047, *36 (E.D. Sept. 23, 2009). An action is only appropriate “if there is
10 a substantial controversy of sufficient immediacy and reality to warrant the issuance
11 of declaratory judgment.” Evanston Ins. Co. v. Ghillie Suits.com, Inc., 2008 U.S.
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12 Dist. LEXIS 82535, *11 (N.D. Sept. 26, 2008); see also Principal Life Ins. Co. v.
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13 Robinson, 394 F. 3d 665, 669-71 (9th Cir. 2001).


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14 Plaintiffs request a “judicial determination of the rights and duties of the


15 parties in regard to the subject property” (FAC ¶ 48.) However, there is no present
16 and actual controversy as to Quality as Quality is not a party to the underlying loan
17 documents. Further, a declaratory judgment is unnecessary when an adequate
18 remedy exists under other causes of action. Mangindin v. Wash. Mut. Bank, 2009
19 U.S. Dist. LEXIS 51231, *13 (N.D. June 18, 2009). In requesting the Court to make
20 a declaration of their rights, Plaintiffs are merely reiterating the claims in the other
21 causes of action. Such reiteration is indicative of an adequate remedy existing under
22 some other cause of action. See Mangindin, 2009 U.S. Dist. LEXIS 51231, *13.
23 Because declaratory relief is duplicative, improper, and unnecessary, Quality’s
24 Motion should be granted.
25 F. Plaintiff’s Sixth Cause of Action Fails as There is No Relationship
26
Between Quality and Plaintiffs Requiring an Accounting.

27 A plaintiff may state a cause of action in equity for an accounting by alleging:


28 (1) a relationship between the parties or other circumstances require an accounting;
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1 and (2) an unknown balance is due to plaintiff that cannot be ascertained without an
2 accounting. Whann v. Doell, 192 Cal. 680, 684 (1923); Kritzer v. Lancaster, 96
3 Cal.App.2d 1, 7 (1950). “A suit for accounting will not lie where it appears from
4 the complaint that none is necessary or that there is an adequate remedy at law.” St.
5 James Church of Christ Holiness v. Superior Court, 135 Cal.App.2d 352, 359
6 (1955).
7 Because Quality is simply Trustee of the Deed of Trust and not the
8 beneficiary, there is no relationship between Quality and Plaintiffs that would
9 require an accounting. “The trustee in nonjudicial foreclosure is not a true trustee
10 with fiduciary duties, but rather a common agent for the trustor and beneficiary.
11 The scope and nature of the trustee’s duties are exclusively defined by the deed of
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12 trust and the governing statutes. No other common law duties exist.” Kachlon, 168
Cal.App.4th 316, 335 (2008) (emphasis added) (internal citations omitted).
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14 California Civil Code sections 2924 through 2924i do not include any requirement
15 that the trustee provide an accounting to the borrower. Quality has no duty to
16 provide Plaintiff with an accounting, and therefore, this cause of action should be
17 dismissed with prejudice.
18 CONCLUSION
19 Plaintiffs fail to state any cognizable claim against Quality. Moreover,
20 Plaintiffs were already given an opportunity to amend the pleadings and even with
21 the benefit of counsel, cannot produce facts to support their claims. Quality
22 requests that Plaintiffs’ FAC be dismissed forthwith, with prejudice.
23 Dated: December 15, 2016 Respectfully submitted,
24 McCARTHY & HOLTHUS, LLP
25
By: /s/ L. Butler
26 Leticia “Tia” Butler, Esq.
Attorney for Defendant,
27 Quality Loan Service Corporation
28
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POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS
PLAINTIFFS’ FIRST AMENDED COMPLAINT

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