Mary Amaral, et al v. Wachovia Mortgage Corporation et al, No. 1:2009cv00937 - Document 110 (E.D. Cal. 2011)
Court Description: MEMORANDUM DECISION AND ORDER regarding defendants' Motions to Dismiss, documents 77 and 84 , Wachovia's Motion to Strike, document 86 , and plaintiffs' Motion to Amend the Complaint, document 97 ; defendants to submit form of order consistent with this Memorandum within five (5) days following electronic service of this order; order signed by Judge Oliver W. Wanger on 2/7/2011. (Rooney, M)
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Mary Amaral, et al v. Wachovia Mortgage Corporation et al Doc. 110 1 2 3 4 UNITED STATES DISTRICT COURT 5 EASTERN DISTRICT OF CALIFORNIA 6 7 8 MARY AMARAL, et al., Plaintiffs, 9 10 11 12 WACHOVIA MORTGAGE CORP., et al., Defendants. 14 I. INTRODUCTION. 15 17 18 19 20 Plaintiffs 23 24 25 26 27 Mary Amaral, Joe Amaral, (“Plaintiffs”) proceed with an action and Danny Amaral for damages and declaratory relief against Defendants Wachovia Mortgage, FSB (“Wachovia”) and Carrington Mortgage Services, LLC (“Carrington”). Plaintiffs’ filed a First Amended Complaint (“FAC”) on August 23, 2010. (Doc. 73). 21 22 MEMORANDUM DECISION AND ORDER REGARDING DEFENDANTS’ MOTIONS TO DISMISS (Docs. 77, 84), WACHOVIA’S MOTION TO STRIKE (Doc. 86), AND PLAINTIFFS’ MOTION TO AMEND (Doc. 97) v. 13 16 1:09-cv-00937-OWW-GSA Carrington and Wachovia filed motions to dismiss the FAC on September 9, 2010 and September 13, 2010, respectively. (Docs. 77, 84). Plaintiffs filed opposition to the motions to dismiss on November 1, 2010. (Docs. 91, 92). Carrington and Wachovia filed replies to Plaintiffs’ opposition November 8, 2010. (Docs. 94, 95). /// 28 1 Dockets.Justia.com II. FACTUAL BACKGROUND. 1 2 This is a mortgage fraud case concerning Plaintiffs’ residence 3 located in Lemoore, California. Initially, Plaintiffs obtained two 4 loans from Freemont & Loan (“Freemont”), one for $460,000 (the 5 “First Loan”) and one for $115,000 (the “Second Loan”). Around 6 January 2008, Plaintiffs approached Wachovia to obtain a third 7 loan, i.e., a refinance loan, to pay off both their First and 8 Second Loans. 9 On or about April 1, 2008, Carrington took over “servicing” of 10 the First Loan, allegedly without notice to Plaintiffs. On or about 11 April 30, 2008, Wachovia purportedly wired $594,806.16 to Freemont 12 to pay off both loans. On May 13, 2008, however, Carrington sent 13 Plaintiffs a Notice of Intent to Foreclose on the First Loan. This 14 notice stated that the monthly loan payments due on or after March 15 1, 2008, had not been received. Starting in June 2008, Plaintiffs 16 made monthly payments to Wachovia on the refinance loan. Starting 17 in December 2008, Wachovia refused to accept Plaintiffs’ payments. 18 III. LEGAL STANDARD. 19 Dismissal under Rule 12(b)(6) is appropriate where the 20 complaint lacks sufficient facts to support a cognizable legal 21 theory. 22 (9th Cir.1990). 23 survive a 12(b) (6) motion, the pleading “does not need detailed 24 factual allegations” but the “[f]actual allegations must be enough 25 to raise a right to relief above the speculative level.” Bell Atl. 26 Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 27 929 28 recitation of the elements of a cause of action will not do.” Id. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (2007). Mere To sufficiently state a claim to relief and “labels and conclusions” 2 or a “formulaic 1 Rather, there must be “enough facts to state a claim to relief that 2 is plausible on its face.” Id. at 570. In other words, the 3 “complaint must contain sufficient factual matter, accepted as 4 true, to state a claim to relief that is plausible on its face.” 5 Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 6 L.Ed.2d 868 (2009) (internal quotation marks omitted). 7 The Ninth Circuit has summarized the governing standard, in 8 light of Twombly and Iqbal, as follows: “In sum, for a complaint to 9 survive a motion to dismiss, the nonconclusory factual content, and 10 reasonable inferences from that content, must be plausibly 11 suggestive of a claim entitling the plaintiff to relief.” Moss v. 12 U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009) (internal 13 quotation marks omitted). Apart from factual insufficiency, a 14 complaint is also subject to dismissal under Rule 12(b)(6) where it 15 lacks a cognizable legal theory, Balistreri, 901 F.2d at 699, or 16 where the allegations on their face “show that relief is barred” 17 for some legal reason, Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 18 910, 166 L.Ed.2d 798 (2007). 19 In deciding whether to grant a motion to dismiss, the court 20 must accept as true all “well-pleaded factual allegations” in the 21 pleading under attack. Iqbal, 129 S.Ct. at 1950. A court is not, 22 however, “required to accept as true allegations that are merely 23 conclusory, 24 inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 25 (9th Cir.2001). “When ruling on a Rule 12(b)(6) motion to dismiss, 26 if a district court considers evidence outside the pleadings, it 27 must normally convert the 12(b)(6) motion into a Rule 56 motion for 28 summary unwarranted judgment, and deductions it must 3 of give fact, the or unreasonable nonmoving party an 1 opportunity to respond.” 2 907 (9th Cir. 2003). “A court may, however, consider certain 3 materials-documents 4 incorporated by reference in the complaint, or matters of judicial 5 notice-without converting the motion to dismiss into a motion for 6 summary judgment.” Id. at 908. attached to the complaint, documents IV. Discussion 7 8 United States v. Ritchie, 342 F.3d 903, A. Carrington’s Motion to Dismiss 1. The FAC’s RESPA Claim Against Carrington 9 10 The FAC alleges that Carrington violated RESPA by failing to 11 give notice to Plaintiffs of the transferring of services of the 12 Subject 13 Carrington. 14 Carrington pled in the original complaint, the court held: 15 Loans from In Plaintiffs’ dismissing initial lender, Plaintiffs’ RESPA Freemont, claim to against As Carrington correctly notes, there are no allegations in the complaint suggesting that Plaintiffs suffered actual damages as a result of Carrington’s alleged violation of § 2605(c). Absent factual allegations suggesting that Plaintiffs suffered actual damages, Plaintiffs’ RESPA claim is insufficiently pled and subject to dismissal. Molina v. Washington Mutual Bank, No. 09-CV-00894-IEG (AJB), 2010 WL 431439, at *7 (S.D. Cal. Jan. 29, 2010) (concluding that a RESPA claim was infirm because the plaintiffs “failed to sufficiently plead pecuniary loss"); Lemieux v. Litton Loan Servicing, LP, No. 2:09-cv-02816-JAM-EFB, 2009 WL 5206641, at *3 (E.D. Cal. Dec. 22, 2009) (“Plaintiffs have not pled facts showing they suffered actual damages. Their failure to do so defeats their RESPA claim.”); Garcia v. Wachovia Mortgage Corp., __ F. Supp. 2d __, 2009 WL 3837621, at *10 (C.D. Cal. 2009) (dismissing RESPA claim because Plaintiff “failed to allege damages under Section 2605"). 16 17 18 19 20 21 22 23 24 25 (Doc. 43 at 9-10). 26 does 27 allegations which they contend are sufficient to allege damages:(1) 28 Due not to allege Carrington repeats its argument that the FAC damages. Carrington’s failure Plaintiffs to 4 identify provide the the following required notice, 1 Plaintiffs authorized Wachovia to wire payments to Freemont rather 2 than Carrington (2) Plaintiffs received a Notice of Intent to 3 Foreclose 4 Plaintiffs late fees; (3) Plaintiffs believe their credit rating 5 has been negatively effected, which has limited their ability to 6 obtain further financing; (4) Plaintiffs have suffered emotional 7 distress as a result of a pending Notice of Trustee’s Sale; (5) 8 Plaintiffs have incurred legal fees. which stated that Carrington was going to charge 9 With respect to Plaintiffs’ first damages argument, Carrington 10 correctly responds that Plaintiffs do not allege a causal link 11 between its purported failure to provide notice and any damages 12 suffered by Plaintiffs. 13 mistakenly wired any payments to Freemont instead of Carrington. 14 With respect to Plaintiffs’ second argument, the FAC does not 15 allege that Carrington actually charged Plaintiffs any late fees or 16 that Plaintiffs paid late fees. 17 With respect to The FAC does not allege that Wachovia Plaintiffs’ third, fourth, and fifth 18 arguments, the FAC does not allege facts sufficient to support a 19 causal link between Carrington’s alleged failure to provide notice 20 and the damages Plaintiffs complain of. 21 Plaintiffs did not make payments in April 2008 or May 2008. 22 Plaintiffs’ knowledge of the transfer of servicing was immaterial 23 to Plaintiffs’ failure to make payments in April and May. 24 Plaintiffs failure to make payments in April and May that was a 25 default that caused any damage to Plaintiffs’ credit and led to the 26 recording of the Notice of Default. The FAC concedes that It was 27 Plaintiffs’ RESPA claim against Carrington is deficient for 28 the same reasons identified in the order dismissing Plaintiffs’ 5 1 original complaint. The RESPA claim is DISMISSED WITH PREJUDICE. 2 2. FAC’s Claim Under California Civil Code section 2937 3 Carrington argues that, to the extent section 2937 provides a 4 private right of action, Plaintiffs fail to establish a claim 5 because the FAC’s allegations do not establish that Plaintiffs are 6 within the class of persons the statute is designed to protect. 7 a related argument, Carrington argues that the FAC does not allege 8 damages resulting from the purported violation of section 2937. 9 Carrington’s argument is well taken. The FAC alleges In that 10 Plaintiffs did not make payments in April or May of 2008. 11 Regardless 12 servicing change, the damages of which Plaintiff complains – damage 13 to their credit ratings, emotional distress resulting from the 14 Notice of Trustees Sale, and the legal fees incurred due to the 15 status of their loan–would have resulted in any event due to 16 Plaintiffs’ conscious decision not to make mortgage payments in 17 April and May 2008. 18 suffered damages as a result of Carrington’s alleged statutory 19 violation. 20 e.g., 21 4 th 1939, 1947 (Cal. Ct. App. 1996) (“the violation of a statute 22 gives to any person within the statute’s protection a right of 23 action to recover damages caused by its violation”) (emphasis 24 added). 25 B. Wachovia’s Motion to Dismiss 26 1. Section 2937 Claim 27 The caption of the section 2937 cause of action purports to 28 of whether Carrington had provided notice of the The FAC fails to allege that Plaintiffs Plaintiffs’ claim is DISMISSED WITH PREJUDICE. See, Faria v. San Jacinto Unified School District, 50 Cal. App. advance the claim against “all defendants.” 6 As discussed above, 1 the FAC does not assert a viable claim under section 2937. 2 Further, Plaintiff concedes it has no section 2937 claim against 3 Wachovia. The section 2937 claim is DISMISSED WITH PREJUDICE as to 4 Wachovia. 5 2. 6 The court dismissed Plaintiffs’ state law tort claims (fraud 7 and conversion) alleged in the original complaint on the grounds 8 that such claims were preempted by the federal Home Owners Loan Act 9 (“HOLA’). 10 11 12 13 14 15 State Law Tort Claims (See Doc. 43 at 17-21). With respect to the fraud claim, the Court held: Plaintiffs allege Wachovia “made material false representations to plaintiffs that their refinance loan was approved by Wachovia, that all loan documents had been processed, and that plaintiff had incurred an obligation to make monthly payments to Wachovia to repay the refinance loan.” (Doc. 24- 2 at 8.) This fraud claim concerns lending and revolves around the “processing, origination [and/or] servicing” of a mortgage. As applied, this fraud claim is a type of state law contemplated in § 560.2(b)(10) and is preempted. 16 17 18 19 20 Plaintiffs’ fraud claim also alleges that “[t]here was no documents indicating the Wachovia loan had been processed or approved, or that plaintiffs had any obligation to pay any money to Wachovia.” (Doc. 24-2 at 8.) This fraud allegation fits squarely within § 560.2(b)(10), and likely within § 560.2(b)(9), which deals with information in “credit-related documents,” and § 560.2(b)(11), which deals with “repayments.” 21 22 23 24 25 26 27 Finally, Plaintiffs’ fraud claim alleges that Wachovia “made false representations with the intent to induce plaintiffs to make monthly mortgage payments to Wachovia.” (Doc. 24-2 at 8.) As applied, this claim is also within § 560.2(b)(10) as it is based on, and seeks to impose liability for and regulate, alleged false statements made in connection with the “[p]rocessing, origination [and/or] servicing . . . of, . . . or participation in,” a mortgage. Because Plaintiffs’ fraud claim, as applied, bears on lending activities expressly contemplated by § 560.2(b), it is preempted. No further analysis is necessary. 28 7 1 (Doc. 43 at 20-21). 2 court held: 3 With respect to the conversion claim, the The conversion claim alleges “Wachovia converted the personal property of plaintiffs, in the form of mortgage payments made on a fraudulent and non-existent loan, to its own use or control.” (Doc. 24-2 at 8.) This claim, as applied, also fits within § 560.2(b). The alleged wrongful conversion of Plaintiffs’ “mortgage payments” made on a “fraudulent loan” is a state law claim that is based on alleged wrongful conduct in the “processing, origination [and/or] servicing” of a mortgage, § 560.2(b)(10), and also concerns “repayment[],” § 560.2(b)(11). Because Plaintiffs' conversion claim, as applied, would regulate lending activities expressly contemplated by § 560.2(b), it is preempted, and no further analysis is necessary. 4 5 6 7 8 9 10 11 (Id. at 21). 12 During oral argument on Wachovia’s first motion to dismiss, 13 Plaintiffs requested an opportunity to amend the complaint to 14 establish that 15 Plaintiffs averred that to the extent no loan was issued, there 16 state law tort claims are not subject to HOLA preemption. 17 court expressed doubt concerning Plaintiffs’ argument: 18 The Even if Plaintiffs amend their complaint, as requested, to allege that Wachovia never issued a loan to Plaintiffs, it is not clear that this would impact the preemption analysis. One stated purpose for the regulatory preemption provision is to ensure “a uniform federal scheme of regulation” for federal savings associations. 12 C.F.R. § 560.2(a). Under Plaintiffs’ analysis, however, in any given situation, the lending activities of federal savings associations would be subject to both federal and state regulations so long as no loan is ultimately issued to the borrower. Nevertheless, supplemental briefing is requested to properly analyze this preemption issue.1 19 20 21 22 23 24 25 Wachovia did not actually issue them a loan. (Doc. 43 at 23) (emphasis added). 26 27 28 1 Analysis of the parties’ supplemental briefing is unnecessary in light of the factual deficiencies of the FAC, which warrant dismissal of Plaintiffs’ fraud and conversion claims with prejudice. 8 1 Despite the guidance provided in the memorandum decision, the 2 FAC not only contains the same allegations that led the court to 3 dismiss the fraud and conversion claims alleged in the original 4 complaint, it fails to allege that Wachovia never issued a loan to 5 Plaintiffs. 6 FAC is worse than the original complaint: the original complaint 7 suggested payments were made on a “non-existing loan,” the FAC 8 alleges that Wachovia converted Plaintiffs property “in the form of 9 payments made on a purported refinancing loan.” In fact, with respect to the conversion claim, the (FAC at 10). 10 Even more troubling are allegations contained in a separate 11 state court complaint Plaintiffs filed on September 9, 2010, after 12 the issuance of the Memorandum Decision dismissing Plaintiffs’ 13 complaint in this action. In that complaint, which does not allege 14 fraud against Wachovia, Plaintiffs’ allegations represent that 15 Wachovia did in fact issue a loan. Inter alia, the complaint filed 16 in state court on September 9, 2010 alleges: (1) “Vasquez advised 17 Plaintiffs that a Wachovia refinance loan had been issued” (Comp. 18 at 3);2 (2) “Vasquez provided a copy of a receipt for deposit 19 showing that LandAmerica Commonwealth Title Company received the 20 refinance 21 Fremont’s account” (id.); (3) “Wachovia...presented Plaintiffs with 22 documentation showing that Plaintiffs’ refinance loan had been 23 approved” (id.); (4) “Plaintiffs received statements from Wachovia 24 reflecting payments due on the refinance loan” (id.); (5) “Wachovia 25 refused to provide Plaintiffs with any information regarding the 26 refinance loan” (id. at 4); (6) “Plaintiffs reasonably believed loan proceeds from Wachovia 27 28 2 (Case 10-cv-01661; Doc. 2-1) 9 and were credited to 1 that the First Loan had been satisfied when Wachovia wired the 2 refinance loan proceeds to Fremont on April 30, 2008" (id.).3 The 3 complaint Plaintiffs filed in state court on September 9, 2010 also 4 asserts a claim for Quiet Title against Wachovia and avers that 5 Wachovia “claims an interest in the subject property.” (Id. at 9). Plaintiffs’ 6 failure to comply with the court’s explicit 7 instructions in the memorandum decision as to what was required to 8 escape HOLA preemption justifies dismissal of Plaintiffs’ fraud and 9 conversion claims with prejudice. The Memorandum Decision’s 10 analysis applies with equal force to the fraud claim pled in the 11 FAC, and with more force to the FAC’s conversion claim. 12 Plaintiffs’ advancement of conflicting factual allegations and 13 legal theories against Wachovia by initiating a separate action in 14 state court concerning the same operative facts underlying the FAC 15 justifies application of judicial estoppel to bar Plaintiffs’ state 16 law tort claims. 17 standards 18 Procedure 11. of Plaintiffs’ conduct also violates applicable professional conduct and Federal Rule of Civil 19 Although detailed analysis of the pleading deficiencies that 20 plague the FAC’s fraud and conversion claims is unnecessary in 21 light of Plaintiffs’ failure to plead around HOLA preemption and 22 attempt to avoid preemption by an excursion to state court, a 23 cursory review of the complaint reveals that the claims do not meet 24 the federal pleading standards of Federal Rule of Civil Procedure 25 9(b). 26 /// 27 3 28 The state court complaint later alleges that Plaintiffs’ attorney was unable to confirm whether Wachovia actually wired the funds. (Id. at 5). 10 1 C. Plaintiff’s Motion to Amend 2 Plaintiffs seek to amend the FAC “to include claims for relief 3 for negligent hiring and supervision, breach of contract, and tort 4 of 5 Defendants and to name as additional defendants Freemont, MTC, and 6 Vasquez.” another against Wachovia, and for quiet title as to all (Doc. 98, Amended Motion to Amend at 6).4 7 With respect to all state law tort claims against Wachovia, 8 Plaintiffs claims appear to be preempted for the same reasons 9 applicable to the FAC’s fraud and conversion claims; Plaintiffs’ 10 motion offers no analysis or authority to the contrary. 11 to add such claims would be futile. Amendment 12 The proposed amended complaint attached to Plaintiffs’ motion 13 seeks to include Freemont as a Defendant under Plaintiffs’ claims 14 under RESPA and California Civil Code section 2937. 15 are untenable as discussed above and thus amendment to add Freemont 16 would be futile. These claims 17 With respect to MTC, the motion to amend seeks to add a claim 18 against MTC for (1) declaratory relief regarding the validity of 19 the Notice of Default, which allegedly contains at least two 20 materially false facts, and (2) Quiet title. 21 be appropriate. With respect to Vasquez, the amendment appears to 22 be appropriate. However, Plaintiffs must comply with Federal Rule 23 of Civil Procedure 9(b) where applicable. 24 /// 25 /// Amendment appears to 26 4 27 28 The proposed second amended complaint attached as exhibit 1 to Plaintiffs’ motion also includes a claims for unjust enrichment and breach of the implied covenant of good faith against Wachovia, although the motion does not request leave to include such claims. 11 1 D. Wachovia’s Motion to Strike 2 3 As the FAC is dismissed, Wachovia’s Motion to Strike is DENIED AS MOOT. ORDER 4 5 For the reasons stated, IT IS ORDERED: 6 1) Plaintiffs’ RESPA claim against Defendant Carrington is 7 DISMISSED WITH PREJUDICE; 8 2) Plaintiffs’ claims under California Civil Code section 2937 9 are DISMISSED WITH PREJUDICE; 10 3) Plaintiffs’ state law tort claims against Wachovia are 11 DISMISSED WITH PREJUDICE; 12 4) Plaintiffs’ motion to amend is GRANTED with respect to MTC 13 and 14 requests; 15 5) Wachovia’s Motion to Strike is DENIED AS MOOT; 16 6)Plaintiffs shall file an amended complaint within fourteen 17 (14) days of service of the Memorandum Decision. 18 shall filed a response within ten (10) days of service of the 19 amended complaint; and 20 7) Defendants shall submit a form of order consistent with 21 this 22 electronic service of this decision. Vasquez only Memorandum 23 IT IS SO ORDERED. 24 Dated: hkh80h February 7, 2011 and DENIED Decision with within respect five (5) to all Defendants days /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 25 26 27 28 12 other following
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