Phillips et al v. DHI Mortgage Company, Ltd., LP et al, No. 1:2009cv01028 - Document 13 (E.D. Cal. 2009)
Court Description: MEMORANDUM, OPINION and ORDER GRANTING defendant DHI Mortgage Company's Motion to Dismiss, document 4 , and directing counsel for same to lodge a proposed in conformity with instant Memorandum; case management deadline set for 10/7/2009 for receipt of said order; order signed by Judge Oliver W. Wanger on 10/2/2009. (Rooney, M)
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Phillips et al v. DHI Mortgage Company, Ltd., LP et al Doc. 13 1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 8 9 CORY PHILLIPS and JILISSA SPENCER, 1:09-CV-01028-OWW-SMS 10 11 12 MEMORANDUM DECISION RE: DEFENDANT DHI MORTGAGE COMPANY’S MOTION TO DISMISS PLAINTIFFS’ COMPLAINT FOR FAILURE TO STATE A CLAIM FOR WHICH RELIEF CAN BE GRANTED (Doc. 4) Plaintiffs, v. 13 14 “MERS” MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, et al., 15 Defendants. 16 17 18 19 20 21 22 23 24 25 26 27 I. INTRODUCTION Defendant lender DHI Mortgage Company, Ltd. (“DHI Mortgage”) moves to dismiss as meritless pro se Plaintiffs Cory Phillips and Jilissa Spencer’s (“Plaintiffs”) thirteen claims arising from default and foreclosure on their first and second mortgages which were secured by deeds of trust on real property located at 722 Orestimba Peak Drive, Newman, California 95360; APN: 026-061-014. Defendant DHI Mortgage served the motion on pro se Plaintiffs at their Orestimba Peak Drive address on June 23, 2009. (Doc. 8.) To date, Plaintiffs have not filed an opposition to DHI’s motion. Nor have Plaintiffs file a statement of non-opposition pursuant to 28 1 Dockets.Justia.com 1 Local Rule 78-230(c).1 2 II. 3 BACKGROUND 4 This case arises out of the purchase of a single family home 5 in California in April 2006 by Plaintiffs, Cory Phillips and 6 Jilissa Spencer.2 7 property with funds obtained from DHI Mortgage’s first and second 8 mortgage, 9 promissory and On April 20, 2006, Plaintiffs purchased the secured notes. A by deeds December 8, of 2008 trust and notice of corresponding default and 10 intention to sell was recorded for the property with the Stanislaus 11 County Recorder. 12 The Complaint, which is devoid of any specific facts as to 13 Plaintiff’s loan, contains general allegations that have been 14 serially asserted against Defendant DHI Mortgage in numerous other 15 lawsuits.3 Plaintiffs allege that defendants participated in 16 1 17 18 19 20 21 22 In connection with its motion to dismiss, Plaintiff submitted a request for judicial notice of Complaints filed in three other actions not involving the parties to the present lawsuit. (Doc. 6.) According to DHI, these Complaints are “almost identical versions of the Complaint Plaintiffs filed in this action.” DHI’s unopposed request is GRANTED. Federal courts may “take notice of proceedings in other courts, both within and without the federal judicial system, if those proceedings have a direct relation to the matters at issue.” U.S. ex rel Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992). 23 2 24 25 26 In addition to DHI Mortgage, the complaint names as defendants Chicago Title Company, Mortgage Electronic Registration Systems, Indymac Bank FSB, and NDEX WEST, LLC. Each defendant is either a loan service provider or deed of trust provider. These defendants are “somewhere in the chain of loan service providers and [have] no other interest in this Note.” (Compl. ¶ 3(a)-(f).) 27 3 28 Plaintiffs’ Complaint is attached as “Exhibit A” to Defendants’ Notice of Removal, filed on June 11, 2009. (Doc. 1.) 2 1 “unethical business practices” and “violated both State and Federal 2 Law” by selling and distributing loans “that would ultimately be 3 sold to unqualified applicants.” 4 contend that defendants had information that “reflected their 5 inability to pay for the risky loan,” and that “defendants knew or 6 should 7 foreclosure, 8 loans.” have known [the absent sale serial (Compl. ¶ 19.) of (Compl. ¶ 12.) such refinancing loans] into Plaintiffs may even result higher in cost The complaint further alleges: These loans were neither proper nor suitable for [plaintiffs'] condition and station in life. These loans exceeded the reasonable expected value of the property at that time and in the foreseeable future, based upon expected market changes. Those loans were an attempt to acquire mortgage broker premiums, appraiser fees, lender service fees and sub-prime loans, all to the advantage of the defendants and disadvantage of the plaintiff. This was done as a group of individuals in this industry through concerted action or through civil conspiracy, all to the disadvantage of the Plaintiff. 9 10 11 12 13 14 15 16 (Compl. ¶ 30.) 17 On April 13, 2009, Plaintiffs filed the instant action in 18 Stanislaus County Superior Court, alleging thirteen causes of 19 action: (1) Suitability; 20 (4) Breach of Fiduciary Duty; (5) Negligent Misrepresentation; (6) 21 Intentional Misrepresentation; (7) Breach of the Covenant of Good 22 Faith and Fair Dealing; (8) Failure to Produce the Notes; (9) 23 Unfair Lending Practices; (10) 24 (11) 25 Practices; and (13) “To Restrain a Wrongful Foreclosure Agent.” 26 (2) Negligence; (3) Negligence Per se; Restoral of Good Credit History; Violation of Cal. Civ.Code 2923.5; (12) Unfair Lending Plaintiffs seek to recover compensatory, (Compl. ¶ 94-96.) statutory, and 27 punitive damages. 28 “[i]njunctive relief including the issuance of a restraining order 3 Plaintiffs also request 1 and thereafter a preliminary injunction to maintain the status quo 2 pending final adjudication.” 3 (Compl. ¶ 97.) On June 11, 2009, this case was removed on the basis of 4 federal question jurisdiction. 5 Plaintiffs’ action is founded on claims arising under federal laws, 6 including 7 (“RESPA”), 12 U.S.C. § § 2601-2617, and Regulation Z, 12 C.F.R. § 8 226 et seq. (Doc. 1, ¶ 2.) 9 10 the federal Estate Settlement Procedures On June 23, 2009, DHI filed a motion to dismiss. Act Plaintiff did not oppose the motion. III. 11 12 Real The notice of removal asserts that LEGAL STANDARD DHI Mortgage attacks Plaintiffs' claims as incognizable and 13 lacking necessary elements and factual allegations. 14 Rule of Civil Procedure 12(b)(6), a motion to dismiss can be made 15 and granted when the complaint fails “to state a claim upon which 16 relief 17 appropriate where the complaint lacks a cognizable legal theory or 18 sufficient facts to support a cognizable legal theory. 19 v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). 20 To can be granted.” sufficiently state Dismissal a claim under for Under Federal Rule relief 12(b)(6) and is Balistreri survive a 21 12(b)(6) motion, a complaint “does not need detailed factual 22 allegations” but the “[f]actual allegations must be enough to raise 23 a right to relief above the speculative level.” 24 Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). 25 Mere “labels and conclusions” or a “formulaic recitation of the 26 elements of a cause of action will not do.” 27 be “enough facts to state a claim to relief that is plausible on 28 its face.” Id. at 570. In other words, “[t]o survive a motion to 4 Bell Atl. Corp. v. Id. Rather, there must 1 dismiss, 2 accepted as true, to state a claim to relief that is plausible on 3 its face.” 4 173 L.Ed.2d 868 (2009) (internal quotation marks omitted). “The 5 plausibility standard is not akin to a probability requirement, but 6 it asks for more than a sheer possibility that a defendant has 7 acted unlawfully. Where a complaint pleads facts that are merely 8 consistent with a defendant's liability, it stops short of the line 9 between possibility and plausibility of entitlement to relief.” 10 a complaint must contain sufficient factual matter, Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, Id. (internal citation and quotation marks omitted). 11 In deciding whether to grant a motion to dismiss, the court 12 must accept as true all “well-pleaded factual allegations.” Iqbal, 13 129 S.Ct. at 1950. 14 true allegations that are merely conclusory, unwarranted deductions 15 of fact, or unreasonable inferences.” 16 Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see, e.g., Doe I v. 17 Wal-Mart Stores, Inc., --- F.3d ----, 2009 WL 1978730, at *3 (9th 18 Cir. July 10, 2009) (“Plaintiffs' general statement that Wal-Mart 19 exercised control over their day-to-day employment is a conclusion, 20 not a factual allegation stated with any specificity. We need not 21 accept Plaintiffs' unwarranted conclusion in reviewing a motion to 22 dismiss.”). 23 A court is not, however, “required to accept as Sprewell v. Golden State The Ninth Circuit has summarized the governing standard, in 24 light of Twombly and Iqbal, as follows: 25 to survive a motion to dismiss, the non-conclusory factual content, 26 and reasonable inferences from that content, must be plausibly 27 suggestive of a claim entitling the plaintiff to relief.” 28 U.S. Secret Service, 572 F.3d 962, 2009 WL 2052985, at *6 (9th Cir. 5 “In sum, for a complaint Moss v. 1 July 16, 2009) (internal quotation marks omitted). 2 IV. 3 DISCUSSION 4 A. Suitability (Count I) 5 The complaint’s suitability claim alleges that “defendants 6 breached their professional duties and obligations by providing a 7 sub-prime loan that was neither suitable nor appropriate for the 8 plaintiffs' personal financial condition and well-being.” 9 ¶ 33.) 10 (Compl. DHI Mortgage notes that suitability is an incognizable claim 11 by a borrower against a lender. 12 premised on New York Stock Exchange Rule 405-Know Your Customer 13 Rule and the National Association of Securities Dealers Rules of 14 Fair Practice.” 15 893, 897 (10th Cir. 1992). 16 California law does not extend the suitability doctrine to the 17 mortgage lender-borrower relationship. 18 impose upon the Bank absolute liability for the hardships which may 19 befall the [borrower] it finances.” 20 App. 3d 27, 34 (1980). 21 not a benefit of the loan agreement which the Bank is under a duty 22 to protect.” 23 disclose 24 suitability claim fails as incognizable against DHI Mortgage. 25 “The unsuitability doctrine is O'Connor v. R.F. Lafferty & Co., Inc., 965 F.2d DHI Mortgage correctly observes that “Public policy does not Wagner v. Benson, 101 Cal. The success of a borrower's investment “is Wagner, 101 Cal. App. 3d at 34 (lender lacked duty to “any information Plaintiffs’ conclusory it may have assertions that had”). DHI Plaintiffs' breached its 26 professional obligations, which were not developed pursuant to a 27 timely 28 Plaintiffs’ “suitability” cause of action is not cognizable legal filed opposition, lack evidentiary 6 and legal support. 1 theory against DHI Mortgage. 2 GRANTED. 3 B. Negligence (Count II) 4 The complaint’s The motion to dismiss this claim is negligence claim alleges that defendants 5 breached their “professional services” duty in that “plaintiffs 6 were placed into loans that were inappropriate for their personal 7 financial circumstances.” 8 that the negligence claim fails in absence of “a legally recognized 9 duty that a lender has to a borrower.” (Compl. ¶ 34.) DHI Mortgage contends (Doc. 4, 4:23-4:25.) 10 “The elements of a cause of action for negligence are (1) a 11 legal duty to use reasonable care, (2) breach of that duty, and (3) 12 proximate 13 plaintiff's 14 Cal.App.4th 1333, 1339 (1998) (citation omitted). 15 of a legal duty to use reasonable care in a particular factual 16 situation is a question of law for the court to decide.” 17 v. Residential Investments, Inc., 118 Cal. App. 4th 269, 278 (2004) 18 (citation omitted). 19 [or legal] injury.” cause between Mendoza v. the City breach of and Los (4) Angeles, the 66 “The existence Vasquez DHI Mortgage correctly notes the absence of an actionable duty 20 between a lender and borrower in that loan transactions are 21 arms-length and do not invoke fiduciary duties. 22 circumstances” a loan transaction “is at arms-length and there is 23 no fiduciary relationship between the borrower and lender.” 24 Management Corp. v. Superior Court, 145 Cal.App.4th 453, 466 25 (2006). 26 approving their loan. 27 arises only when the lender ‘actively participates' in the financed 28 enterprise ‘beyond the domain of the usual money lender.’” Wagner, Absent “special Oaks A lender “owes no duty of care to the [borrowers] in Liability to a borrower for negligence 7 1 101 Cal.App.3d at 35 (citations omitted). “[A] s a general rule, a 2 financial institution owes no duty of care to a borrower when the 3 institution's involvement in the loan transaction does not exceed 4 the scope of its conventional role as a mere lender of money.” 5 Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089, 6 1096 (1991). 7 DHI Mortgage recognizes the absence of a lender's duty to 8 ensure a loan is suitable for a borrower. 9 for a lender “to determine the borrower's ability to repay the loan 10 .... The lender's efforts to determine the creditworthiness and 11 ability to repay by a borrower are for the lender's protection, not 12 the borrower’s.” Renteria v. United States, 452 F.Supp.2d 910, 13 922-923 2006) 14 judgment and risk assessment to determine whether or not to accept 15 the loan”). (D.Ariz. (borrowers “had “No such duty exists” to rely on their own 16 Plaintiffs’ negligence claim lacks a recognized legal duty 17 owed by DHI Mortgage to them. The complaint lacks allegations that 18 Plaintiffs relied on DHI Mortgage's loan processing to ensure their 19 ability to repay the loan. The complaint further lacks facts of 20 special circumstances to impose duties on DHI Mortgage in that the 21 complaint depicts an arms-length home loan transaction, nothing 22 more. A complaint must contain sufficient factual matter, accepted 23 as true, to “state a claim to relief that is plausible on its 24 face.” Iqbal, 129 S.Ct. 1937, 1949 (quoting Bell Atlantic Corp. v. 25 Twombly, 550 U.S. 544, 570.). 26 plaintiff pleads factual content that allows the court to draw the 27 reasonable 28 misconduct alleged." inference that Id. A claim is plausible "when the the defendant for the Plaintiffs do not meet this burden. The 8 is liable 1 motion to dismiss its negligence is GRANTED. 2 DHI Mortgage also contends that the economic loss doctrine 3 “precludes recover under a negligence theory because Plaintiffs’ 4 claims for damages are purely economic damages.” 5 6:28.) 6 person or property, but not for purely economic losses that may be 7 recovered in a contract action.” 8 App. 4th 1318, 1327 (1995). 9 remedies for strict liability and negligence only for physical 10 injury to person or property, and not for pure economic losses.” 11 Cal. Dept. Of Toxic Substances v. Payless Cleaners, 368 F. Supp. 2d 12 1069, 1084 (E.D.Cal. 2005) (citing Seely v. White Motor Co., 63 13 Cal.2d 14 occurs, a plaintiff cannot state a cause of action for strict 15 liability or negligence.” Payless Cleaners, 368 F.Supp.2d at 1084. 16 Since Plaintiffs' alleged damages are purely economic, the 17 economic loss doctrine supports dismissal of the negligence claim. 18 DHI Mortgage’s motion to dismiss is GRANTED. (Doc. 4, 6:25- “[P]laintiffs may recover in tort for physical injury to 9, 18-19,(1965)). W.R. Grace & Company, 37 Cal. “In California, plaintiffs may seek “Therefore, unless physical injury 19 20 C. Negligence Per Se (Count III) 21 The complaint’s negligence per se claim alleges that 22 defendants are “subject to California Statutes and Provisions that 23 govern and direct their conduct. 24 class of citizens of the State of California for whose benefit the 25 Statutes and Codes are enacted, and for whose protection the 26 Statutes dealing with the Fair Lending Act under California Law are 27 meant to provide.” 28 negligence per se claim fails as a matter of law because negligence (Compl. ¶ 38.) 9 Plaintiffs are members of the DHI Mortgage contends that the 1 per se doctrine does not apply to mortgage lending. 2 California Evidence Code section 669(a) addresses negligence 3 per se and provides that a presumption of failure to exercise due 4 care if: (1) Defendant violated a statute, ordinance, or regulation 5 of a public entity; (2) the violation proximately caused death or 6 injury to person or property; (3) the death or injury resulted from 7 an 8 regulation was designed to prevent; and (4) the injured party was 9 one of the class of persons for whose protection the statute, 10 11 occurrence of the nature which the statute, ordinance or ordinance, or regulation was adopted. DHI Mortgage submits that the negligence per se doctrine does 12 not establish a cause of action distinct from negligence. This 13 argument is meritorious. 14 negligence must be viable before the presumption of negligence of 15 Evidence Code section 669 can be employed.” 16 and Auto. Repair Ass'n v. American Home Assurance Co., 62 Cal. App. 17 4th 1166, 1178 (1998). 18 evidence to prove negligence. “[I]t is the tort of negligence, and 19 not the violation of the statute itself, which entitles a plaintiff 20 to recover civil damages. In such circumstances the plaintiff is 21 not attempting to pursue a private cause of action for violation of 22 the statute; rather, he is pursuing a negligence action and is 23 relying upon the violation of a statute, ordinance, or regulation 24 to establish part of that cause of action.” 25 Bank Assn. v. Superior Court, 227 Cal. App. 3d 318, 333 (1991). “[A]n underlying claim of ordinary Cal. Service Station The negligence per se doctrine assists as Sierra-Bay Fed. Land 26 Plaintiffs’ negligence per se claim fails just as their 27 negligence claim fails, i.e., there is no liability absent a viable 28 duty. In support of dismissal, DHI Mortgage also faults the 10 1 negligence per se claim's failure to identify a specific statute 2 that DHI Mortgage violated and the class of persons that the 3 unidentified statute was intended to protect. DHI Mortgage is 4 correct, and for these reasons, the negligence per se claim fails 5 against DHI Mortgage. 6 7 Defendant’s motion to dismiss the negligence per se claim is GRANTED. 8 9 D. Breach of Fiduciary Duty (Count IV) 10 The complaint’s breach of fiduciary duty claim alleges that 11 defendants breached their fiduciary duty by failing “to perform 12 their duties, obligations and functions in a fair, upstanding, 13 honest and forthright manner, to conduct themselves so that the 14 plaintiff would experience the benefit or [sic] their professional 15 education and training, and to place plaintiff's interests above 16 and before the interest of the defendants.” 17 Fatal to Plaintiffs’ fiduciary duty claim is the absence of a 18 fiduciary duty between lender and borrower. “The relationship 19 between a lending institution and its borrower-client is not 20 fiduciary in nature.” 21 (citing Price v. Wells Fargo Bank, 213 Cal. App. 3d 465, 476-478 22 (1989)). 23 economic interests in a loan transaction. Nymark, 231 Cal. App. 3d 24 at 1093, n. 1 (citing Kruse v. Bank of America, 202 Cal. App. 3d 25 38, 67, 1988)). 26 is “at arms-length and there is no fiduciary relationship between 27 the borrower and lender.” 28 466 (“the bank is in no sense a true fiduciary”). Nymark, 231 Cal. App. 3d at 1093, n. 1 A commercial lender is entitled to pursue its own Absent “special circumstances” a loan transaction Oaks Management, 145 Cal. App. 4th at 11 1 “[T]o plead a cause of action for breach of fiduciary duty, 2 there must be shown the existence of a fiduciary relationship, its 3 breach, and damage proximately caused by that breach. The absence 4 of any one of these elements is fatal to the cause of action.” 5 Pierce v. Lyman, 1 Cal.App.4th 1093, 1101 (1991). 6 Here, the complaint fails to demonstrate existence of a 7 fiduciary duty. 8 and a legal duty owed by DHI Mortgage, the breach of fiduciary duty 9 claim fails. Defendant’s motion to dismiss the breach of fiduciary 10 In the absence of alleged special circumstances claim is GRANTED. 11 12 E. Negligent and Intentional Misrepresentation (Counts V-VI) 13 The complaint’s negligent misrepresentation claim alleges that 14 defendant breached their duty “to provide accurate, truthful and 15 complete information by failing to provide the information to the 16 plaintiff in a manner that they could understand” and “failed to 17 provide all the information necessary for the plaintiff to make a 18 complete, accurate and well-thought decision.” (Compl. ¶ 46.) The 19 complaint’s 20 defendants “intentionally misrepresented the nature of loans.” 21 (Compl. ¶ 50.) intentional misrepresentation claim alleges that 22 DHI Mortgage argues that Plaintiffs’ fifth and sixth causes of 23 action should be dismissed for failure to state a claim because the 24 claims are not pled with particularity, as required by Rule 9 of 25 the Federal Rules of Civil Procedure.4 26 27 28 4 Rule 9(b)'s particularity requirement applies to state law causes of action: “[W]hile a federal court will examine state law to determine whether the elements of fraud have been pled 12 1 Rule 9(b) requires a party to “state with particularity the 2 circumstances constituting fraud.” In the Ninth Circuit, “claims 3 for fraud and negligent misrepresentation must meet Rule 9(b)'s 4 particularity requirements.” 5 N.A., 290 F.Supp.2d 1101, 1141 (C.D.Cal. 2003). 6 subject to dismissal when its allegations fail to satisfy Rule 7 9(b)'s heightened pleading requirements. 8 USA, 317 F.3d 1097, 1107 (9th Cir.2003). 9 claim “grounded in fraud” under Rule 9(b) for failure to plead with 10 particularity is the “functional equivalent” of a Rule 12(b)(6) 11 motion to dismiss for failure to state a claim. 12 1107. 13 “a short and plain statement of the claim showing that the pleader 14 is entitled to relief.” Neilson v. Union Bank of California, A fraud claim is Vess v. Ciba-Geigy Corp. A motion to dismiss a Vess, 317 F.3d at As a counter-balance, Rule 8(a)(2) requires from a pleading 15 Rule 9(b)'s heightened pleading standard “is not an invitation 16 to disregard Rule 8's requirement of simplicity, directness, and 17 clarity” and “has among its purposes the avoidance of unnecessary 18 discovery.” 19 “A pleading is sufficient under Rule 9(b) if it identifies the 20 circumstances constituting fraud so that the defendant can prepare 21 an adequate answer from the allegations.” 22 F.3d 666, 671-672 (9th Cir. 1993) (internal quotations omitted; 23 citing Gottreich v. San Francisco Investment Corp., 552 F.2d 866, 24 866 (9th McHenry v. Renne, 84 F.3d 1172, 1178 (9th Cir. 1996). Cir.1997)). The Ninth Circuit Neubronner v. Milken, 6 Court of Appeals has 25 26 27 28 sufficiently to state a cause that the circumstances of particularity is a federally Corp. USA, 317 F.3d 1097, 1103 of action, the Rule 9(b) requirement the fraud must be stated with imposed rule.” Vess v. Ciba-Geigy (9th Cir. 2003) (citations omitted). 13 1 explained: Rule 9(b) requires particularized allegations of the circumstances constituting fraud. The time, place and content of an alleged misrepresentation may identify the statement or the omission complained of, but these circumstances do not “constitute” fraud. The statement in question must be false to be fraudulent. Accordingly, our cases have consistently required that circumstances indicating falseness be set forth.... [W]e [have] observed that plaintiff must include statements regarding the time, place, and nature of the alleged fraudulent activities, and that “mere conclusory allegations of fraud are insufficient.” ... The plaintiff must set forth what is false or misleading about a statement, and why it is false. In other words, the plaintiff must set forth an explanation as to why the statement or omission complained of was false or misleading.... 2 3 4 5 6 7 8 9 10 In certain cases, to be sure, the requisite particularity might be supplied with great simplicity. 11 12 13 In Re Glenfed, Inc. Securities Litigation, 42 F.3d 1541, 14 1547-1548 (9th Cir.1994) (en banc) (italics in original) superseded 15 by statute on other grounds as stated in Marksman Partners, L.P. v. 16 Chantal Pharm. Corp., 927 F.Supp. 1297 (C.D.Cal. 1996); see Cooper 17 v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997) (“fraud allegations 18 must be accompanied by “the who, what, when, where, and how” of the 19 misconduct charged). 20 The elements of a fraud are: (1) concealment or misrepresentation 22 nondisclosure); (2) knowledge of the falsity (or “scienter”); (3) 23 intent to defraud, i.e., to induce reliance; (4) justifiable 24 reliance; and (5) resulting damage. Lazar v. Superior Court, 12 25 Cal.4th 631, 638 (1996). 26 action 27 requirement of intent to induce reliance. Caldo v. Owens-Illinois, 28 Inc., 125 Cal. App. 4th 513, 519 (2004). negligent representation, claim 21 for (false California The same elements comprise a cause of misrepresentation, 14 except there is no 1 “[T]o establish a cause of action for fraud a plaintiff must 2 plead and prove in full, factually and specifically, all of the 3 elements of the cause of action. 4 Cal.App.4th 133, 156 (1996). 5 defendant thereby intended to induce the plaintiff to act to his 6 detriment in reliance upon the false representation” and “that the 7 plaintiff actually and justifiably relied upon the defendant's 8 misrepresentation 9 Cal.App.4th at 157. in acting Conrad v. Bank of America, 45 There must be a showing “that the to his detriment.” Conrad, 45 10 The complaint is severely lacking and fails to satisfy Rule 11 9(b) “who, what, when, where and how” requirements as to DHI 12 Mortgage, as well the other defendants. 13 Mut. Auto. Ins. Co., 2 Cal. App. 4th 153, 157 (1991) (a plaintiff 14 asserting fraud against a corporate employer must “allege the names 15 of the persons who made the allegedly fraudulent representations, 16 their authority to speak, to whom they spoke, what they said or 17 wrote, and when it was said or written.”) 18 establish fraud elements. 19 particular defendants, and the complaint’s global approach is 20 unsatisfactory. 21 suggest no potential improvement from an attempt to amend. The 22 fifth DHI 23 Mortgage. and sixth See Tarmann v. State Farm The complaint fails to The fraud allegations do not target The fraud claims' deficiencies are so severe to causes of action are DISMISSED against 24 25 F. Implied Covenant of Good Faith and Fair Dealing (Count VII) 26 The complaint's seventh claim alleges that DHI Mortgage 27 breached the covenant of good faith and fair dealing, which, 28 according to Plaintiffs, required DHI to “deal fairly and in good 15 1 faith with the plaintiff and not seek to take an undue advantage of 2 the plaintiff in their weakened bargaining position and with their 3 lesser knowledge, skill, education and ability regarding the loan 4 transactions.” DHI Mortgage notes the uncertainty whether the claim proceeds 5 6 (Compl. ¶ 56.) under contract or tort law. 7 i. Contract 8 9 “The prerequisite for any action for breach of the implied 10 covenant of good faith and fair dealing is the existence of a 11 contractual relationship between the parties, since the covenant is 12 an implied term in the contract.” 13 Francisco, 225 Cal. App. 3d 38, 49 (1990). The “implied covenant of 14 good faith and fair dealing is limited to assuring compliance with 15 the express terms of the contract, and cannot be extended to create 16 obligations not contemplated by the contract.” Pasadena Live, LLC 17 v. 18 (citation 19 plaintiff] cannot state a cause of action for breach of the implied 20 covenant.” City of Pasadena, omitted.) 114 Smith v. City and County of San Cal.App.4th “Without a 1089, contractual 1093-1094 (2004) relationship, [a Smith, 225 Cal. App. 3d at 49. DHI Mortgage correctly notes that the absence of allegations 21 22 to identify a particular contract or breach. The complaint 23 references “oral and/or written agreements with all defendants” but 24 fails to specify or detail such agreements. 25 conclusory allegations fail to support a contractual relationship 26 upon which to base an alleged breach of the implied covenant of 27 good faith and fair dealing. 28 breach of implied covenant of good faith and fair dealing claim for The complaint's DHI Mortgage further faults the 16 1 addressing alleged wrongs prior to contract formation. DHI is 2 correct that it could not have breached a contractual obligation 3 prior to contract formation. 4 Plaintiffs’ purported contract claim fails. 5 of good faith claim is DISMISSED. To the extent it was advanced, The implied covenant 6 ii. Tort 7 8 9 DHI Mortgage also challenges the breach of covenant of good faith and fair dealing claim's failure to allege a special 10 relationship to invoke tort liability. 11 action for the tortious breach of the implied covenant of good 12 faith and fair dealing can arise unless the parties are in a 13 ‘special relationship’ with ‘fiduciary characteristics.’” 14 Trust Fund v. Federal Ins. Co., 307 F.3d 944, 955 (9th Cir. 2002) 15 (applying 16 contractual relationship between the parties, [plaintiffs] have 17 pled no facts establishing a ‘special relationship’ between them 18 which could justify extending tort liability for bad faith to the 19 present context.” California law). “Moreover, “Generally, no cause of even if there Pension were a Smith, 225 Cal. App. 3d at 49. 20 The “implied covenant tort is not available to parties of an 21 ordinary commercial transaction where the parties deal at arms' 22 length.” 23 do not invoke a special relationship between a lender and borrower. 24 See Kim v. Sumitomo Bank, 17 Cal. App. 4th 974, 979 (1993) (“the 25 relationship of a bank-commercial borrower does not constitute a 26 special relationship for the purposes of the covenant of good faith 27 and fair dealing”); 28 212 Cal. App. 3d 726, 729 (borrower precluded to assert tortious Pension Trust Fund, 307 F.3d at 955. California courts Mitsui Manufacturers Bank v. Superior Court, 17 1 breach of implied covenant of good faith and fair dealing claim 2 against lender). A lender generally owes no fiduciary duty to a 3 borrower “it 4 borrower.” 5 unless excessively controls or dominates the Pension Trust Fund, 307 F.3d at 955. No special relationship arises between mortgage lender DHI 6 Mortgage and the borrower plaintiff. The complaint makes no 7 attempt to allege such a special relationship with meaningful 8 facts. 9 dealing claim fails in absence of allegations of a sufficient The breach of implied covenant of good faith and fair 10 contractual 11 plaintiffs. or special relationship between DHI Mortgage and The implied covenant tort claim is DISMISSED. 12 13 G. Failure to Produce the Note (Count VIII) 14 The complaint’s eighth cause of action alleges that defendants 15 “have not produced the Note to prove who the real party in interest 16 is” and “[n]one of the defendants are the real party in interest as 17 they have not provided nor can they provide the Note.” 18 61-63.) (Compl. ¶¶ 19 Like many other borrowers subject to foreclosure, Plaintiffs 20 appear to argue DHI needs to possess the original promissory note 21 to permit foreclosure. 22 totally discredited claim within the meaning of Rule 11 of the 23 Federal Rules of Civil Procedure. 24 This is not the law in California and a It is well-established that non-judicial foreclosures can be 25 commenced without producing the original promissory note. 26 judicial 27 California Civil Code section 2924, et seq. 28 provides that a “trustee, mortgagee or beneficiary or any of their foreclosure under a deed 18 of trust is Non- governed by Section 2924(a)(1) 1 authorized agents” may conduct the foreclosure process. California 2 courts have held that the Civil Code Provisions “cover every 3 aspect” of the foreclosure process, I.E. Assoc. v Safeco Title Ins. 4 Co., 5 exhaustive,” Moeller v. Lien, 25 Cal. App. 4th 822, 834 (1994). 6 There is no requirement that the party initiating foreclosure be in 7 possession of the original note. 8 LLC, 2008 WL 5382259, at *4 (E.D. Cal. Dec. 23, 2008) (“No 9 requirement 39 Cal. 3d 281, exists 285 under (1985), and are “intended to be See, e.g., Candelo v. NDEX West, statutory framework to produce the 10 original note to initiate non-judicial foreclosure.”); Putkkuri v. 11 ReconTrust 12 (“Production of the original note is not required to proceed with 13 a non-judicial foreclosure.”); see also Vargas v. Reconstruction 14 Co. , 2008 U.S. Dist. LEXIS 100115, at *8-9 (E.D. Cal. Dec. 1, 15 2008). 16 the note is incognizable and fails as matter of law. 17 DISMISSED. Co., 2009 WL 32567, *2 (S.D. Cal. Jan 5, 2009) Plaintiffs’ eighth cause of action for failure to produce It is 18 19 H. Unfair Lending Practices (Count IX) 20 The complaint's unfair lending practices claim alleges that 21 defendants “violated various California Statutes defining unfair 22 lending practices” and “made a home loan to the plaintiffs without 23 determining or using commercially reasonable means or mechanisms 24 that the borrowers had the ability to repay the loan.” 25 66-67.) 26 statutes violated by DHI Mortgage nor DHI Mortgage's wrongs to 27 violate such statutes. 28 factual (Compl. ¶¶ However, the complaint neither identifies the specific allegations, While Rule 8 does not demand detailed "it demands 19 more than an unadorned, 1 the-defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. 2 1937, 1949. 3 action, supported by mere conclusory statements, do not suffice." 4 Id. 5 identifiable claim and is DISMISSED. "Threadbare recitals of the elements of a cause of The unfair lending practices claim fails far short of an 6 7 I. 8 The complaint's tenth cause of action for “restoral of good 9 credit history” requests “restoral” of Plaintiffs' “reputation and 10 Restoral of Good Credit History (Count X) good credit history.” 11 DHI Mortgage correctly notes that the claim merely states a 12 remedy, not a cause of action, and fails since it is premised on 13 Plaintiffs' other flawed claims. The tenth claim is DISMISSED. 14 15 J. 16 The complaint's eleventh claim is comprised of one untitled 17 18 19 20 21 22 23 Wrongful Foreclosure (Count XI) paragraph, however, it appears to claim wrongful foreclosure: “Defendants, each of them, were aware of senate [sic] Bill 1137, which became law September 8, 2008 and as stated in [California Civil Code] 2923.5, due diligence, which set forth the requirement that any or all notice of default and or [sic] Notice of Trustee Sale must include a statement of affirmation reflecting that the Beneficiary and or [sic] its authorize [sic] trustee has complied within the herein above statute. Plaintiff state [sic] that the Notice of Default filed on DECEMBER 08, 2008 must be set aside for willful failure to comply with the law.” 24 (Compl. ¶ 70.) 25 California Civil Code section 2923.5 (“section 2923.5”) 26 requires a lender or its agent to attempt to contact a defaulted 27 borrower prior to foreclosure. Section 2923.5(a)(2) requires a 28 20 1 “mortgagee, 2 borrower 3 borrower's financial situation and explore options for the borrower 4 to avoid foreclosure.” Section 2923.5(b) requires a default notice 5 to include a declaration “from the mortgagee, beneficiary, or 6 authorized agent” of compliance with section 2923.5, including 7 attempt “with due diligence to contact the borrower as required by 8 this section.” 9 in Here, beneficiary person the or or authorized by telephone complaint does not agent” in to order include a “contact to assess single the the factual 10 allegation that DHI Mortgage participated in the notice of default 11 or notice of trustee sale; the complaint also fails to identify who 12 issued and recorded the notice of default. DHI Mortgage is correct 13 that the claim lacks sufficient allegations for a viable claim. 14 15 K. Unfair Lending Practices (Count XII) 16 The complaint's twelfth cause of action is entitled “Unfair 17 Lending Practices” but appears to attempt to re-allege fraud and 18 breach of fiduciary claims. The twelfth cause of action alleges 19 that “defendants committed acts of misrepresentations and fraud as 20 so [sic] the terms of the loans, mortgage, and sale of the property 21 with the intent to exert undue influence.” 22 alleges: “Due the defendants [sic] undue influence, they received 23 a deed of trust to the property for a loan that plaintiffs should 24 not have given or been allowed to take.” The claim further 25 To the extent Plaintiffs’ twelfth claim seeks to recover for 26 fraud and breach of fiduciary duty, it fails for the reasons 27 discussed above, i.e., Plaintiffs’ allegations do not satisfy Rule 28 9(b) and there is no fiduciary relationship between Plaintiffs and 21 1 DHI Mortgage. To the extent it attempts to allege undue influence, 2 the complaint also fails due to the absence of allegations of a 3 pattern of activity to support undue influence.5 4 twelfth cause of action is DISMISSED. Plaintiffs’ 5 6 L. 7 The complaint's thirteenth claim entitled “To restrain a 8 Wrongful Foreclosure,” alleges that the “representation as stated 9 on the Notice of Default were [sic] a false representation” and 10 that defendants “have foreclosed on a property that they had no 11 right to foreclose upon.” The claim includes identical allegations 12 as the eighth cause of action regarding lack of physical possession 13 of the promissory notes. 14 Wrongful Foreclosure (Count XIII) Like similar claims, the restraint of wrongful foreclosure 15 claim is deficient. The claim fails to allege that DHI Mortgage 16 commenced foreclosure and to identify the text, source and alleged 17 reliance on a misrepresentation. 18 wrongdoing to a specific defendant with requisite sufficiency. 19 the extent the claim seeks equitable relief, it fails in that it is The claim pinpoints no alleged To 20 21 22 23 24 25 26 27 28 5 Undue influence “involves a type of mismatch.” Myerchin v. Family Benefits, Inc., 162 Cal. App. 4th 1526, 1540 (2008). Undue influence is “generally accompanied by certain characteristics which tend to create a pattern. The pattern usually involves several of the following elements: (1) discussion of the transaction at an unusual or inappropriate time, (2) consummation of the transaction in an unusual place, (3) insistent demand that the business be finished at once, (4) extreme emphasis on untoward consequences of delay, (5) the use of multiple persuaders by the dominant side against a single servient party, (6) absence of third-party advisers to the servient party, (7) statements that there is no time to consult financial advisers or attorneys.” Myerchin, 162 Cal. App. 4th at 1540. 22 1 premised on the other flawed claims. The thirteenth claim is 2 DISMISSED. 3 4 M. Punitive Damages 5 The intentional misrepresentation and unfair lending practices 6 claims and complaint's prayer reference punitive damages. DHI 7 Mortgage seeks to strike the punitive damages claims in the absence 8 of viable fraud and undue influence claims. 9 Rule 12(f) empowers a court to strike from a pleading “any 10 redundant, immaterial, impertinent, or scandalous matter.” Motions 11 to strike may be granted if “it is clear that the matter to be 12 stricken could have no possible bearing on the subject matter of 13 the litigation.” 14 F.Supp. 820, 830 (N.D.Cal. 1992); Colaprico v. Sun Microsystems, 15 Inc., 758 F.Supp. 1335, 1339 (N.D.Cal. 1991). “[T]he function of a 16 [F.R.Civ.P.] 12(f) motion to strike is to avoid the expenditure of 17 time and money that must arise from litigating spurious issues by 18 dispensing with those issues prior to trial.” 19 A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). 20 strike maybe used to strike any part of the prayer for relief when 21 the damages sought are not recoverable as a matter of law.” 22 Bureerong v. Uvawas, 922 F.Supp. 1450, 1479, n. 34 (C.D.Cal. 1996). 23 In the absence of viable claims, Plaintiffs lack a claim for 24 punitive damages to warrant striking references to and prayer for 25 punitive 26 GRANTED. damages. LeDuc v. Kentucky Central Life Ins. Co., 814 The motion to 27 28 23 strike Sidney-Vinstein v. “[A] motion to punitive damages is 1 N. Attempt At Amendment 2 Plaintiffs' claims are incognizable or barred as a matter of 3 law. Plaintiffs are unable to cure their claims by allegation of 4 other 5 Defendant DHI Mortgage’s motion is GRANTED WITH PREJUDICE. facts and thus are not granted an attempt to amend. 6 V. CONCLUSION. 7 8 For the reasons stated: 9 (1) 10 The action against DHI Mortgage is DISMISSED with prejudice. 11 Defendant DHI Mortgage shall submit a form of order consistent 12 with, and within five (5) days following electronic service of, 13 this memorandum decision. 14 15 IT IS SO ORDERED. 16 Dated: aa70i8 October 2, 2009 /s/ Oliver W. Wanger UNITED STATES DISTRICT JUDGE 17 18 19 20 21 22 23 24 25 26 27 28 24
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