Smith v. Countrywide Financial Corporation et al, No. 2:2009cv00607 - Document 33 (E.D. Cal. 2009)
Court Description: ORDER GRANTING 24 Motion to Dismiss signed by Judge Frank C. Damrell, Jr on 10/21/2009; pltf is granted 15 days to file second amended complaint; dfts are granted 30 days from date of service of pltf's second amended complaint to file a response. (Suttles, J)
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Smith v. Countrywide Financial Corporation et al Doc. 33 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA ----oo0oo---- 10 11 12 YASMIN SMITH NO. CIV. 2-09-00607 FCD/KJM 13 Plaintiff, 14 v. MEMORANDUM AND ORDER 15 16 17 18 19 20 COUNTRYWIDE FINANCIAL CORPORATION, COUNTRYWIDE HOME LOANS, INC., COUNTRYWIDE BANK, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., a suspended California corporation, DEBRA DELGADO, RECONSTRUST COMPANY, N.A. and DOES 1-20 inclusive, 21 Defendants. 22 ----oo0oo---23 24 This matter is before the court on defendants Countrywide 25 Bank (“CB”), Countrywide Home Loans, Inc. (“CHL”), Mortgage 26 Electronic Registration Systems, Inc. (“MERS”), and Countrywide 27 Financial Corporation’s (“CFC”) (collectively “defendants”) 28 motions to dismiss plaintiff’s First Amended Complaint (“FAC”) 1 Dockets.Justia.com 1 for failure to state a claim on which relief may be granted 2 pursuant to Federal Rule of Civil Procedure 12(b)(6) and for 3 failure to allege the purported causes of action based on fraud 4 or concealment with particularity pursuant to Rule 9(b). 5 Plaintiff Yasmin Smith (“plaintiff”) opposes the motions. 6 the reasons set forth below,1 defendants’ motion to dismiss is 7 GRANTED.2 For BACKGROUND 8 9 In July 2007, plaintiff was looking to relocate her day care 10 business to California and was in need of a home loan. (First Am. 11 Compl. (“FAC”), filed June 8, 2009, 6:5-6.) 12 she met with CHL loan officer Debra Delgado (“Deldgado”), who 13 informed plaintiff that she qualified for the loan based upon her 14 credit score alone and that Delgado could get her the “best deal” 15 and the “best interest rates.” 16 representation, plaintiff entered into a “consumer credit 17 transaction” with defendants and also “entered into one loan as 18 part of the loan transaction, a first deed.” (Id. at 7:2-5.) 19 Plaintiff claims that she was not only advised that defendants 20 would refinance to a lower interest rate and payment after a 21 year, but that she could refinance if the loan became 22 unaffordable. (Id. at 6:15-17) Plaintiff alleges (Id. at 6:6-12.) Relying on this Plaintiff alleges that she relied 23 24 25 26 27 28 1 Because oral argument will not be of material assistance, the court orders this matter submitted on the briefs. E.D. Cal. L.R. 78-230(h). 2 Defendants also move to strike all allegations that are allegedly copied from other complaints pursuant to Rule 12(f) and for a more definite statement pursuant to Rule 12(e). Because the court grants defendants’ motion to dismiss, the court does not reach the merits of these motions. 2 1 on this representation to her detriment. (Id. at 6:11-14.) 2 Plaintiff claims that she was not given a copy of the loan 3 documents prior to closing as required, and that at the time of 4 closing, she was rushed to sign the documents (Id. at 6:20-24) 5 She further alleges that the loan documents were never explained 6 to her, she was never given the opportunity to review them, and 7 she never received the required copies of the notice of 8 cancellation. 9 (Id.) Plaintiff asserts that on or about August 21, 2007, she 10 completed the loan transaction. The terms of the loan were 11 included in the promissory note, secured by a deed of trust on 12 the property, which identified Recontrust Company as trustee, and 13 Countrywide Bank (“CB”) as the lender. 14 Plaintiff claims that Mortgage Electronic Registration Systems, 15 Inc. (“MERS”) was also the named nominee and beneficiary. (Id. at 16 7:5-6) Plaintiff alleges that when the loan was completed, she 17 did not receive “the required documents and disclosures, 18 including, but not limited to, the Truth in Lending Disclosure 19 Statement containing real disclosures and the required number of 20 copies of the Notice of Right to Cancel.” (Id. at 8:9-13.) (Id. at 7:1-4.) On February 10, 2009, plaintiff allegedly sent a Qualified 21 22 Written Request to defendants pursuant to the Real Estate 23 Settlement Procedures Act (“RESPA”), which demanded cancellation 24 of the pending Trustee Sale and rescission of the loan pursuant 25 to the provisions of the Truth in Lending Act (“TILA”). 26 7:13-16.) 27 of the CHL and CB’s actions of malice, oppression and fraud, 28 ///// (Id. at Plaintiff claims that as a direct and proximate result 3 1 plaintiff is entitled to damages for direct monetary loss, 2 consequential damages, and emotional distress. 3 In her First Amended Complaint, plaintiff asserts claims for 4 1) violation of TILA, 15 U.S.C. §§ 1601 et seq.; 2) violation of 5 the Rosenthal Fair Debt Collection Practices Act (“RFDCPA”), 3) 6 negligence, 4) violation of RESPA, 12 U.S.C. §§ 2601 et seq., 5) 7 breach of fiduciary duty, 6) fraud, 7) violation of California 8 Business and Professions Code § 17200; 8) breach of contract, 9) 9 breach of implied covenant of good faith and fair dealing, and 10 11 10) wrongful foreclosure. Defendants now move to dismiss plaintiff’s claims for 12 failure to state cognizable claims on which relief can be 13 granted. (Defs.’ P. & A. In Supp. of MTD (“MTD”), June 24, 2009, 14 4:23-25.) 15 First Amended Complaint or in the alternative, for a more 16 definite statement. Defendants also move to strike portions of plaintiff’s 17 18 STANDARDS Under Federal Rule of Civil Procedure 8(a), a pleading must 19 contain “a short and plain statement of the claim showing that 20 the pleader is entitled to relief.” 21 S. Ct. 1937, 1949 (2009). 22 court, the complaint must “give the defendant fair notice of what 23 the claim is and the grounds upon which it rests.” 24 v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations 25 omitted). 26 liberal discovery rules and summary judgment motions to define 27 disputed facts and issues and to dispose of unmeritorious 28 claims.” See Ashcroft v. Iqbal, 129 Under notice pleading in federal Bell Atlantic “This simplified notice pleading standard relies on Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002). 4 1 On a motion to dismiss, the factual allegations of the 2 complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 3 322 (1972). 4 every reasonable inference to be drawn from the “well-pleaded” 5 allegations of the complaint. 6 Schermerhorn, 373 U.S. 746, 753 n.6 (1963). 7 allege “‘specific facts’ beyond those necessary to state his 8 claim and the grounds showing entitlement to relief. 9 550 U.S. at 570. The court is bound to give plaintiff the benefit of Retail Clerks Int’l Ass’n v. A plaintiff need not Twombley, “A claim has facial plausibility when the 10 plaintiff pleads factual content that allows the court to draw 11 the reasonable inference that the defendant is liable for the 12 misconduct alleged.” 13 Iqbal, 129 S. Ct. at 1949. Nevertheless, the court “need not assume the truth of legal 14 conclusions cast in the form of factual allegations.” United 15 States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th 16 Cir. 1986). 17 allegations, “it demands more than an unadorned, the defendant- 18 unlawfully-harmed-me accusation.” 19 pleading is insufficient if it offers mere “labels and 20 conclusions” or “a formulaic recitation of the elements of a 21 cause of action.” 22 1950 (“Threadbare recitals of the elements of a cause of action, 23 supported by mere conclusory statements, do not suffice.”). 24 Moreover, it is inappropriate to assume that the plaintiff “can 25 prove facts which it has not alleged or that the defendants have 26 violated the . . . laws in ways that have not been alleged.” 27 Associated Gen. Contractors of Cal., Inc. v. Cal. State Council 28 of Carpenters, 459 U.S. 519, 526 (1983). While Rule 8(a) does not require detailed factual Iqbal, 129 S. Ct. at 1949. A Twombly, 550 U.S. at 555; Iqbal, 129 S. Ct. at 5 1 Ultimately, the court may not dismiss a complaint in which 2 the plaintiff has alleged “enough facts to state a claim to 3 relief that is plausible on its face.” 4 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 5 (2007)). 6 her] claims across the line from conceivable to plausible,” is 7 the complaint properly dismissed. 8 plausibility requirement is not akin to a probability 9 requirement, it demands more than “a sheer possibility that a Iqbal, 129 S. Ct. at 1949 Only where a plaintiff has failed to “nudge [his or Id. at 1952. Id. at 1949. While the 10 defendant has acted unlawfully.” 11 inquiry is “a context-specific task that requires the reviewing 12 court to draw on its judicial experience and common sense.” 13 at 1950. This plausibility Id. 14 In ruling upon a motion to dismiss, the court may consider 15 only the complaint, any exhibits thereto, and matters which may 16 be judicially noticed pursuant to Federal Rule of Evidence 201. 17 See Mir v. Little Co. Of Mary Hospital, 844 F.2d 646, 649 (9th 18 Cir. 1988); Isuzu Motors Ltd. V. Consumers Union of United 19 States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). 20 21 22 ANALYSIS A. Claims Against Countrywide Financial Corporation Defendants assert that CFC should be dismissed as a party to 23 this action due to plaintiff’s failure to allege any facts 24 implicating CFC. 25 corporation and its subsidiary will be treated as separate legal 26 entities.” 27 App. 4th 382, 391 (1st Dist. 1994); Laird v. Capital Cities/ABC, 28 Inc., 68 Cal. App. 4th 727, 741 (3d Dist. 1998). “It is the general rule that a parent Current Inc. v. State Bd. of Equalization, 24 Cal. 6 “The alter ego 1 doctrine is one exception to the rule where a parent corporation 2 will be found liable for the actions of its subsidiary when there 3 is (1) such unity of interest and ownership that the separate 4 personalities of the corporation and the individual no longer 5 exist, and (2) that if the acts are treated as those of the 6 corporation alone, an inequitable result will follow.” 7 v. Countrywide Home Loans, Inc., 2009 U.S. Dist. LEXIS 70856 8 (N.D. Cal. July 9, 2009) (citing Automotriz Del Golfo De 9 California v. Resnick, 47 Cal. 2d 792, 796 (1957); United States Pantoja 10 v. Healthwin-Midtown Convalescent, 511 F. Supp. 416, 418 (C.D. 11 Cal. 1981) affirmed 685 F.2d 448 (9th Cir. 1982). 12 exception to the general rule is when the subsidiary is the agent 13 of the parent, which requires a showing that the parent so 14 controls the subsidiary as to cause the subsidiary to be become 15 merely the instrumentality of the parent. 16 4th at 741. 17 subsidiary is not enough to find alter ego or agency liability. 18 Sonora Diamond Corp. v. Superior Court, 83 Cal. App. 4th 523, 19 539, 541 (5th Dist. 2000). Another Laird, 68 Cal. App. A parent corporation contributing funds to a 20 While plaintiff references defendant CFC as a wrongdoer in 21 the overall conspiracy of providing unaffordable home loans and 22 initiating in unfair business practices, the FAC fails to allege 23 any facts supporting a connection between CFC and the various 24 claims for relief asserted. 25 any factual assertions which would implicate CFC’s liability as 26 an alter ego or agent of other named corporate defendants. 27 Accordingly, defendants’ motion to dismiss all claims asserted 28 against CFC is GRANTED. Further, plaintiff fails to allege 7 1 B. TILA 2 1. Damages 3 Plaintiff’s first claim for relief alleges a violation of 4 the Truth in Lending Act (“TILA”) against defendants CHL and CB. 5 Defendants argue that the civil damages portion of plaintiff’s 6 TILA violation claim is time barred. 7 statutory period has not expired based on equitable tolling. Plaintiff asserts that the 8 TILA provides that a plaintiff can bring an action to 9 recover damages “within one year from the date of the occurrence In King, the Ninth 10 of the violation.” 11 Circuit held that equitable tolling of civil damages claims 12 brought under TILA might be appropriate “in certain 13 circumstances.” 14 (9th Cir. 1986). 15 reasonable opportunity within one year to discover the fraud or 16 nondisclosures that form the basis of a TILA action and that, 17 through TILA, Congress “sought to protect consumer’s choice 18 through full disclosure and to guard against the divergent and at 19 times fraudulent practices stemming from uninformed use of 20 credit.” 21 “district courts . . . can evaluate specific claims of fraudulent 22 concealment and equitable tolling to determine if the general 23 rule would be unjust or frustrate the purpose of the Act and 24 adjust the limitations period accordingly.” 25 determining whether the statute of limitations period has expired 26 for the purposes of a motion to dismiss, a court can only grant 27 the motion “if the assertions of the complaint, read with the 28 required liberality, would not permit the plaintiff to prove that Id. 15 U.S.C. § 1640(e). King v. State of California, 784 F.2d 910, 915 The court noted that a borrower may not have a As such, the Ninth Circuit explained that 8 Id. When 1 the statute was tolled.” 2 1204, 1206 (9th Cir. 1995). 3 Supermail Cargo, Inc. v. U.S., 68 F.3d In this case, defendants contend, and plaintiff does not 4 dispute, that the alleged TILA violations occurred no later than 5 August 21, 2007, the date plaintiff entered into the loan 6 agreement with defendants. 7 plaintiff did not bring her claim until March 3, 2009, more than 8 one year has elapsed since the alleged TILA violation. 9 (MTD 8:3-4.) Accordingly, since Plaintiff argues that equitable tolling may apply to her 10 TILA claim because it based upon defendants’ alleged failure to 11 clearly and conspicuously disclose various terms of the loan. 12 (FAC at 8:17-20; 9:19-23.) 13 facts to explain how defendants concealed the true facts or why 14 plaintiff could not otherwise have discovered the TILA violations 15 at the consummation of her loan. 16 all the more important . . . since the vast majority of 17 [p]laintiff’s] alleged violations under TILA are violations that 18 are self-apparent at the consummation of the transaction.” 19 Cervantes v. Countrywide Home Loans, Inc., 2009 U.S. Dist. LEXIS 20 87997, at ** 13-14 (D. Ariz. Sept. 23, 2009) (holding that 21 equitable tolling was not appropriate when plaintiffs simply 22 alleged that defendants “fraudulently misrepresented and 23 concealed the true facts related to the items subject to 24 disclosure”). However, plaintiff pleads no other “Such factual underpinnings are Accordingly, defendants’ motion to dismiss plaintiff’s claim 25 26 for civil damages based on violation of TILA is GRANTED. 27 ///// 28 ///// 9 1 2. Rescission 2 In her claim for rescission under TILA, plaintiff contends 3 that, as a result of defendants’ failure to provide the required 4 disclosure statements, she has a continuing right to rescission. 5 (FAC 11:20-22.) 6 rescission claim under TILA must be dismissed because, under 7 TILA, rescission is dependent on the borrower’s ability to return 8 the loan principal, which plaintiff has not adequately alleged. 9 Defendants CHL and CB assert that plaintiff’s 15 U.S.C. § 1635(b) “adopts a sequence of rescission and 10 tender that must be followed unless the court orders otherwise: 11 within twenty days of receiving a notice of rescission, the 12 creditor is to return any money or property and reflect 13 termination of the security interest; when the creditor has met 14 these obligations, the borrower is to tender the property.” 15 Yamamoto v. Bank of N.Y., 329 F. 3d 1167, 1170 (9th Cir. 2003). 16 The Ninth Circuit has held that rescission under TILA “should be 17 conditioned on repayment of the amounts advanced by the lender.” 18 Id. (emphasis in original). 19 courts have required a plaintiff to plead facts relating to the 20 ability to tender the loan principal in order to withstand a 21 12(b)(6) motion to dismiss and proceed with a claim for 22 rescission under TILA. 23 188604 at *5 (E.D. Cal. Jan. 27, 2009) (“rescission is an empty 24 remedy without [plaintiff’s] ability to pay back what she has 25 received”); Serrano v. Sec. Nat’l Mortg. Co., 2009 U.S. Dist. 26 Lexis 71725 (S.D. Cal. Aug. 14, 2009) (“If Plaintiff continues to 27 seek rescission under TILA, he must tender the owed amount or 28 provide proof of his ability to tender”); Pesayco v. World Say., A number of California district Garza v. Am. Home Mortgage, 2009 WL 10 1 Inc., 2009 U.S. Dist. LEXIS 73299 (C.D. Cal. July 29, 2009) (“[A] 2 claim for TILA rescission will only be able to succeed if 3 Plaintiff can show the ability to tender the principal of the 4 subject loan.”). 5 Plaintiff has failed to allege any facts relating to her 6 ability to tender the loan principal. 7 motion to dismiss plaintiff’s claim for rescission under TILA is 8 GRANTED. 9 C. 10 Accordingly, defendants’ RFDCPA Plaintiff’s second claim for relief alleges that defendants 11 CHL, CB, CFC, and MERS violated the California Rosenthal Act 12 (“RFDCPA”). 13 threatened to take actions not permitted by law, including but 14 not limited to: foreclosing upon a void security interest; 15 foreclosing upon a note of which they were not in possession nor 16 otherwise entitled to payment; falsely stating the amount of a 17 debt; increasing the amount of a debt by including amounts that 18 are not permitted by law or contract; and using unfair and 19 unconscionable means in an attempt to collect a debt. 20 12:22-27.) 21 Specifically, plaintiff claims that defendants (FAC at The purpose of the RFDCPA is “to prohibit debt collectors 22 from engaging in unfair or deceptive acts or practices in the 23 collection of consumer debts and to require debtors to act fairly 24 in entering into and honoring such debts.” 25 1788.1(b). 26 “any person who, in the ordinary course of business, regularly, 27 on behalf of himself or herself or others, engages in debt 28 collection.” Cal. Civ. Code § Under the RFDCPA, a “debt collector” is defined as (Cal. Civ. Code. § 1788.2(c)). 11 A debt collector 1 violates the act when it engages in harassment, threats, the use 2 of profane language, false simulation of the judicial process, or 3 when it cloaks its true nature as a licensed collection agency in 4 an effort to collect a debt. 5 88.18; see also Hernandez v. Cal. Reconveyance Co., 2009 U.S. 6 Dist. LEXIS 13936, at * 13 (E.D. Cal. Feb. 23, 2009) (holding 7 that a RFDCPA claim failed because the complaint lacked 8 allegations of harassment or abuse, false or misleading 9 representations of the debt collector’s identity, or unfair See Cal. Civ. Code §§ 1788.10- 10 practices during the process of collecting debt). 11 not applicable until after a loan is made and does not constitute 12 a lending regulation. 13 Supp. 2d 1061, 1064 (N.D. Cal. 2004). 14 deed of trust does not implicate the RFDCPA. 15 Aurora Loan Servs., 2009 U.S. Dist. LEXIS 78384, at *6 (N.D. Cal. 16 Sept. 1, 2009) (dismissing plaintiff’s complaint “because 17 foreclosing on a property pursuant to a deed of trust is not the 18 collection of a debt within the meaning of the RFDCPA”); Ricon v. 19 Recontrust Co., 2009 U.S. Dist. LEXIS 67807, at *9 (S.D. Cal. 20 Aug. 4, 2009); Hepler v. Wash. Mut. Bank, F.A., 2009 U.S. Dist. 21 LEXIS 33883, at *11 (C.D. Cal. April 17, 2009). 22 The RFDCPA is See Alkan v. Citimortgage, Inc., 336 F. Moreover, foreclosing on a See e.g. Benham v. Plaintiff’s complaint fails to allege any facts supporting 23 how defendants violated the RFDCPA. 24 Cal., 2009 U.S. Dist. Lexis 60400 (N.D. Cal. July 15, 2009) 25 (dismissing the plaintiff’s complaint where it did not allege 26 facts giving rise to the inference that any of the defendants is 27 a debt collector as defined by the RFDCPA” nor assert what 28 provisions of the RFDCPA defendants allegedly violated). 12 Rosal v. First Fed. Bank of 1 Plaintiff does not allege that defendants used threats, 2 harassment, or profane language to collect a debt after the loan 3 was made. 4 acted as a debt collector pursuant to the RFDCPA. 5 Deutsche Bank, 2009 U.S. Dist. LEXIS 57931 (S.D. Cal. July 8, 6 2009) (granting defendant’s motion for judgment “[s]ince a 7 residential mortgage is not a debt and a home foreclosure is not 8 debt collection within the meaning of the statute”); Gamboa v. 9 Trustee Corps, 2009 WL 656285 (N.D. Cal. March 12, 2009) (“[T]he Further, plaintiff fails identify who among defendants See Fuentes v. 10 law is clear that foreclosing on a property pursuant to a deed of 11 trust is not a debt collection within the meaning of the 12 RFDCPA.”). Accordingly, defendants’ motion to dismiss plaintiff’s 13 14 second claim for violation of RFDCPA is GRANTED. 15 D. 16 Negligence Plaintiff’s third claim for relief alleges that all 17 defendants were negligent in directing her into a loan 18 transaction against industry standards, resulting in 19 unnecessarily increased fees, which defendants knew were in 20 excess of what plaintiff could afford. 21 Further, plaintiff alleges that defendants failed to maintain the 22 original mortgage note and to make the statutorily required 23 disclosures to plaintiff. 24 claim fails because she has failed to plead sufficient facts 25 supporting a duty owed by them to plaintiff. (FAC at 13:16-19.) Defendants contend that plaintiff’s 26 The elements of a cause of action for negligence are (1) a 27 legal duty to use reasonable care, (2) breach of that duty, and 28 (3) proximate [or legal] cause between the breach and (4) the 13 1 plaintiff’s injury.” Mendoza v. City of Los Angeles, 66 Cal. 2 App. 4th 1333, 1339 (1998). 3 legal duty of care . . . 4 be determined by the courts alone.” 5 Ariz., N.A. v. Murphy, Weir & Butler, 210 F.3d 983, 987 (9th Cir. 6 2000). 7 breach and no negligence.” 8 1672, 1683 (1993); Nymark v. Heart Fed. Savings & Loan Assn., 231 9 Cal. App. 3d 1089, 1096 (Cal. App. 3d Dist. 1991) (“The existence “The question of the existence of a presents a question of law which is to First Interstate Bank of “Absent the existence of duty ... , there can be no Nichols v. Keller, 15 Cal. App. 4th 10 of a duty of care owed by a defendant to a plaintiff is a 11 prerequisite to establishing a claim for negligence.”) (citations 12 omitted). 13 “Under California law, a lender does not owe a borrower or 14 third party any duties beyond those expressed in the loan 15 agreement, except[] those imposed due to special circumstance.” 16 Resolution Trust Corp. v. BVS Dev., 42 F.3d 1206, 1214 (9th Cir. 17 1994) (citing Nymark, 231 Cal. App. 3d at 1096 (1991)); see also 18 Cataulin v. Wash. Mut. Bank, 2009 U.S. Dist. LEXIS 59708, at *6 19 (S.D. Cal. July 13, 2009); Spencer v. DHI Mortgage Co., 2009 U.S. 20 Dist. LEXIS 55191, at *8 (E.D. Cal. June 30, 2009); Mangindin v. 21 Wash. Mut. Bank, 2009 U.S. Dist. LEXIS 51231, at *21 (N.D. Cal. 22 June 17, 2009). 23 actively participates in the financed enterprise. 24 231 Cal. App. 3d at 1096; Wagner v. Benson, 101 Cal. App. 3d 27, 25 35 (1980) (“Liability to a borrower for negligence arises only 26 when the lender ‘actively participates’ in the financed 27 enterprise beyond the domain of the usual money lender.”). 28 lender may also be secondarily liable through the actions of a Special circumstances arise when a lender 14 See Nymark, A 1 mortgage broker, who has a fiduciary duty to its borrower-client, 2 if there is an agency relationship between the lender and the 3 broker. 4 LEXIS 38807, at *23 (N.D. Cal. Dec. 13, 2005). 5 See Plata v. Long Beach Mortg. Co., 2005 U.S. Dist. In her complaint, plaintiff describes nothing more than an 6 arms-length loan transaction between defendants and herself. 7 Plaintiff also does not allege that defendant actively 8 participated in the financed enterprise beyond the usual 9 practices associated with the lending business. As such, under 10 the facts pled in the complaint, defendants owe plaintiff no duty 11 of care. 12 negligence claim is GRANTED. 13 E. 14 Therefore, defendants’ motion to dismiss plaintiff’s RESPA Plaintiff’s fourth claim for relief alleges that defendants 15 CHL and CB violated the Real Estate Settlement Procedures Act 16 (“RESPA”) pursuant to 12 U.S.C. § 2605 et seq. by failing to 17 correctly and accurately comply with disclosure requirements at 18 the time of closing on the sale of the property. 19 specifically alleges that defendants violated 12 U.S.C. § 20 2605(e)(2) by failing to provide a written explanation or 21 response to plaintiff’s qualified written request (“QWR”). 22 Defendants move to dismiss plaintiff’s RESPA claim 23 allegations reflect that the “QWR” did not challenge the accuracy 24 of the account or information regarding servicing of the loan and 25 thus, do not meet the description in Section 2605(e)(1). 26 Plaintiff because the Section 2605 requires a loan servicer to provide disclosures 27 relating to the assignment, sale, or transfer of loan servicing 28 to a potential or actual borrower: (1) at the time of the loan 15 1 application, and (2) at the time of transfer. 2 The loan servicer also has a duty to respond to a borrower’s 3 inquiry or “qualified written request.” 4 qualified written request is a written correspondence that 5 enables the servicer to identify the name and account of the 6 borrower. 7 statement describing why the borrower believes that the account 8 is in error or provides sufficient detail to the servicer 9 regarding other information sought by the borrower. 12 U.S.C. § 2605(e)(1). 12 U.S.C. § 2605. 12 U.S.C. § 2605(e). A It also either includes a Id. The 10 loan servicer is required to respond by making appropriate 11 corrections to the borrower’s account, if necessary and, after 12 conducting an investigation, providing the borrower with a 13 written clarification or explanation. 14 Pursuant to § 2605(i), “‘servicing’ means receiving any scheduled 15 periodic payments from a borrower . . . and making the payments 16 of principal and interest and such other payments with respect to 17 the amounts received from the borrower.” 18 12 U.S.C. § 2605(e)(2). Plaintiff alleges that on February 10, 2009, she mailed a 19 QWR to defendant CHL, which included a demand to cancel the 20 pending Trustee Sale and for rescission pursuant to TILA. (FAC at 21 7:13-15.) 22 February 10, 2009 letter “simply disputed the validity of the 23 loan and not its servicing.” 24 Hillery, -- F. Supp. 2d --, 2009 WL 2711264 (Aug. 26, 2009 N.D. 25 Cal. 2009); see MorEquity, Inc. v. Naeem, 118 F. Supp. 2d 885, 26 900-01 (N.D. Ill.2000) (noting that the “[t]he counterclaim 27 alleges [that the request alleged] a forged deed, and 28 irregularities with respect to the recoding of the two loans, but According to the allegations in the complaint, the Consumer Solutions REO, LLC v. 16 1 [made] no claim with respect to improper servicing” and therefore 2 dismissing claim pursuant to § 2605(e)). 3 failed to set forth facts alleging that she sent a valid and 4 actionable QWR to defendant. Accordingly, defendants’ motion to dismiss plaintiff’s RESPA 5 6 claim is GRANTED.3 7 F. 8 9 As such, plaintiff has Breach of Fiduciary Duty Plaintiff’s fifth claim for relief alleges that defendant CB breached its fiduciary duties to act primarily for plaintiff’s 10 benefit by allegedly obtaining a loan with unfavorable terms, 11 failing to disclose the negative consequences of the loan, and 12 securing a secret profit by failing to comply with TILA, RESPA 13 and engaging in unfair business practices. 14 dismiss the claim on the basis that a lending institution does 15 not owe a fiduciary duty to a borrower. 16 Defendants move to Plaintiff’s claim fails for the same reason the negligence 17 claim fails. In order to sustain a claim for breach of a 18 fiduciary duty, “a plaintiff must demonstrate the existence of a 19 fiduciary relationship, breach of that duty and damages.” 20 Serrano v. Sec. Nat’l Mortg. Co., 2009 U.S. Dist. LEXIS 71725 21 (S.D. Cal. Aug. 14, 2009) (citing Shopoff & Cavallo LLP v. Hyon, 22 167 Cal. App. 4th 1489, 85 Cal. Rptr.3d 268, 285 (Cal. Ct. App. 23 3 24 25 26 27 28 Plaintiff also asserts that defendants violated RESPA at the time of closing on the sale of the property by failing to correctly and accurately comply with disclosure requirements. However, plaintiff fails to allege any facts pertaining to which defendant(s) failed to correctly and accurately comply with disclosure requirements and what documents the defendant(s) failed to provide. In the absence of any facts supporting plaintiff’s contention that defendants failed to comply with disclosure requirements, plaintiff fails to allege a cognizable RESPA cause of action on this basis. 17 1 2008). “Absent special circumstances, a loan transaction is at 2 arms-length and there is no fiduciary relationship between the 3 borrower and lender.” 4 U.S. Dist. LEXIS 65674, at *8 (E.D. Cal. July 20, 2009); see also 5 e.g. Tasaranta v. Homecomings Fin., 2009 U.S. Dist. LEXIS 87372, 6 at *15 (S.D. Cal. Sept. 21, 2009); Brittain v. IndyMac Bank, FSB, 7 2009 U.S. Dist. LEXIS 84863, at * 14 (N.D. Cal. Sept. 16, 2009); 8 Dinsmore-Thomas v. Ameriprise Fin., Inc., 2009 U.S. Dist. LEXIS 9 68882, at *29 (C.D. Cal. Aug. 3, 2009); Fox & Carskadon Financial Rangel v. DHI Mortgage Co., Ltd., 2009 10 Corp. v. San Francisco Fed. Sav. & Loan Assn. 52 Cal. App. 3d 11 484, 488, 489 (1st Dist. 1975); Bradler v. Craig, 274 Cal. App. 12 2d 466, 473, 476 (2d Dist. 1969). 13 Because, as set forth above, plaintiff has failed to allege 14 any facts that would give rise to a fiduciary relationship 15 between defendants and herself, defendants’ motion to dismiss 16 plaintiff’s claim for breach of fiduciary duty is GRANTED. 17 G. 18 Fraud Plaintiff’s sixth claim for relief alleges that all 19 defendants committed fraud by intentionally and falsely 20 representing to plaintiff that she qualified for a loan based 21 upon her credit score alone and that defendants would refinance 22 to a lower interest rate and payment in one year. 23 claims that she relied upon such representations in purchasing 24 the property, but that on or about June 10, 2008, defendants 25 caused a Notice of Default to be issued and recorded and executed 26 a foreclosure. 27 claim for failure to satisfy Rule 9(b)’s heightened pleading 28 requirements. Plaintiff Defendants move to dismiss plaintiff’s fraud 18 1 Under California law, the elements of common law fraud are 2 “misrepresentation, knowledge of its falsity, intent to defraud, 3 justifiable reliance, and resulting damages.” 4 Am., Nat’l Ass’n, 138 Cal. App. 4th 1371, 1381 (2006). 5 may dismiss a claim grounded in fraud when its allegations fail 6 to satisfy Rule 9(b)’s heightened pleading requirements. 7 Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). 8 Therefore, plaintiff “must state with particularity the 9 circumstances constituting fraud.” Gil v. Bank of A court Fed. R. Civ. P. 9(b). Vess v. In 10 other words, the plaintiff must include “the who, what, when, 11 where, and how” of the fraud. 12 “The plaintiff must set forth what is false or misleading about a 13 statement, and why it is false.” Decker v. Glenfed, Inc., 42 14 F.3d 1541, 1548 (9th Cir. 1994). The purpose of Rule 9(b) is to 15 ensure that defendants accused of the conduct specified have 16 adequate notice of what they are alleged to have done, so that 17 they may defend against the accusations. 18 F.3d 1493, 1502 (9th Cir. 1995). 19 defendants in these cases would be put to an unfair advantage, 20 since at the early stages of the proceedings they could do no 21 more than generally deny any wrongdoing.” 22 Weidner, 780 F.2d 727, 731 (9th Cir. 1985). 23 Id. at 1106 (citations omitted). Concha v. London, 62 “Without such specificity, Id. (citing Semegen v. Furthermore, “Rule 9(b) does not allow a complaint to merely 24 lump multiple defendants together but require[s] plaintiffs to 25 differentiate their allegations when suing more than one 26 defendant . . . and inform each defendant separately of the 27 allegations surrounding his alleged participation in the fraud.” 28 Swartz v. KPMG LLP, 476 F.3d 756, 765-66 (9th Cir. 2007). 19 When 1 asserting a fraud claim against a corporation, “the plaintiff’s 2 burden . . . is even greater. . . . The plaintiff must ‘allege 3 the names of the persons who made the allegedly fraudulent 4 representations, their authority to speak, to whom they spoke, 5 what they said or wrote, and when it was said or written.’” 6 Lazar v. Superior Court, 12 Cal. 4th 631, 645 (1996) (quoting 7 Tarmann v. State Farm Mut. Auto. Ins. Co., 2 Cal. App. 4th 153, 8 157 (1991)); see also Edejer, 2009 U.S. Dist. LEXIS 52900 at *36 9 (dismissing the fraud claim where the plaintiff did not allege 10 any misrepresentation or false statements made by the defendants; 11 did not allege the names of the persons who made the allegedly 12 fraudulent representations and their authority to speak; and did 13 not allege with sufficient particularity or clarity what was 14 false or misleading about the statements); Mohammad Akhavein v. 15 Argent Mortgage Co., 2009 U.S. Dist. LEXIS 61796, at *10 (N.D. 16 Cal. July 17, 2009); Spencer v. DHI Mortgage Co., 2009 U.S. Dist. 17 LEXIS 55191, at *18 (E.D. Cal. June 30, 2009) (dismissing the 18 plaintiff’s fraud claim without leave to amend because it failed 19 to satisfy Rule 9(b)’s “‘who, what, when, where and how’ 20 requirements” and was so deficient as to “suggest no potential 21 improvement from an attempt to amend”). 22 In this case, plaintiff fails to satisfy the heightened 23 pleading requirements of Rule 9(b) with respect to her 24 allegations against defendants. 25 false statements were made by CHL or MERS. 26 alleges that Delgado made the allegedly false statements on 27 behalf of CB, plaintiff fails to allege any facts relating to 28 Delgado’s authority to make such representations on its behalf. Plaintiff fails to allege what 20 Assuming plaintiff 1 Nor did plaintiff allege with sufficient particularity or clarity 2 what is false or misleading about the statement or why it is 3 false. 4 sixth claim for relief is GRANTED. 5 H. 6 Accordingly, defendant motion to dismiss plaintiff’s Breach Of Contract Plaintiff’s eighth claim for relief alleges breach of 7 contract against defendants Delgado and CB. 8 that plaintiff’s claims must be dismissed for failure to state a 9 claim upon which relief may be granted. 10 Defendants argue In California, “[a] cause of action for breach of contract 11 requires proof of the following elements: (1) existence of the 12 contract; (2) plaintiff's performance or excuse for 13 nonperformance; (3) defendant’s breach; and (4) damages to 14 plaintiff as a result of the breach.” 15 Maldonado, 158 Cal. App. 4th 1226, 1239 (2008). 16 contractual claims on a motion to dismiss is proper if the terms 17 of the contract are unambiguous.” 18 Residential Mortgage Corp., –– F. Supp. 2d –-, No. CV 07-05607 19 SJO (CTX), 2008 WL 867727, at *5 (C.D. Cal. 2008). 20 provision will be considered ambiguous when it is capable of two 21 or more reasonable interpretations.” 22 Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co., 855 P.2d 1263, 23 1271 (Cal. 1993)). 24 interpreted most strongly against the party who caused the 25 uncertainty to exist.” 26 CDF Firefighters v. “Resolution of Monaco v. Bear Stearns “A contract Id. (citing Bay Cities “[T]he language of a contract should be Cal. Civ. Code § 1654. With respect to an oral contract to restructure the terms of 27 a loan, the agreement must embody definite terms, capable of 28 enforcement, in order to constitute a legal contract. 21 Price v. 1 Wells Fargo Bank, 213 Cal. App. 3d 465, 483 (1st Dist. 1989) 2 (noting that “the terms of a restructuring agreement obviously 3 may vary as widely as the terms of the original agreement”). 4 “Preliminary negotiations or an agreement for future negotiations 5 are not the functional equivalent of a valid, subsisting 6 agreement.” 7 38, 59 (1st Dist. 1988)). 8 that a loan or mortgage would be restructured is insufficient to 9 state a claim for breach of contract. Id. (quoting Kruse v. Bank of Am., 202 Cal. App. 3d Moreover, the mere “understanding” Id. In this case, plaintiff merely alleges that defendant 10 11 promised to refinance plaintiff’s loan to a lower rate after a 12 year or when the loan became unaffordable. 13 that defendant CB breached this contract by failing to refinance 14 the loan. 15 facts alleging a valid, enforceable contract under California 16 law, she has failed to state a viable claim for breach of such a 17 contract. 18 eighth claim for relief is GRANTED. 19 I. 20 Plaintiff contends Because plaintiff’s allegations fail to set forth any Accordingly, defendants’ motion to dismiss plaintiff’s Wrongful Foreclosure Plaintiff’s tenth cause of action alleges a wrongful 21 foreclosure claim against defendants CHL and Recontrust. 22 Defendants contend that plaintiff’s claim must fail because it is 23 based solely upon defendants’ lack of possession of the note. 24 Section 3301 of the California Commercial Code defines a 25 “[p]erson entitled to enforce” as “(a) the holder of the 26 instrument, (b) a nonholder in possession of the instrument who 27 has the rights of a holder, or (c) a person not in possession of 28 the instrument who is entitled to enforce the instrument ...” 22 1 However, possession of the original promissory note is not 2 required to permit foreclosure. 3 Co., Ltd., U.S. Dist. LEXIS 65674, at *24 (E.D. Cal. July 20, 4 2009); Pantoja v. Countrywide Home Loans, Inc., 2009 U.S. Dist. 5 LEXIS 70856, at *14 (N.D. Cal. July, 9 2009); Calderon v. Endres, 6 2009 U.S. Dist. LEXIS 57936, at *8 (S.D. Cal. July 7, 2009). 7 mere allegation that a trustee or lender does not have the 8 original note or has not received it is insufficient to render 9 the foreclosure proceeding invalid. See Neal v. Juarez, 2007 U.S. 10 See e.g. Rangel v. DHI Mortg. A Dist. LEXIS 98068, WL 2140640, *8 (S.D. Cal. July, 23 2007). In her complaint, plaintiff merely alleges that defendants 11 12 are not in possession of the note and are therefore not entitled 13 to enforce the security interest on the property. 14 The allegation fails to support plaintiff’s claim as a matter of 15 law. 16 that defendants were not entitled to enforce the security 17 interest pursuant to § 3301. 18 dismiss the tenth claim for relief for wrongful foreclosure is 19 GRANTED.4 20 ///// 21 ///// (FAC 7:17-19.) Plaintiff fails to set forth any facts to support her claim Accordingly, defendants’ motion to 22 23 24 25 26 27 28 4 Plaintiff also asserts that defendants failed to record and give Notice of Default as required by California Civil Code § 2923.5(b). Section 2923.5(b) provides that a declaration shall be included in a notice of default stating that “the mortgagee, beneficiary, or authorized agent . . . has contacted the borrower . . . or tried with due diligence to contact the borrower.” However, this section did not become “effective” until July 8, 2008, a month after the alleged default. Furthermore, aside from the conclusory allegations that defendants failed to comply with statutory notice requirements, plaintiff alleges no facts to support this claim. Accordingly, plaintiff has failed state a claim pursuant to this section. 23 1 2 J. Breach of Implied Covenant of Good Faith and Fair Dealing Additionally, plaintiff’s ninth claim for relief asserts 3 that all defendants breached the implied covenant of good faith 4 and fair dealing. 5 collectively breached the implied covenant of good faith when 6 they: (1) failed to put as much consideration to plaintiff’s 7 interest as their own interests; (2) initiated foreclosure 8 proceedings on the property despite not having the right to do so 9 and failure to comply with California law; (3) failed to give Plaintiff specifically alleges that defendants 10 proper notice before commencing foreclosure; (4) sent deceptive 11 letters to plaintiff advising plaintiff of her ability to short 12 sale her property when defendant had no intention to act. 13 at 19:7-12.) 14 (FAC “The prerequisite for any action for breach of the implied 15 covenant of good faith and fair dealing is the existence of a 16 contractual relationship between the parties.” 17 County of San Francisco, 225 Cal. App. 3d 38, 49 (1990). 18 establish a breach of an implied covenant of good faith and fair 19 dealing, a plaintiff must establish the existence of a 20 contractual obligation, along with conduct that frustrates the 21 other party’s rights to benefit from the contract.” 22 PNC Fin. Servs. Group, Inc., 2009 U.S. Dist. LEXIS 64624, at 23 **15-16 (N.D. Cal. July 27, 2009). 24 implied covenant of good faith and fair dealing involves 25 something beyond breach of the contractual duty itself.” 26 & Co. v. Security Pacific Business Credit, Inc., 222 Cal. App. 3d 27 1371, 1394 (1990). 28 dealing is limited to assuring compliance with the express terms Smith v. City & “To Fortaleza v. Furthermore, “a breach of the Careau The “implied covenant of good faith and fair 24 1 of the contract, and cannot be extended to create obligations not 2 contemplated by the contract.” 3 Pasadena, 114 Cal. App. 4th 1089, 1093-1094 (2004). 4 implied covenant will only be recognized to further the 5 contract's purpose; it will not be read into a contract to 6 prohibit a party from doing that which is expressly permitted by 7 the agreement itself.” 8 Television, 162 Cal. App. 4th 1107, 1120 (2008). 9 Pasadena Live, LLC v. City of “[T]he Wolf v. Walt Disney Pictures and Plaintiff contends that this claim is a derivative of her 10 breach of contract claim. However, while plaintiff’s breach of 11 contract claim is alleged against only defendants CB and Delgado, 12 plaintiff alleges this claim against all defendants. 13 unclear from the allegations in the complaint what contract 14 plaintiff is referring to and which defendant was a party to 15 those specific contracts. 16 claims are based upon the same conduct giving rise to her 17 wrongful foreclosure claims, as set forth above, plaintiff has 18 failed to set forth sufficient facts to state a claim. 19 plaintiff’s allegation regarding the defendants sending deceptive 20 letters regarding her ability to short sale her property is not 21 supported by any factual allegations in the FAC and bears no 22 relation to any contract described therein. It is Further, to the extent plaintiff’s Finally, 23 Accordingly, defendants’ motion to dismiss plaintiff’s ninth 24 claim for relief for breach of implied covenant of good faith and 25 fair dealing is GRANTED. 26 ///// 27 ///// 28 ///// 25 1 2 K. Violations of UCL Finally, plaintiff’s seventh claim alleges that all 3 defendants violated California Business & Professions Code § 4 17200 by participating in unfair and fraudulent business 5 practices. 6 claim as she merely relies upon a conclusory assertion of 7 unlawful, unfair, and fraudulent business practices and bases her 8 claims upon the foregoing violations, which fail to state a 9 claim. 10 Defendant argues that plaintiff fails to state a The Unfair Competition Law (“UCL”), California Business and 11 Professions Code §§ 17200, et seq., forbids acts of unfair 12 competition, which includes “any unlawful, unfair or fraudulent 13 business act or practice.” 14 UCL is broad in scope, embracing anything that can properly be 15 called a business practice and that at the same time is forbidden 16 by law.” 17 App. 4th 950, 959 (2008) (internal citations omitted). 18 17200 “‘borrows’ violations of other laws and treats” them as 19 unlawful business practices “independently actionable under 20 section 17200.” 21 377, 383 (1992). 22 local law may serve as the basis for a[n] [unfair competition] 23 claim.” 24 1098 (9th Cir. 2008) (citing Suanders v. Superior Court, 27 Cal. 25 App. 4th 832, 838-39 (1994)); see Hauk v. JP Morgan Chase Bank 26 United States, 552 F.3d 1114 (9th Cir. 2009) (“California’s UCL 27 has a broad scope that allows for ‘violations of other laws to be 28 treated as unfair competition that is independently actionable’ Cal. Bus. & Prof. Code § 17200. “The People ex rel. Gallegos v. Pacific Lumber Co., 158 Cal. Section Farmers Ins. Exch. V. Superior court, 2 Cal. 4th Violation of almost any federal, state, or Plascencia v. Lending 1st Mortg., 583 F. Supp. d 1090, 26 1 while also ‘sweep[ing] within its scope acts and practices not 2 specifically proscribed by any other law.”). 3 Because plaintiff’s UCL claim is predicated on facts 4 supporting plaintiff’s other claims, all of which the court has 5 dismissed, defendants’ motion to dismiss plaintiff’s seventh 6 cause of action for violations of California Business & 7 Professions Code § 17200 is GRANTED. 8 9 CONCLUSION For the foregoing reasons, defendants’ motion to dismiss is 10 GRANTED. 11 this order to file a second amended complaint in accordance with 12 this order. 13 the date of service of plaintiff’s second amended complaint to 14 file a response thereto. 15 16 17 Plaintiff is granted fifteen (15) days from the date of Defendants are granted thirty (30) days from IT IS SO ORDERED. DATED: October 21, 2009 _______________________________________ FRANK C. DAMRELL, JR. UNITED STATES DISTRICT JUDGE 18 19 20 21 22 23 24 25 26 27 28 27
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