-WVG Quintero Family Trust et al v. Federal Deposit Insurance Corporation et al, No. 3:2009cv01561 - Document 62 (S.D. Cal. 2010)

Court Description: ORDER granting in part and denying in part One West Bank FSB's 8 Motion to Dismiss; granting in part and denying in part Clarion Mortgage Capital, Inc.'s 11 Motion to Dismiss. Court denies Dfts' motion as to the TILA claim for reci ssion alleged in the first cause of action. Plaintiffs have leave to amend claim if they wish in conjunction w/ the other dismissed claims. The Motions to Dismiss are granted, in all other respects. Court dismisses w/ leave to amend: 1.) 2nd and 5th causes of action against OneWest and IndyMac, 2.) 6th cause of action for violation of Sections 2605(a) and 2605(e) of RESPA against all moving dfts, 3.) 8th, 9th, 10th, 14th and 15th causes of actions against all moving dfts. Plaintiffs shall 30 day s from the file date of this Order to file a Second Amended Complaint. Court dismisses w/o prejudice: 1.) 2nd cause of action against Clarion, and 2.) 4th, 12th, and 13th causes of actions against all moving dfts. Court dismisses w/ prejudice: 1.) TI LA claim for damages alleged in the 1st cause of action, 2.) 5th cause of action against Clarion, 3.) allegations in the 6th cause of action for improper payments for referrals and charges for services never rendered, and 4.) 7th and 11th causes of a ction against all moving dfts. With regard to the Preliminary Injunction entered on 11/25/2009 against all Dfts except Clarion, Court continues the injunction and will not require additional undertaking by Plaintiffs at this stage. Signed by Judge Irma E. Gonzalez on 1/27/2010. (jah) (jrl).

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-WVG Quintero Family Trust et al v. Federal Deposit Insurance Corporation et al Doc. 62 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 13 QUINTERO FAMILY TRUST; GEORGE HANNIBAL QUINTERO & CELIA G. QUINTERO, as Trustees; GEORGE HANNIBAL QUINTERO, an individual; and CELIA G. QUINTERO, an individual, CASE NO. 09-CV-1561 - IEG (WVG) ORDER GRANTING IN PART AND DENYING IN PART MOTIONS TO DISMISS Plaintiffs, 14 [Doc. Nos. 8, 11] vs. 15 22 ONEWEST BANK, F.S.B. as successor to INDYMAC BANK, F.S.B., a Federally Chartered Savings and Loan Association; IDNYMAC BANKCORP, INC., a California corporation; INDYMAC MORTGAGE SERVICES, a division of ONEWEST BANK, F.S.B.; QUALITY LOAN SERVICE CORP., a California corporation; CLARION MORTGAGE CAPITAL, INC., a Colorado corporation; BILL LANEY, an individual; and BREAKTHROUGH MARKETING, INC., a California corporation d/b/a HOME ASSET MORTGAGE, 23 Defendants. 16 17 18 19 20 21 24 25 Currently before the Court are Motions to Dismiss brought by: (1) OneWest Bank, F.S.B. and 26 IndyMac Mortgage Services (collectively, “OneWest”); and (2) Clarion Mortgage Capital, Inc. 27 (“Clarion”). For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART 28 Defendants’ Motions to Dismiss. -1- 09cv1561-IEG (AJB) Dockets.Justia.com 1 2 BACKGROUND I. Factual background 3 George Hannibal Quintero and Celia G. Quintero (“Quinteros”) are the owners of certain real 4 property commonly known as 4180 EAST CANTERBURY DRIVE, SAN DIEGO, CA 92116 5 (“Property”). They allege Defendants Bill Laney and his business entity, Home Asset Mortgage, with 6 the aid of the other Defendants, targeted them for a series of loans and refinances over the years and 7 as a result have stripped their house of all equity.1 (FAC ¶ 1.) According to Quinteros, Laney and 8 Home Asset befriended them and persuaded them to finance up to 100% of the equity in the Property 9 so that the money could be invested in other real property in hopes of gaining rental income. (Id. ¶ 18.) 10 The central focus of the litigation is the last refinance, which occurred in October-November 2006. 11 On October 31, 2006, Quinteros obtained a loan from Defendant Clarion in the amount of 12 $821,000.00. The loan was recorded on November 20, 2006. Allegedly, the loan was immediately sold 13 by Clarion to IndyMac Bank, F.S.B. It’s unclear what happened afterwards. It appears the notice of 14 the proposed assignment was sent to Plaintiffs some time before January 1, 2007, but the assignment 15 of the Deed of Trust was not recorded until March 20, 2009. (Def. Clarion’s RJN, Ex. B.) That 16 assignment, which was notarized on March 10, 2009, lists December 18, 2008 as the effective date. 17 (Id.) Subsequently, on September 28, 2009, IndyMac assigned the loan to HSBC Bank USA, N.A. (Pl. 18 Ex Parte Appl., Ex. C [Doc. No. 45].) This new assignment was recorded on November 2, 2009. (Id.) 19 On December 19, 2008, IndyMac executed a Substitution of Trustee, substituting Quality Loan 20 Service as a trustee under the Deed of Trust. (Clarion’s RJN, Ex. D.) The Substitution of Trustee was 21 recorded on February 25, 2009. (Id.) On January 13, 2009, Quality Loan Services–acting as an agent 22 for the beneficiary–recorded and served a Notice of Default on the Property. (Id., Ex. C.) On April 15, 23 2009, Quality Loan Service recorded a Notice of Trustee’s Sale of the Property in the amount of 24 $902,529.50, setting May 4, 2009 as the date of sale. (Id., Ex. E.) The Quinteros subsequently filed 25 a Chapter 13 bankruptcy on May 2, 2009, thereby staying the foreclosure sale. (FAC ¶ 47.) In October 26 2009, the bankruptcy court dismissed Plaintiffs’ Chapter 13 case. 27 28 1 On December 21, 2009, Plaintiffs voluntarily dismissed Defendants Bill Laney and Breakthrough Marketing, Inc. from this action. [Doc. No. 57]. -2- 09cv1561-IEG (AJB) 1 II. Procedural background 2 The Quinteros commenced the present action on July 17, 2009, and filed a First Amended 3 Complaint (“FAC”) on August 20, 2009, alleging fifteen causes of action against Defendants. Since 4 then, OneWest and Clarion (together, “Moving Defendants”) filed their Motions to Dismiss pursuant 5 to Fed. R. Civ. P. 12(b)(6). [Doc. Nos. 8, 11]. The hearings on these motions have been consolidated 6 and continued to January 13, 2010. In the interim, Plaintiffs filed an Ex Parte Application seeking 7 expedited discovery to allow them to respond to the Motions to Dismiss. [Doc. No. 15]. On October 8 16, 2009, the Court granted in part and denied in part Plaintiffs’ Ex Parte Application. [Doc. No. 23]. 9 Specifically, the Court granted Plaintiffs’ request for “disclosure of the complete mortgage loan files 10 in the Defendants’ possession, including but not limited to the promissory note and the trust deed.” 11 (Order on Ex Parte Appl. for Expedited Discovery, at 3 [Doc. No. 23].) 12 On November 12, 2009, Plaintiffs filed a Motion for Temporary Restraining Order (“TRO”) 13 and Preliminary Injunction, asking the Court to enjoin Defendants from conducting a trustee’s sale 14 of the Property, at least until the matter can be considered on the merits. (Pl. TRO Motion, at 12.) The 15 Court granted Plaintiffs’ motion on the same day, entering a TRO and setting November 25, 2009 as 16 the hearing date on the preliminary injunction. [Doc. No. 33]. On November 25, 2009, after holding 17 a hearing on the preliminary injunction, the Court granted Plaintiffs’ request for a preliminary 18 injunction as to all Defendants, except Defendant Clarion. [Doc. No. 43]. In entering the preliminary 19 injunction, the Court determined that the security interest Defendants currently have in the Property 20 was sufficient at the time. However, the Court also noted that it will revisit the issue of whether any 21 additional security should be posted at the time of its ruling on the Motions to Dismiss. 22 LEGAL STANDARD 23 A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings. A 24 complaint survives a motion to dismiss if it contains “enough facts to state a claim to relief that is 25 plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.544, 570 (2007). The court may dismiss 26 a complaint as a matter of law for: (1) “lack of cognizable legal theory,” or (2) “insufficient facts 27 under a cognizable legal claim.” SmileCare Dental Group v. Delta Dental Plan of Cal., 88 F.3d 780, 28 783 (9th Cir. 1996) (citation omitted). The court only reviews the contents of the complaint, accepting -3- 09cv1561-IEG (AJB) 1 all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. 2 al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (citation omitted). 3 Despite the deference, the court need not accept “legal conclusions” as true. Ashcroft v. Iqbal, 4 --- U.S. ---, 129 S.Ct. 1937, 1949-50 (2009). It is also improper for the court to assume “the [plaintiff] 5 can prove facts that [he or she] has not alleged.” Assoc. Gen. Contractors of Cal., Inc. v. Cal. State 6 Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, “[w]hen there are well-pleaded 7 factual allegations, a court should assume their veracity and then determine whether they plausibly 8 give rise to an entitlement to relief.” Iqbal, 129 S.Ct. at 1950. 9 DISCUSSION 10 Plaintiffs’ FAC alleges fifteen causes of action. In their Motions to Dismiss, Defendants ask 11 the Court to dismiss all of the causes of action for failure to state a claim upon which relief can be 12 granted. In their opposition, Plaintiffs indicate that they do not oppose dismissal, without prejudice, 13 of the following causes of actions against specific Defendants: (1) the second and third causes of 14 action against all Defendants, except Quality Loan, OneWest, IndyMac Bancorp, and IndyMac 15 Mortgage Services; (2) the fourth cause of action against all Defendants; (3) the sixth cause of action 16 against Laney, Breakthrough Marketing, and Home Asset Mortgage; (4) the seventh cause of action 17 against Clarion, OneWest, IndyMac, and Quality Loan; and (5) the eleventh, twelfth, and thirteenth 18 causes of action against all Defendants. (Pl. Opp., at 2-3.) 19 I. First cause of action–TILA violation (against Defendants IndyMac Bank, IndyMac, Bancorp, Clarion, and OneWest) 20 Plaintiffs’ first cause of action alleges Defendants violated the Truth in Lending Act (“TILA”), 21 15 U.S.C. §§ 1601 et seq., and Regulation Z, 12 C.F.R. 226, by failing to make some material 22 disclosures, or failing to accurately disclose, and by “making consumer credit disclosures that do not 23 reflect the terms of the legal obligation between the parties.” (FAC ¶ 52.) 24 A. TILA claim for rescission 25 Section 1635 governs the borrower’s right under TILA to rescind a “consumer credit 26 transaction . . . in which a security interest . . . is or will be retained or acquired in any property which 27 is used as the principal dwelling of the person to whom credit is extended.” 15 U.S.C. § 1635(a). 28 While the borrower’s right of rescission must normally be exercised within a three-day period, TILA -4- 09cv1561-IEG (AJB) 1 extends that period to three years where the lender fails to provide the borrower with certain “material 2 disclosures.”2 See id. § 1635(f); 12 C.F.R. §§ 226.15(a)(3), 226.23(a)(3). 3 In the present case, contrary to Defendants’ arguments, Plaintiffs can take advantage of the 4 longer three-year period under Section 1635(f). Plaintiffs’ FAC alleges Defendants have failed to 5 provide them with some material disclosures, or have provided them with inaccurate disclosures. (See 6 FAC ¶ 52.) In particular, Plaintiffs allege Defendants did not disclose, or did not accurately disclose, 7 the following information: (a) the amount financed; (b) the finance charge; (c) the annual percentage 8 rate; (d) the payment schedule; (e) the total payments; (f) whether or not penalty may be imposed if 9 the obligation is prepaid in full; and (g) any dollar or percentage charge that may be imposed before 10 maturity due to a late payment, other than a deferral or extension charge.3 (Id.) These allegations, if 11 true, would entitle Plaintiffs to rescind the loan within three years. See 15 U.S.C. § 1635(f); 12 C.F.R. 12 § 226.15(a)(3). Accordingly, because the loan was recorded in November 2006, and Plaintiffs filed 13 their complaint in July 2009, Plaintiffs’ TILA claim for rescission does not appear to be time-barred, 14 and the Court DENIES Defendants’ Motions to Dismiss as they relate to this claim.4 15 /// 16 2 17 18 19 20 21 22 23 24 25 26 27 28 The term “material disclosures” means “the information that must be provided to satisfy the requirements in § 226.6 with regard to the method of determining the finance charge and the balance upon which a finance charge will be imposed, the annual percentage rate, the amount or method of determining the amount of any membership or participation fee that may be imposed as part of the plan, and the payment information described in § 226.5b(d)(5)(i) and (ii) that is required under § 226.6(e)(2).” 12 C.F.R. § 226.15(a)(3) n.36. 3 At the hearing, Plaintiffs also alleged they were not provided with the notice of the right to rescind in duplicate as required by 12 C.F.R. § 226.23(b)(1). However, the Court can only consider what has been submitted in the parties’ pleadings and exhibits attached thereto. Nevertheless, in light of the fact that the Court is dismissing some of the other causes of action with leave to amend, Plaintiffs may also have LEAVE TO AMEND this cause of action to make it more specific. 4 Clarion also argues Plaintiffs improperly base their allegations of inaccurate disclosures on the Federal Truth-in-Lending Disclosure Statement attached to their FAC, dated September 6, 2006 (hereinafter, “TILA Disclosure 9-6-06"). (See FAC, Ex. A.) According to Clarion, by the time the loan was closed, Plaintiffs were provided with and signed a different Federal Truth-in-Lending Disclosure Statement, this one dated October 31, 2006 (hereinafter, “TILA Disclosure 10-31-06"). (See Clarion’s Reply, RJN, Ex. B.) While Clarion correctly argues that the TILA Disclosure 10-31-06 would have superseded the TILA Disclosure 9-6-06, the Court has to accept as true Plaintiffs’ allegations at this stage of the proceedings. Taking those allegations as true, it appears Plaintiffs were provided with two contradictory disclosure statements within months of each other. At this stage of the proceedings, it is premature to determine when and/or how those two contradictory disclosure statements were provided. Moreover, even if only the second disclosure statement is controlling, Plaintiffs have still alleged sufficient facts to show that the disclosures in there were inaccurate and/or misleading. -5- 09cv1561-IEG (AJB) 1 B. 2 On the other hand, Plaintiffs’ TILA claim for damages appears to be time-barred. Section 3 1640(e) provides that a claim for damages under TILA must be commenced within one year following 4 the date of the alleged violation. 15 U.S.C. § 1640(e); see also Lynch v. RKS Mortgage Inc., 588 F. 5 Supp. 2d 1254, 1259 (E.D. Cal. 2008). The date of violation refers to the date of the consummation 6 of the transaction, unless the doctrine of equitable tolling applies. King v. State of Cal., 784 F.2d 910, 7 915 (9th Cir. 1986). In the present case, because the loan transaction occurred in November 2006, 8 Plaintiffs’ TILA claim for damages is clearly time-barred. There is also no indication that the doctrine 9 of equitable tolling applies. Accordingly, the Court will GRANT Defendants’ motions in this respect 10 TILA claim for damages and will DISMISS WITH PREJUDICE Plaintiffs’ TILA claim for damages. Ability to tender 11 C. 12 Finally, the Court will not require Plaintiffs to demonstrate an ability to tender at this stage of 13 the proceedings. Section 1635(b) governs the rescission-tender sequence “that must be followed unless 14 the court orders otherwise: within twenty days of receiving a notice of rescission, the creditor is to 15 return any money or property and reflect termination of the security interest; when the creditor has met 16 these obligations, the borrower is to tender the property.” Yamamoto v. Bank of N.Y., 329 F.3d 1167, 17 1170 (9th Cir. 2003). The decision on whether to depart from this sequence is left to the discretion of 18 the district court, and must be approached on a “case-by-case basis.” Id. at 1173 (concluding the 19 district court did not abuse its discretion in reversing the rescission-tender sequence where it was 20 “clear from the evidence that the borrower lacks capacity to pay back what she has received”). 21 In the present case, because of the “egregious” facts alleged and because the balance of 22 equities weighs in Plaintiffs’ favor, the Court refuses to alter the statutorily-provided sequence. See 23 id. (noting that the decision on whether to alter the sequence depends upon “‘the equities present’”); 24 LaGrone v. Johnson, 534 F.2d 1360, 1362 (9th Cir. 1976) (mandating rescission to be conditioned on 25 tender where TILA violations “were not egregious” and “the equities heavily favor[ed] creditors”). 26 Accordingly, the Court will not require Plaintiffs to demonstrate a present ability to tender. The Court 27 will, however, require Plaintiffs to allege, consistent with Fed. R. Civ. P. 11, their readiness to tender 28 the proceeds of the loan if Plaintiffs do prevail on their TILA rescission claim. -6- 09cv1561-IEG (AJB) 1 II. Second cause of action–Violation of RFDCPA (against all Defendants) 2 Plaintiffs’ second cause of action alleges Defendants violated California’s Rosenthal Fair Debt 3 Collection Practices Act (“RFDCPA”), California Civil Code §§ 1788 et seq., by threatening to take 4 actions prohibited by law, including: falsely stating the amount of debt; increasing the amount of debt 5 by including amounts not permitted by law or contract; improperly foreclosing upon the subject 6 property; and using unfair and unconscionable means in an attempt to collect a debt. (FAC ¶ 60.) 7 Because Plaintiffs do not oppose dismissal of this cause of action as to Defendant Clarion, the Court 8 will DISMISS WITHOUT PREJUDICE this cause of action against Clarion. 9 As for Defendants OneWest and IndyMac, to be liable for a violation of the FDCPA or the 10 RFDCPA, they “must–as a threshold requirement–fall within the Act’s definition of ‘debt collector.’” 11 See Izenberg v. ETS Servs., LLC, 589 F. Supp. 2d 1193, 1198 (C.D. Cal. 2008) (citing Heintz v. 12 Jenkins, 514 U.S. 291, 294 (1995), and Romine v. Diversified Collection Servs., 155 F.3d 1142, 1146 13 (9th Cir. 1998)). The FDCPA provides that the term “debt collector” does not include any person who 14 collects any debt owed or due to the extent such activity “concerns a debt which was not in default 15 at the time it was obtained by such person.” 15 U.S.C. § 1692a(6)(F)(iii). The definition of the “debt 16 collector” under the RFDCPA is broader, and includes any person who collects a debt “on behalf of 17 himself or herself or others.” See CAL. CIV. CODE § 1788.2(c). 18 In the present case, even if OneWest and IndyMac are “debt collectors” under the RFDCPA’s 19 broader definition, Plaintiffs nonetheless failed to demonstrate their actions in this case are covered 20 by the RFDCPA. Numerous district courts have held that “‘the activity of foreclosing on a property 21 pursuant to a deed of trust is not collection of a debt within the meaning of the FDCPA.’” Diessner 22 v. Mortgage Elec. Reg. Sys., 618 F. Supp. 2d 1184, 1189 (D. Ariz. 2009) (citing cases); accord 23 Izenberg, 589 F. Supp. 2d at 1193 (citations omitted). There is no indication, and Plaintiffs have 24 supplied none, that the RFDCPA provides for a broader protection in this regard. See Tina v. 25 Countrywide Home Loans, Inc., No. 08 CV 1233 JM (NLS), 2008 WL 4790906, at *7 (S.D. Cal. Oct. 26 30, 2008). Accordingly, the Court GRANTS OneWest’s Motion to Dismiss in this regard and 27 DISMISSES WITH LEAVE TO AMEND Plaintiffs’ RFDCPA claim. 28 /// -7- 09cv1561-IEG (AJB) 1 III. Third cause of action–Violation of FDCPA (against Defendant Quality Loan Services) 2 Plaintiffs’ third cause of action alleges violations of the FDCPA, 15 U.S.C. §§ 1692 et seq., 3 only against Defendant Quality Loan Services. (FAC ¶¶ 64-66.) There is no need to consider this 4 cause of action at this time because it does not apply to any of the Moving Defendants. 5 IV. Fourth cause of action–Violations of Cal. Civil Code §§ 1916.7 et seq. and 1918.5-1921 (against all Defendants) 6 Plaintiffs’ fourth cause of action alleges that the interest rate of the subject loan was adjusted 7 monthly in violation of Section 1916.7(b)(2) of the California Civil Code. (FAC ¶ 69.) It also alleges 8 Defendants violated Section 1916.7(a)(8) by including a prepayment penalty in the subject loan and 9 Sections 1918.5 through 1921 by failing to properly notify Plaintiffs on a monthly basis of the change 10 in the interest rate and calculation of such. (Id. ¶¶ 70-71.) Because Plaintiffs do not oppose dismissal 11 of this cause of action as to all Defendants, the Court will DISMISS WITHOUT PREJUDICE this 12 cause of action against the Moving Defendants. 13 14 V. Fifth cause of action–Wrongful foreclosure (against Defendants IndyMac Bank, IndyMac Bancorp, Clarion Mortgage, and Quality Loan Services) 15 Plaintiffs’ fifth cause of action alleges Defendants’ efforts to foreclose on the subject property 16 constitute wrongful foreclosure. First, Plaintiffs allege Clarion has no right or interest in the subject 17 loan, and therefore has no right to participate in foreclosing on the security of the loan. (FAC ¶ 73.) 18 Next, Plaintiffs allege IndyMac Bank, IndyMac Bancorp, and Quality Loan Services have no right to 19 foreclose either because they have already assigned the note pertaining to the subject property to a 20 third party, and therefore are not “person[s] entitled to enforce” the security interest on the subject 21 property pursuant to Section 3301 of the California Commercial Code. (Id. ¶ 76.) 22 Plaintiffs also allege IndyMac Bank, IndyMac Bancorp, Clarion, and Quality Loan Services 23 failed to properly record and give notice of the Notice of Default as required by Section 2923.5 of the 24 California Civil Code, which prevented the trustors from exercising their rights to investigate the 25 circumstances of the foreclosure proceedings. (Id. ¶ 79.) Finally, Plaintiffs allege the procedures 26 implemented by Defendants in attempting to enforce the alleged security interest in the subject 27 residence violated statutory requirements governing nonjudicial foreclosure proceedings. (Id. ¶ 81.) 28 /// -8- 09cv1561-IEG (AJB) 1 A. Parties’ arguments 2 OneWest disputes Plaintiffs’ assertion that under California law it must produce the original 3 promissory note before initiating foreclosure. Rather, OneWest contends that nonjudicial foreclosures 4 are governed by the comprehensive statutory framework set forth in Sections 2924 through 2924i of 5 the California Civil Code, which was intended to be exhaustive. According to OneWest, Plaintiffs 6 cannot state a claim for wrongful foreclosure because California law nowhere imposes a duty on 7 OneWest to produce the original promissory note. Moreover, according to OneWest, California 8 district courts have repeatedly rejected the exact argument presented by Plaintiffs here, and held there 9 is no statutory duty to provide a copy of the note when instituting a nonjudicial foreclosure. 10 Clarion likewise argues that production of the original promissory note is not required. 11 Moreover, Clarion alleges Plaintiffs cannot state a claim against it for wrongful foreclosure because 12 it has no current interest in the subject loan and has never been a party to any of the foreclosure 13 proceedings against the subject residence. 14 In their opposition, Plaintiffs appear to argue the foreclosure was wrongful because it was 15 instituted by Quality Loan Service acting on behalf of IndyMac, even though at that time IndyMac 16 had not yet been granted an assignment of any rights under the subject loan. Plaintiffs rely on 17 Deutsche Bank Nat. Trust Co. v. Abbate, No. 100893/07, 2009 WL 3384474, at *1 (N.Y. Sup. Ct. 18 OCt. 6, 2009), for the proposition that “[a]n assignee of a mortgage does not have a right or standing 19 to foreclose a mortgage unless the assignment is complete at the time of commencing the 20 action.”According to Plaintiffs, IndyMac did not receive an assignment of right under the subject loan 21 until March 10, 2009 at the earliest, and March 20, 2009 at the latest, which are the respective dates 22 of the notarization and recordation of the Assignment of the Deed of Trust. Seeing as the Notice of 23 Default was signed on January 12, 2009 and recorded on January 13, 2009, Plaintiffs allege it 24 amounted to wrongful foreclosure. Finally, Plaintiffs dispute Clarion’s allegation that it had no interest 25 in the subject loan when the foreclosure proceedings were instituted. According to Plaintiffs, because 26 the Assignment of the Deed of Trust was not notorized or recorded until March 2009, Clarion clearly 27 still had an interest in the subject loan when the Notice of Default was signed in January 2009. 28 /// -9- 09cv1561-IEG (AJB) 1 B. Analysis 2 As an initial matter, it is doubtful Plaintiffs’ claim for “wrongful foreclosure” states a viable 3 cause of action. See Fortaleza v. PNC Finan. Servs. Group, Inc., 642 F. Supp. 2d 1012, 1026 (N.D. 4 Cal. 2009). Apart from relying on Section 3301 of the California Commercial Code, Plaintiffs failed 5 to allege any common law or statutory rule or authority pursuant to which such a claim may be 6 asserted. Section 3301, however, is inapposite because it reflects California’s adoption of the Uniform 7 Commercial Code and does not govern non-judicial foreclosures, which are governed by Section 2924 8 of the Civil Code.5 See, e.g., Blanco v. Am. Home Mortgage Servicing, Inc., No. CIV 2:09-578 WBS 9 DAD, 2009 WL 4674904, at *9 (E.D. Cal. Dec. 4, 2009); Gaitan v. Mortgage Elec. Registration Sys., 10 No. EDCV 09-1009 VAP (MANx), 2009 WL 3244729, at *10 (C.D. Cal. Oct. 5, 2009). Moreover, 11 as California courts have noted, the “comprehensive statutory framework established to govern 12 nonjudicial foreclosure sales,” consisting of Section 2924 through 2924i of the Civil Code, was 13 intended to be “exhaustive.” See, e.g., Moeller v. Lien, 25 Cal. App. 4th 822, 834 (1994) (citation 14 omitted). Accordingly, because under California law there is no requirement for the production of the 15 original note to initiate nonjudicial foreclosure proceedings, the Court must reject Plaintiffs’ argument 16 to that effect. See, e.g., Blanco, 2009 WL 4674904, at *9 (citing cases); Farmer v. Countrywide Home 17 Loans, No. 08cv2193 BTM (AJB), 2009 WL 189025, at *2 (S.D. Cal. Jan. 26, 2009); Putkkuri v. 18 Recontrust Co., No. 08cv1919 WQH (AJB), 2009 WL 32567, at *2 (S.D. Cal. Jan. 5, 2009). 19 Even if a cause of action for “wrongful foreclosure” exists, Plaintiffs’ FAC fails to allege 20 sufficient facts to demonstrate any impropriety in the nonjudicial foreclosure proceedings in this case. 21 In California, such proceedings can be instituted by “[t]he trustee, mortgagee, or beneficiary, or any 22 of their authorized agents” by filing a notice of default with the office of the recorder. CAL. CIV. CODE 23 § 2924(a)(1). In the present case, Plaintiffs admitted that Clarion sold all of its interest in the subject 24 25 5 26 “Person entitled to enforce” an instrument means (a) the holder of the instrument, (b) a nonholder in possession of the instrument who has the rights of a holder, or (c) a person not in possession of the instrument who is entitled to enforce the instrument pursuant to Section 3309 or subdivision (d) of Section 3418. A person may be a person entitled to enforce the instrument even though the person is not the owner of the instrument or is in wrongful possession of the instrument. 27 28 Section 3301 of the California Commercial Code provides in full: - 10 - 09cv1561-IEG (AJB) 1 loan to IndyMac by November 2006. (See FAC ¶¶ 29, 73.) On December 19, 2008, IndyMac executed 2 a substitution of trustee, which substituted Quality Loan Service as a trustee under the Deed of Trust. 3 (Clarion’s RJN, Ex. D.) On January 13, 2009, after the Quinteros defaulted on their loan, Quality Loan 4 Service, acting as an agent for the beneficiary, recorded and served a Notice of Default on the 5 Property. (Id., Ex. C.) No impropriety appears in this sequence of events. 6 Two of Plaintiffs’ arguments, however, deserve additional consideration. First, in their 7 opposition, Plaintiffs argue–for the first time–that the assignment of the subject loan did not become 8 effective until March 2009, which would mean that IndyMac could not properly execute the 9 Substitution of Trustee. (See Pl. Opp., at 9-10.) This assertion contradicts the allegations set forth in 10 Plaintiffs’ FAC, where they argued the assignment occurred in November 2006. (See FAC ¶¶ 29, 73.) 11 However, even if the Court assumes no valid assignment occurred in November 2006, the Court 12 cannot ignore the fact that the Assignment of the Deed of Trust bears an effective date of December 13 18, 2008, which is prior to the execution of both the substitution of trustee (December 19, 2008) and 14 the notice of default (January 12, 2009). (See Clarion’s RJN, Exs. B, C, D.) Accordingly, because a 15 valid assignment from Clarion to IndyMac predates both the substitution of trustee and the notice of 16 default, Plaintiffs failed to allege sufficient facts to state a claim for “wrongful foreclosure.”6 17 Second, Plaintiffs allege that Defendants are liable for wrongful foreclosure because IndyMac 18 has already sold and assigned the subject loan to a third party. As the documents submitted in 19 December demonstrate, Plaintiffs are correct in that IndyMac assigned the subject deed of trust to 20 HSBC Bank USA, N.A. on September 28, 2009. (Pl. Ex Parte Appl., Ex. C [Doc. No. 45].) This new 21 assignment was recorded on November 2, 2009. (Id.) However, Plaintiffs cite no authority that would 22 support a claim for wrongful foreclosure where the assignment of all beneficial interest occurred more 23 6 24 25 26 27 28 The Court is not persuaded by Plaintiffs’ argument that an assignment of the deed of trust does not become effective until it is recorded. Rather, Section 2936 of the Civil Code provides that: “The assignment of a debt secured by mortgage carries with it the security.” Hence, when Clarion assigned the note to IndyMac in November 2006, at the earliest–or December 18, 2008, at the latest–the security automatically followed the note. Recordation of the assignment was necessary only to give constructive notice to third parties. See Cal. Civ. Code § 2934; accord Burkett v. Doty, 176 Cal. 89, 93-94 (1917) (holding that an assignment of the mortgage was complete without placing it on the record); Adler v. Newell, 109 Cal. 42, 48-49 (1895) (upholding a prior assignment of a mortgage, even though it was not timely recorded). Finally, Plaintiffs cannot claim any prejudice due to untimely recordation because they concede that they became aware of the assignment by January 1, 2007. (See FAC ¶¶ 34, 125.) - 11 - 09cv1561-IEG (AJB) 1 than eight months after the foreclosure proceedings have already been initiated. 2 Accordingly, although the Court is troubled by the inconsistency between the notarization date 3 and the effective date of the Assignment of the Deed of Trust, the Court will DISMISS WITH 4 LEAVE TO AMEND this cause of action against Defendant OneWest. In amending their complaint, 5 Plaintiffs are encouraged to be specific with their allegations, especially with regard to the dates in 6 dispute. On the other hand, because it is very unlikely Plaintiffs can state a cause of action against 7 Defendant Clarion, the Court will DISMISS WITH PREJUDICE this cause of action as to Clarion. 8 VI. Sixth cause of action–RESPA violation (against all Defendants) 9 Plaintiffs’ sixth cause of action alleges Defendants violated the Real Estate Settlement 10 Procedures Act (“RESPA”), 12 U.S.C. §§ 2605 et seq., by (1) “failing to properly and accurately 11 comply with disclosure requirements” in that they did not provide Plaintiffs with a Servicing 12 Statement as set forth in 12 U.S.C. § 2605(a) and Reg. X § 3500.21(b); (2) not properly responding 13 to Plaintiffs’ qualified written requests (“QWRs”) as required by 12 U.S.C. § 2605(e) and Reg. X § 14 3500.21(e); (3) failing to make the requested corrections on their account; and (4) “failing to provide 15 written explanation of why the servicer believes the account is correct, and the name and telephone 16 number of the servicer representative.” (FAC ¶ 88.) Plaintiffs further allege Defendants “received 17 money and/or things of value for referrals of settlement service business related to the Subject Loan, 18 in addition to charging Plaintiffs for services that were never rendered in that they conspired to over 19 charge for an appraisal and committed other similar acts.” (Id. ¶ 90.) RESPA violations under Section 2605(e) 20 A. 21 Section 2605(e) of RESPA sets forth the procedures that a loan servicer must follow and 22 certain actions that it must take upon receiving a QWR from a borrower. Specifically, a “written 23 response acknowledging receipt” of the request must be sent within 20 days, and an appropriate action 24 with respect to the inquiry must be taken within 60 days after the receipt of the request. See 12 U.S.C. 25 § 2605(e)((1)(A), (e)(2). The statute defines a “qualified written request” as: 26 [A] written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that-- 27 28 (i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and - 12 - 09cv1561-IEG (AJB) 1 (ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower. 2 3 Id. § 2605(e)(1)(B). “Servicer” is defined in the statute as, “the person responsible for servicing of a 4 loan (including the person who makes or holds a loan if such person also services the loan).” Id. § 5 2605(i)(2). “Servicing” is further defined as, “receiving any scheduled periodic payments from a 6 borrower pursuant to the terms of any loan, . . . and making the payments of principal and interest and 7 such other payments with respect to the amounts received from the borrower as may be required 8 pursuant to the terms of the loan.” Id. § 2605(i)(3). 9 The Court previously found Plaintiffs have sufficiently demonstrated that there are “serious 10 questions” going to the merits of whether Defendants committed RESPA violations. (See Order 11 Granting Prelim. Inj., at 7 [Doc. No. 43].) As the Court stated: 12 13 14 15 16 17 First, it appears that the requests Plaintiffs sent to Defendants constituted QWRs in that they were made as part of a “written correspondence” that included “the name and account of the borrower[s],” stated the reasons why Plaintiffs believed “the account [was] in error,” and also provided “sufficient detail to the servicer regarding other information sought” by Plaintiffs.7 See [12 U.S.C.] § 2605(e)(1)(B); see also Rawlings, 64 F. Supp. 2d at 1162. Moreover, at least some of Defendants appear to have construed Plaintiffs’ letters as QWRs.8 Second, it appears that Plaintiffs’ requests related to the “servicing” of their loan, in that they asked Defendants to provide certain information relating to the payments received, breakdown of those payments, the interest rates charged, etc. (See, e.g., Pines Decl., Exs. D, J.) 18 19 20 21 Finally, although it is not exactly clear from the record whether any of Defendants’ requests were timely or proper under Section 2605, the Court finds Plaintiffs have at least raised “serious questions” going to those issues. In their complaint and moving papers, Plaintiffs allege that Defendants: (1) did not timely respond to their requests; (2) refused to identify the true owner of the Note and mortgage for the loan; (3) failed to make the requested corrections on their account; and (4) failed “to provide written explanation of why the servicer believes the account 22 23 24 25 26 27 7 For example, Plaintiffs’ letter of June 19, 2009, states that they “dispute” the amount alleged due and owing, and requests Defendants to provide information on, among others: (1) the monthly principal and interest payments before and after May 2, 2009; (2) the total unpaid principal, interest, and escrow balances due and owing as of May 2, 2009; (3) breakdown of the payments received and how they were applied; (4) the “amount, payment date, purpose, and recipient of all foreclosure expenses, late charges, NFS check charges, appraisal fees, [etc];” and (5) the current interest rate on their mortgage account. (Pines Decl., Ex. J.) Plaintiffs’ letter of July 13, 2009 appears to request similar information. (Id., Ex. O.) 8 28 For example, in responding to one of Plaintiffs’ letters, IndyMac Mortgage Services wrote: “Under the Real Estate Settlement Procedures Act (RESPA) your letter is considered a RESPA Qualified Written Request (RESPA - QWR).” (Id., Ex. H.) - 13 - 09cv1561-IEG (AJB) 1 2 3 is correct, and the name and telephone number of the servicer representative.” (See Compl. ¶ 88; Pl. TRO Motion, at 9.) If true, these allegations would entitle Plaintiffs to relief under RESPA. See, e.g., 12 U.S.C. § 2605(a), (e). For the foregoing reasons, and in light of OneWest’s conclusory opposition that Plaintiffs failed to show how Defendants’ responses violated RESPA, the Court finds that Plaintiffs have demonstrated “serious questions” going to the merits of their RESPA claim. 4 (Id. at 7-8.) This determination, however, was based on the exhibits submitted by Plaintiffs’ former 5 counsel in support of Plaintiffs’ Motion for Preliminary Injunction and on Defendants’ conclusory 6 opposition to that motion. On the other hand, there are no exhibits attached to either the FAC or 7 Plaintiffs’ current Opposition to the Motions to Dismiss, nor do Plaintiffs specifically rely on any of 8 the previously submitted exhibits to support their allegations. Accordingly, because it is unclear as 9 to which Defendants the allegations are made, and because Plaintiffs fail to adequately allege in the 10 amended complaint when the QWRs were made or how Defendants failed to respond to them, the 11 Court will DISMISS WITH LEAVE TO AMEND Plaintiffs’ RESPA claim under Section 2605(e). 12 B. Remaining RESPA claims 13 Plaintiffs’ sixth cause of action alleges two additional claims. First, in their claim under 14 Section 2605(a), Plaintiffs allege Defendants did not provide a Servicing Statement as required by that 15 section.9 (FAC ¶ 88.) However, the Deed of Trust clearly indicates that such statement was provided.10 16 (See OneWest’s RJN, Ex. A, ¶ 20.) Because Plaintiffs have not alleged if or how this statement was 17 deficient, the Court will DISMISS this claim WITH LEAVE TO AMEND. Second, Plaintiffs’ 18 allegations of improper payments for referrals and charges for services that were never rendered 19 appear to fall under Section 2607, which prohibits kickbacks and unearned fees. See 12 U.S.C. § 2607. 20 However, because recovery under Section 2607 is governed by a one-year statute of limitations, 21 22 23 9 Section 2605(a) requires disclosure “to each person who applies for the loan, at the time of application for the loan, whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.” 24 10 25 The Note or partial interest in the Note (together with this Security Instrument) can be sold one or more times without prior notice to Borrower. A sale might result in a change in the entity (known as the “Loan Servicer”) that collects Periodic Payments due under the Note and this Security Instrument and performs other mortgage loan servicing obligations under the Note, this Security Interest, and Applicable Law. There also might be one or more changes of the Loan Servicer unrelated to a sale of the Note. 26 27 28 The Deed of Trust provides that: (OneWest’s RJN, Ex. A, ¶ 20.) - 14 - 09cv1561-IEG (AJB) 1 Plaintiffs’ claims in this regard are untimely on the face of the complaint. See id. § 2614. Accordingly, 2 the Court will DISMISS these latter claims WITH PREJUDICE. 3 VII. Seventh cause of action–Breach of fiduciary duty (against all Defendants) 4 Plaintiffs’ seventh cause of action alleges Defendants Laney and Home Asset willfully and 5 intentionally breached their fiduciary obligations and their duty of loyalty to Plaintiffs by obtaining 6 the subject loan with unfavorable terms and for a self-serving purpose, knowing that Plaintiffs did not 7 have the financial means to make the required monthly payments. (FAC ¶ 97.) Furthermore, Plaintiffs 8 allege Defendants breached their fiduciary duty and duty of loyalty by not disclosing to Plaintiffs all 9 adverse consequences of the subject loan, by securing an undisclosed profit for the sale and servicing 10 of the subject loan, and by engaging in unfair business practices. (Id.) According to Plaintiffs, all other 11 Defendants aided and abetted in the breaches by Defendants Laney and Home Asset. (Id.) 12 Although Plaintiffs do not oppose dismissal of this cause of action without prejudice as to all 13 Defendants, the Court will nonetheless proceed to review the underlying merits. As a general rule, “a 14 financial institution owes no duty of care to a borrower where the institution’s involvement in the loan 15 transaction does not exceed the scope of its conventional role as a lender of money.” Nool v. HomEq 16 Servicing, 653 F. Supp. 2d 1047, 1056 (E.D. Cal. 2009) (citing Nymark v. Hart Fed. Sav. & Loan 17 Ass’n, 231 Cal. App. 3d 1089, 1096 (1991)). Likewise, servicers of the loan do not owe any fiduciary 18 duties to the borrowers of the loans they service. Castaneda v. Saxon Mortgage Services, Inc., --- F. 19 Supp. 2d ---, 2009 WL 4640673, at *4 (E.D. Cal. 2009) (citing cases). Accordingly, because none of 20 the Moving Defendants owe any fiduciary duties to Plaintiffs, the seventh cause of action fails to state 21 a claim upon which relief may be granted. Thus, the Court GRANTS the Motions to Dismiss in this 22 regard and DISMISSES WITH PREJUDICE Plaintiffs’ seventh cause of action. 23 VIII. Eighth and ninth causes of action–Fraud–intentional & negligent misrepresentations (against all Defendants) 24 Plaintiffs’ eighth and ninth causes of action allege that, as noted elsewhere in the FAC, 25 Defendants have made several representations to Plaintiffs regarding material facts concerning the 26 subject loan and the subject residence that were false. (FAC ¶¶ 100-09, 110-17.) Plaintiffs further 27 allege that: (1) those representations were material to Plaintiffs’ decision to refinance the subject 28 residence; (2) Defendants made those representations with knowledge of their falsity, with reckless - 15 - 09cv1561-IEG (AJB) 1 disregard for their truth or falsity, or without a reasonable basis to believe that they were true; (3) 2 Defendants made the representations with the intent that Plaintiffs would rely on them and with intent 3 to deceive Plaintiffs and to induce them into consummating the subject loan, or with the knowledge 4 or expectation that Plaintiffs would rely on them; (4) Plaintiffs reasonably and justifiably relied on 5 these misrepresentations in entering into the subject loan; and (5) Plaintiffs were injured as a result 6 of these misrepresentations. (Id.) 7 To recover for common law fraud under California law, Plaintiffs must demonstrate: (1) 8 misrepresentation, (2) knowledge of its falsity, (3) intent to defraud, (4) justifiable reliance, and (5) 9 resulting damage. Gil v. Bank of Am., N.A., 138 Cal. App. 4th 1371 (2006) (citation omitted). 10 Moreover, Federal Rule of Civil Procedure 9(b) requires allegations of fraud or mistake to be stated 11 “with particularity.” In the Ninth Circuit, this rule “has been interpreted to mean the pleader must state 12 the time, place and specific content of the false representations as well as the identities of the parties 13 to the misrepresentation.” Misc. Serv. Workers, Drivers & Helpers v. Philco-Ford Corp., 661 F.2d 14 776, 782 (9th Cir.1981) (citations omitted); see also Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 15 1106 (9th Cir. 2003) (“Averments of fraud must be accompanied by ‘the who, what, when, where, and 16 how’ of the misconduct charged.” (citation omitted)). Thus, where multiple defendants are involved, 17 “a plaintiff must, at a minimum, ‘identify the role of each defendant in the alleged fraudulent 18 scheme.’” Swartz v. KPMG LLP, 476 F.3d 756, 765 (9th Cir.2007) (quotation omitted). 19 In the present case, apart from providing details on the allegedly fraudulent conduct of 20 Defendants Laney and Home Asset, (FAC ¶¶ 18-25)–who have since been voluntarily dismissed from 21 this action–Plaintiffs’ FAC fails to sufficiently plead causes of action for fraud against the Moving 22 Defendants. As Defendants correctly point out, the specific sections in the FAC entitled 23 “fraud–intentional misrepresentation” and “fraud–negligent misrepresentation” merely recite the 24 elements of common law fraud. Although elsewhere in their FAC Plaintiffs provide various examples 25 of alleged misrepresentations, it is unclear which of those allegations serve as the bases of Plaintiffs’ 26 causes of action for fraud. As such, both the eighth and ninth causes of action fail to comply with Rule 27 9(b) because they are not “specific enough to give defendants notice of the particular misconduct ... 28 so that they can defend against the charge and not just deny that they have done anything wrong.” See - 16 - 09cv1561-IEG (AJB) 1 Vess, 317 F.3d at 1106 (internal quotation marks and citation omitted). Accordingly, the Court 2 GRANTS the Motions to Dismiss in this regard and DISMISSES WITH LEAVE TO AMEND 3 Plaintiffs’ eighth and ninth causes of action. 4 IX. Tenth cause of action–Violations of Cal. Bus. & Prof. Code §17200 (against all Defendants) 5 Plaintiffs’ tenth cause of action alleges Defendants engaged in unlawful, unfair, and fraudulent 6 business practices as alleged elsewhere in the FAC in violation of Section 17200 of the Business & 7 Professions Code, as a result of which Plaintiffs suffered various damages and injuries. (FAC ¶¶ 1188 22.) Defendants move to dismiss this cause of action because it fails to differentiate between the 9 conduct of eight Defendants or to allege any specific conduct by any specific Defendant. Defendants 10 also allege that Plaintiffs lack standing to recover under Section 17200 because they have not alleged 11 any facts showing that they suffered an injury in fact or lost any money or property as a direct result 12 of Defendants’ conduct. Finally, Clarion argues that to the extent Plaintiffs’ tenth cause of action seeks 13 recovery for violations of TILA, it is inconsistent with TILA and is thus preempted. 14 Section 17200 defines unfair competition as “any unlawful, unfair or fraudulent business act 15 or practice” and “unfair, deceptive, untrue or misleading advertising.” CAL. BUS. & PROF. CODE § 16 17200. Because the statute is written in the disjunctive, it prohibits three separate types of unfair 17 competition: (1) unlawful acts or practices, (2) unfair acts or practices, and (3) fraudulent acts or 18 practices. Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163 (1999). As one court 19 has explained: 20 21 22 An act is “unlawful” under section 17200 if it violates an underlying state or federal statute or common law. . . . An act is “unfair” if the act “threatens an incipient violation of an antitrust law, or violates the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law.” . . . A practice is “fraudulent” if members of the public are likely to be deceived. . . . . 23 Fortaleza v. PNC Fin. Serv. Group, Inc., 642 F. Supp. 2d 1012, 1019 (N.D. Cal. 2009) (internal 24 citations omitted). Moreover, “[b]y proscribing ‘any unlawful’ business practice, ‘section 17200 25 “borrows” violations of other laws and treats them as unlawful practices’ that the unfair competition 26 law makes independently actionable.” Cel-Tech, 20 Cal. 4th at 180. 27 Plaintiffs’ FAC once again fails to plead sufficient facts to apprise Defendants of the claims 28 against them. A plaintiff alleging unfair business practices under Section 17200 “must state with - 17 - 09cv1561-IEG (AJB) 1 reasonable particularity the facts supporting the statutory elements of the violation.” Fortaleza, 642 2 F. Supp. 2d at 1019 (internal quotation marks and citation omitted); see also Khoury v. Maly’s of Cal., 3 14 Cal. App. 4th 612, 619 (1993) (citations omitted). In the present case, Plaintiffs’ tenth cause of 4 action merely states that Defendants violated Section 17200 by “engaging in unlawful, unfair and 5 fraudulent business practices” as alleged elsewhere in the FAC. (FAC ¶ 119.) This is insufficient to 6 provide Defendants with notice of the claims against them. See Fortaleza, 642 F. Supp. 2d at 1020 7 (dismissing a Section 17200 claim where the plaintiff failed to allege “with ‘reasonable particularity’ 8 the facts surrounding any purportedly fraudulent statements made by defendants-i.e., the who, what, 9 where, and when of such statements”). Moreover, Plaintiffs also failed to identify any state, federal, 10 or local law or policy that serves as the predicate for their recovery under Section 17200. See id. 11 It is also unclear whether Plaintiffs can allege any ongoing injury or losses due to Defendants’ 12 conduct. As California Supreme Court has stated, “[w]hile the scope of conduct covered by [Section 13 17200] is broad, its remedies are limited.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 14 1134, 1144 (2003) (citing Cel-Tech, 20 Cal. 4th at 180). Thus, “‘prevailing plaintiffs are generally 15 limited to injunctive relief and restitution.’” Id. (quoting Cel-Tech, 20 Cal. 4th at 179). Section 17203, 16 which sets forth the remedies for violations of Section 17200, provides that restitutionary relief will 17 be available only where the court concludes such relief is “necessary to restore to any person in 18 interest any money or property, real or personal, which may have been acquired by means of such 19 unfair competition.” CAL. BUS. & PROF. § 17203; accord In re Napster, Inc. Copyright Litig., 354 F. 20 Supp. 2d 1113, 1126 (N.D. Cal. 2005). In the present case, it is at best unclear from the FAC whether 21 Defendants are currently in possession of funds and/or property in which Plaintiffs have an ownership 22 interest. See In re Napster, 354 F. Supp. at 1126-27. But see Sullivan v. Wash. Mut. Bank, FA, No. 23 C-09-2161 EMC, 2009 WL 3458300, at **4-5 (N.D. Cal. Oct. 23, 2009) (concluding that the initiation 24 of foreclosure proceedings put the plaintiff’s interest in her property sufficiently in jeopardy to allege 25 an injury under Section 17200); Rabb v. BNC Mortg., Inc., CV 09-4790 AHM (RZx), 2009 WL 26 3045812, at *2 (C.D. Cal. Sept. 21, 2009) (same). Accordingly, the Court GRANTS Defendants’ 27 Motions to Dismiss and DISMISSES WITH LEAVE TO AMEND the tenth cause of action. 28 /// - 18 - 09cv1561-IEG (AJB) 1 X. Eleventh cause of action–Breach of contract (against Defendants Clarion, IndyMac Bank, IndyMac Bancorp, and Quality Loan Service) 2 Plaintiffs’ eleventh cause of action alleges the named Defendants “breached their agreement(s) 3 with Plaintiffs by, among other things, failing to provide Plaintiffs with an affordable loan given their 4 age and fixed income.” (FAC ¶ 127.) To allege an action for a breach of contract, a plaintiff must 5 plead: (1) the existence of a contract; (2) plaintiff’s performance of the contract or excuse for non6 performance; (3) defendant’s breach of the contract; and (4) the resulting damage to plaintiff. First 7 Commercial Mortgage Co. v. Reece, 89 Cal. App. 4th 731, 745 (2001). In the present case, the only 8 contracts identified in the FAC are the Note and the Deed of Trust. (See FAC ¶ 124.) Plaintiffs’ claim 9 for breach of contract fails, however, because Plaintiffs do not allege which specific provisions in the 10 Note or the Deed of Trust impose upon Defendants a duty to provide Plaintiffs “with an affordable 11 loan given their age and fixed income” or how each Defendant breached that duty. See Frances T. v. 12 Vill. Green Owners Ass’n, 42 Cal. 3d 490, 512-13 (1986) (breach of contract claim failed where no 13 provision of the alleged contract imposed an obligation on the defendant). Because no such provision 14 appears in the Note or the Deed of Trust, the Court GRANTS Defendants’ motions in this regard and 15 DISMISSES WITH PREJUDICE Plaintiffs’ eleventh cause of action. 16 17 XI. Twelfth cause of action–Breach of implied covenant of good faith and fair dealing (against all Defendants) 18 Plaintiffs’ twelfth cause of action alleges Defendants owed Plaintiffs duties of good faith and 19 fair dealing, and that they breached those duties by: (1) failing to put as much consideration to 20 Plaintiffs’ interests as to Defendants’ own interests; (2) initiating foreclosure proceedings on the 21 subject residence despite not having the right to do so and failing to comply with applicable California 22 law; and (3) failing to provide proper notice before commencing foreclosure proceedings. (FAC ¶¶ 23 131-37.) Moreover, according to Plaintiffs, Defendants were on “constructive notice” that the subject 24 loan should not have been made because Plaintiffs were on a minimal fixed income and were fast- 25 approaching the age of eighty years old. (Id. ¶ 136.) 26 “It is universally recognized the scope of conduct prohibited by the covenant of good faith is 27 circumscribed by the purposes and express terms of the contract.” Carma Developers (Cal.) Inc. v. 28 Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 373 (citations omitted). Thus, while a breach of a specific - 19 - 09cv1561-IEG (AJB) 1 provision of the contract is “‘not a necessary prerequisite’ to establishing a breach of the implied 2 covenant of good faith and fair dealing,” the plaintiff must at the very least be able to demonstrate 3 some express terms of the contract “‘on which to hinge the implied duty.’” Berger v. Home Deport 4 U.S.A., Inc., 476 F. Supp. 2d 1174, 1177 (C.D. Cal. 2007) (citations omitted). 5 In the present case, Plaintiffs failed to allege any bases for the implied duties of good faith and 6 fair dealing against the Moving Defendants. Although Plaintiffs allege Defendants failed to put as 7 much consideration to Plaintiffs’ interests as to Defendants’ own interests, Plaintiffs fail to identify 8 any provision in the Note or the Deed of Trust that impose such duties. As already noted, loan 9 providers and loan servicers do not owe any fiduciary duties to the borrowers. See Nool, 653 F. Supp. 10 2d at 1056 (E.D. Cal. 2009) (citing Nymark, 231 Cal. App. 3d at 1096); Castaneda, --- F. Supp. 2d ---, 11 2009 WL 4640673, at *4 (citing cases). Rather, where the contract is a note or a deed of trust, the 12 purpose of the contract “is to permit the borrower the use of funds loaned on the terms and at the 13 interest rate specified and to give the lender the right to a specified repayment with the security of the 14 deed of trust.” Freeman v. Lind, 181 Cal. App. 3d 791, 805 (1986). If the borrower defaults on his loan 15 payments, the current lender has a contractual right to enforce the power of sale contained in the deed 16 of trust. Id. Because Plaintiffs fail to allege any actions by Defendants that would undermine the 17 purpose of the contracts at issue, the Court GRANTS Defendants’ Motions to Dismiss in this regard. 18 However, because questions exist as to the propriety of the current foreclosure proceedings, the Court 19 will DISMISS this cause of action WITHOUT PREJUDICE. 20 XII. Thirteenth cause of action–Violation of Cal. Civ. Code § 2923.5 (against Defendants IndyMac Bank, IndyMac Bancorp, Clarion, and Quality Loan Service) 21 Plaintiffs’ thirteenth cause of action alleges Defendants violated Section 2923.5 of the 22 California Civil Code by failing to contact and assess Plaintiffs’ financial situation, and to explore 23 options for Plaintiffs to avoid foreclosure on the subject property, before filing the Notice of Default. 24 (FAC ¶¶ 142-43.) Plaintiffs also allege Defendants violated Section 2923.5(b) by failing to include 25 in the Notice of Default a declaration outlining their due diligence to contact Plaintiffs prior to serving 26 the Notice of Default. (Id. ¶ 144.) 27 Section 2923.5 requires the mortgagee, beneficiary, or authorized agent to contact the borrower 28 in person or by telephone “in order to assess the borrower’s financial situation and explore options - 20 - 09cv1561-IEG (AJB) 1 for the borrower to avoid foreclosure.” CAL. CIV. CODE § 2923.5(a)(2). In addition, the statute requires 2 the Notice of Default to “include a declaration from the mortgagee, beneficiary, or authorized agent 3 that it has contacted the borrower, tried with due diligence to contact the borrower as required by this 4 section, or the borrower has surrendered the property to the mortgagee, trustee, beneficiary, or 5 authorized agent.” Id. § 2923.5(b). 6 In the present case, Plaintiffs failed to allege facts sufficient to state a cause of action for 7 violation of Section 2923.5. All that the statute requires is for Defendants to contact or attempt to 8 contact Plaintiffs in a good faith effort to avoid foreclosure. See Ortiz v. Accredited Home Lenders, 9 Inc., 639 F. Supp. 2d 1159, 1166 (S.D. Cal. 2009). In the present case, Plaintiffs allege Defendants 10 failed to contact them before filing the Notice of Default. A copy of the Notice of Default submitted 11 by Defendants, however, provides that attempts to contact Plaintiffs were made as required by Section 12 2923.5.11 (Def. OneWest’s RJN, Ex. C.) “[J]udicial notice may be taken of a fact to show that a 13 complaint does not state a cause of action.” Sears, Roebuck & Co. v. Metro. Engravers, Ltd., 245 F.2d 14 67, 70 (9th Cir. 1957). In light of the statement in the Notice of Default, and because no reason to 15 question its accuracy exists, Plaintiffs cannot state a cause of action for violation of Section 16 2923.5(a)(2). Neither can they state a cause of action for violation of Section 2923.5(b). Contrary to 17 Plaintiffs’ arguments, Section 2923.5(b) only requires a declaration stating that contact or attempts 18 at contact were made with due diligence, and not “a declaration outlining [Defendants’] due diligence 19 to contact Plaintiffs.” In the present case, such declaration was provided on the last page of the Notice 20 of Default. (See Def. OneWest’s RJN, Ex. C.) Accordingly, the Court GRANTS the Motions to 21 Dismiss in this regard. However, because Plaintiffs may be able to raise questions as to the accuracy 22 of the Notice of Default, the Court will DISMISS this cause of action WITHOUT PREJUDICE. 23 /// 24 25 11 26 The Beneficiary or its designated agent declares it has contacted the borrower, tried with due diligence to contact the borrower as required by California Civil Code § 2923.5, or the borrower has surrendered the property to the beneficiary or authorized agent, or is otherwise exempt from the requirements of § 2923.5. 27 28 The last paragraph of the Notice of Default reads as follows: (Def. OneWest’s RJN, Ex. C.) - 21 - 09cv1561-IEG (AJB) 1 XIII. Fourteenth cause of action–Quiet title (against Defendants IndyMac Bank, IndyMac Bancorp, Clarion, and Quality Loan Service) 2 Plaintiffs’ fourteenth cause of action alleges named Defendants claim an interest adverse to 3 Plaintiffs’ interest in the subject property, in the form of the deed of trust recorded pursuant to the 4 subject loan. (FAC ¶ 148.) Plaintiffs therefore seek to quiet title against the claims of said Defendants 5 under the deed of trust. (Id.) Defendants move to dismiss this cause of action because Plaintiffs have 6 not tendered or offered to tender the balance remaining on the subject loan as allegedly required under 7 California law. Defendant Clarion also argues the cause of action should be dismissed because 8 Plaintiffs’ FAC is not “verified” as required by Section 761.020 of the Code of Civil Procedure and 9 because Plaintiffs failed to state any claim that would form the basis of their right to quiet title. 10 Section 761.020 provides that a complaint to quiet title “shall be verified,” and requires it to 11 include all of the following: 12 13 14 15 16 17 (a) A description of the property that is the subject of the action. In the case of tangible personal property, the description shall include its usual location. In the case of real property, the description shall include both its legal description and its street address or common designation, if any. (b) The title of the plaintiff as to which a determination under this chapter is sought and the basis of the title. If the title is based upon adverse possession, the complaint shall allege the specific facts constituting the adverse possession. (c) The adverse claims to the title of the plaintiff against which a determination is sought. 18 19 (d) The date as of which the determination is sought. If the determination is sought as of a date other than the date the complaint is filed, the complaint shall include a statement of the reasons why a determination as of that date is sought. 20 (e) A prayer for the determination of the title of the plaintiff against the adverse claims. 21 CAL. CIV. PROC. CODE § 761.020. 22 In the present case, as Clarion correctly points out, Plaintiffs’ FAC is not “verified.” This, by 23 itself, may be sufficient to dismiss this cause of action. See Anaya v. Advisors Lending Group, No. 24 CV F 09-1191 LJO DLB, 2009 WL 2424037, at *7 (E.D. Cal. Aug. 5, 2009). Moreover, Plaintiffs 25 failed to sufficiently comply with other requirements of Section 761.020. Plaintiffs’ fourteenth cause 26 of action merely states that Defendants IndyMac Bank, IndyMac Bancorp, Clarion, and Quality Loan 27 Service “claim an interest adverse to Plaintiffs’ interest in the Subject Property, in the form of the deed 28 of trust recorded pursuant to the Subject Loan. Plaintiffs are therefore seeking to quiet title against the - 22 - 09cv1561-IEG (AJB) 1 claims of said Defendants under the deed of trust.” (FAC ¶ 148.) Although the gist of each required 2 element appears elsewhere in the FAC, the cause of action as a whole fails to give Defendants 3 sufficient notice to defend against it. Accordingly, the Court GRANTS the Motions to Dismiss with 4 respect to the fourteenth cause of action, but will grant Plaintiffs LEAVE TO AMEND their 5 complaint to allege each of the elements with required specificity. 6 XIV. Fifteenth cause of action–Elder financial abuse (against all Defendants) 7 Plaintiffs’ fifteenth cause of action alleges Defendants are liable for elder financial abuse in 8 violation of Sections 15610 et seq. of the California Welfare & Institutions Code. According to 9 Plaintiffs, at all relevant times they were “elders” as defined in Section 15610.27. (FAC ¶ 151.) 10 Plaintiffs allege Defendants Laney and Home Asset befriended them, and over time worked their way 11 into Plaintiffs’ confidence and trust. (Id. ¶ 152.) All Defendants then took, secreted, appropriated, 12 and/or retained real or personal property of Plaintiffs for wrongful use or with the intent to defraud, 13 or both. (Id. ¶¶ 153-54.) Using the trust gained, Defendants allegedly induced Plaintiffs to enter into 14 the subject loan, secured by their primary residence, which was against their best interest. (Id. ¶¶ 155- 15 56.) Subsequently, Defendants allegedly caused inflated and unjust fees to be charged, and then 16 unlawfully instituted foreclosure proceedings on the subject property. (Id.) According to Plaintiffs, 17 Defendants at all times acted with recklessness, oppression, fraud, and/or malice in the commission 18 of elder abuse, and their conduct constituted an intentional scheme to defraud Plaintiffs and to deprive 19 them of their home and legal rights. (Id. ¶ 158.) 20 Defendants move to dismiss Plaintiffs’ fifteenth cause of action because Plaintiffs failed to 21 plead it with sufficient particularity. Plaintiffs respond by arguing that they have adequately stated that 22 Defendants Laney and Home Asset have engaged in taking, secreting, appropriating, obtaining, or 23 retaining their real and personal property for a wrongful use or with intent to defraud, and that other 24 Defendants have aided and abetted in that conduct. Thus, as it relates to the Moving Defendants, 25 Plaintiffs argue Clarion acted with Defendants Laney, Home Asset, and Breakthrough Marketing to 26 conceal the true terms of the Subject Loan. Plaintiffs also allege the Moving Defendants subsequently 27 orchestrated the final phase of the plan to appropriate Plaintiffs’ property–namely their home–through 28 the consummation, servicing, and foreclosure proceedings. - 23 - 09cv1561-IEG (AJB) 1 Under the Elder Abuse and Dependent Adult Civil Protection Act, elder financial abuse occurs 2 when a person or entity “[t]akes, secretes, appropriates, obtains, or retains real or personal property 3 of an elder or dependent adult for a wrongful use or with intent to defraud, or both.” CAL. WEL. & 4 INST. CODE § 15610.30(a)(1). Elder financial abuse also occurs when a person or entity assists another 5 in such conduct. Id. § 15610.30(a)(2). A violation of the statute occurs if, among other things, the 6 person or entity (1) “takes, secretes, appropriates, obtains, or retains the property,” and that person or 7 entity (2) “knew or should have known that this conduct is likely to be harmful to the elder or 8 dependent adult.” Id. § 15610.30(b). 9 In the present case, although Plaintiffs may still have possession of their property, Plaintiffs 10 have sufficiently alleged that Defendants have taken, secreted, appropriated, or retained their property 11 in that Defendants are “basically asserting a secured interest in the property unless [Plaintiffs] pay a 12 certain sum.” See Consumer Solutions REO, LLC v. Hillery, --- F. Supp. 2d ---, 2009 WL 2711264, 13 at *12 (N.D. Cal. 2009). Moreover, elsewhere in their FAC, Plaintiffs have also sufficiently alleged 14 that such conduct was for a wrongful use and/or with intent to defraud. However, similar to Plaintiffs’ 15 causes of action for fraud and unfair competition, their fifteenth cause of action fails to state with any 16 specificity which particular Defendant did what, when it was done, and how it was fraudulent. See 17 Hougue v. City of Holtville, No. 07cv2229 WQH (WMc), 2008 WL 1925249, at *6 (S.D. Cal. Apr. 18 30, 2008) (“As a statutory cause of action, a claim under the Elder Abuse Act must be alleged with 19 particularity.” (citing Delaney v. Baker, 20 Cal. 4th 23, 32 (1999)). But see Harrison v. Downey Sav. 20 & Loan Ass’n, F.A., No. 09-CV-1391 H (BLM), 2009 WL 2524526, at *6 (S.D. Cal. 2009) 21 (concluding that the plaintiff adequately pled facts under Section 15610.30(a)(2) against one of the 22 defendants where “[t]he facts alleged throughout the Complaint and in the ninth cause of action 23 suggest that Defendant Cornish knowingly notarized fraudulent loan documents [and] then attempted 24 to cover that act by persuading Plaintiff to sign his journal or another acknowledgment”). Accordingly, 25 the Court GRANTS the Motions to Dismiss in this regard and DISMISSES WITH LEAVE TO 26 AMEND Plaintiffs’ fifteenth cause of action for elder financial abuse. 27 /// 28 /// - 24 - 09cv1561-IEG (AJB) 1 CONCLUSION 2 For the foregoing reasons, the Court DENIES Defendants’ Motions to Dismiss as they relate 3 to the TILA claim for rescission alleged in the first cause of action. Plaintiffs, however, may have 4 LEAVE TO AMEND this claim if they wish in conjunction with the other dismissed claims 5 appearing below. In all other respects, the Motions to Dismiss are GRANTED. Specifically: 6 - The Court DISMISSES WITH LEAVE TO AMEND the following: (1) the second 7 and fifth causes of action against OneWest and IndyMac; (2) the sixth cause of action for violations 8 of Sections 2605(a) and 2605(e) of RESPA against all Moving Defendants; and (3) the eighth, ninth, 9 tenth, fourteenth, and fifteenth causes of actions against all Moving Defendants. Plaintiffs shall have 10 11 thirty (30) days from the filing date of this Order to file a Second Amended Complaint. - The Court DISMISSES WITHOUT PREJUDICE the following: (1) the second cause 12 of action against Clarion; and (2) the fourth, twelfth, and thirteenth causes of actions against all 13 Moving Defendants. 14 - The Court DISMISSES WITH PREJUDICE the following: (1) the TILA claim for 15 damages alleged in the first cause of action; (2) the fifth cause of action against Clarion; (3) the 16 allegations in the sixth cause of action of improper payments for referrals and charges for services that 17 were never rendered; and (4) the seventh and eleventh causes of action against all Moving Defendants. 18 Finally, with regard to the Preliminary Injunction that was entered against all Defendants, 19 except Defendant Clarion, on November 25, 2009, the Court CONTINUES the injunction and will 20 NOT REQUIRE additional undertaking by Plaintiffs at this stage. 21 IT IS SO ORDERED. 22 23 24 DATED: January 27, 2010 IRMA E. GONZALEZ, Chief Judge United States District Court 25 26 27 28 - 25 - 09cv1561-IEG (AJB)

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