OLIVER W. WANGER, District Judge.
On or about August 2, 2007, Plaintiff Bernard F. Clark obtained a mortgage loan in the amount of $360,000 secured by a deed of trust encumbering real property in Groveland, California. Plaintiff defaulted on the loan, and Defendants proceeded to foreclose on the real property. Defendant's Request for Judicial Notice ("RJN"), Exs. B-D.
On August 24, 2009, Plaintiff filed a complaint in the Superior Court of the State of California, County of Tuolumne, alleging ten causes of action. Doc. 1. On November 12, 2009, Defendants removed the action to federal court pursuant to 28 U.S.C. §§ 1331, 1441, based on federal question jurisdiction. Id. Plaintiff's amended complaint, filed March 17, 2010, alleges 17 causes of action: (1) Fraud; (2) Breach of Loan Commitment; (3) Negligence; (4) Breach of Good Faith; (5) Breach of Fiduciary Duty; (6) Economic Duress; (7) Civil RICO; (8) Cal. Civ.Code § 2923.5; (9) Cal. Civ.Code § 2923.6; (10) California's Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), Cal. Civ. Code. § 1788.17; (11) Cal. Civ.Code § 1572; (12) Real Estate Settlement Procedures Act ("RESPA"), (12) U.S.C. § 2607(b); (13) Quiet Title; (14) Unfair business practices, Cal. Bus. Prof.Code § 17200 et seq.; (15) Produce the Original Note; (16) Cal. Civ.Code § 1572; (17) Injunctive Relief. Doc. 16.
On April 5, 2010, Defendants Countrywide Home Loans, Inc. ("Countrywide"), ReconTrust Company ("ReconTrust"), Bank of America, N.A. ("BANA"), and Mortgage Electronic Registration Systems, Inc.'s ("MERS"), (collectively "Countrywide Defendants") moved to dismiss all of the claims in the case pursuant to Federal Rule of Civil Procedure 12(b)(6). Doc. 24. Plaintiff opposed the motion to dismiss. Doc. 31, filed June 1, 2010. Countrywide Defendants replied. Doc. 33, filed June 7, 2010. Defendant Chase Home Finance,
A motion to dismiss brought under Federal Rule of Civil Procedure 12(b)(6) "tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001). In deciding whether to grant a motion to dismiss, the court "accept [s] all factual allegations of the complaint as true and draw[s] all reasonable inferences" in the light most favorable to the nonmoving party. TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir.1999). To survive a motion to dismiss, a complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)).
Id. (citing Twombly, 550 U.S. at 556-57, 127 S.Ct. 1955). Dismissal also can be based on the lack of a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988).
On or about July 26, 2007, Plaintiff financed the purchase of a residential property located at 12689 Mt. Jefferson Street, Groveland, California ("Subject Property") through a promissory note with First Magnus Financial Corp. ("First Magnus") in the amount of $360,000 ("Subject Loan") secured by a deed of trust. Doc. 16 at ¶ 9. Plaintiff later defaulted on the Subject Loan. On January 27, 2009, a Notice of Default and Election to Sell Under Deed of Trust, Instrument No. 2007013088, was recorded in the Office of the County Recorder of Tuolumne County. Doc. 16 at ¶ 21. The default was not cured, and on May 1, 2009, a notice of trustee's sale,
Plaintiff alleges that (1) no Defendant has the original note to prove that it is a party authorized to conduct the foreclosure (Doc. 16 at ¶ 24); (2) Defendants breached an oral promise to modify the existing loan terms (Doc. 16 at ¶ 31); and (3) Plaintiff was not contacted to explore his financial situation prior to notice of default (Doc. 16 at ¶ 156-160). These allegations form the basis of most of Plaintiff's causes of action.
Plaintiff's first cause of action alleges fraud by each Defendant. This claim is based largely on the allegation that "each Defendant has represented to Plaintiff and to third parties that they were the owner of the Trust Deed and Note as either the Trustee or the beneficiary regarding ... Possession of the Note is not incidental to the right to foreclose, it is absolutely necessary." Doc. 16 at ¶ 34. This is a wholly discredited legal theory serially advanced in mortgage fraud cases.
It is well established that there is no requirement under California law that the party initiating foreclosure be in possession of the original note. Nool v. HomeQ Servicing, 653 F.Supp.2d 1047, 1053 (E.D.Cal.2009); Candelo v. NDex West, LLC, 2008 WL 5382259, at *4 (E.D.Cal. Dec. 23, 2008) ("No requirement exists under statutory framework to produce the original note to initiate non-judicial foreclosure."); Putkkuri v. Recontrust Co., 2009 WL 32567, *2 (S.D.Cal. Jan. 5, 2009) ("Production of the original note is not required to proceed with a non-judicial foreclosure."). Therefore, Plaintiff's assertion that Countrywide Defendants and Chase did not possess the note is not grounds for a wrongful foreclosure or a fraud claim.
Plaintiff also alleges that the "broker" committed fraud by placing him in a sub-prime mortgage "on the promise that things would get better and the borrower could refinance when the value of their home increases." Doc. 1 ¶ 39. All claims for fraud must comply with Federal Rule of Civil Procedure 9(b), which requires that Plaintiff clearly set forth the "who, what, when, where, and how" concerning their fraud allegations. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003). Plaintiff entirely fails to describe which of the many defendants was the "broker," what the broker told him, and when and how any such statements were made.
Plaintiff has been previously afforded leave to amend the fraud claim. The fraud cause of action against the Countrywide Defendants and Chase is DISMISSED WITH PREJUDICE.
Plaintiff's second cause of action alleges a breach of loan commitment against MERS and First Magnus. This allegation is based on supposed oral promises made by First Magnus to modify the loan and a breach of those promises. Doc. 16 at ¶ 127. Plaintiff further alleges that MERS is liable as a nominee of the lender who breached a contract. Doc. 16 at ¶ 128. As "breach of loan commitment" is not a cognizable legal claim, Plaintiff's claim is analyzed as a breach of contract claim. The elements for a breach of contract are: (1) the existence of a valid contract, (2) plaintiff's performance or excuse for nonperformance, (3) defendants' breach, and (4) resulting damage. McKell v. Washington Mutual, Inc., 142 Cal.App.4th 1457, 1489, 49 Cal.Rptr.3d 227 (2006).
Certain types of contracts are invalid unless memorialized by a written document signed by the party against
Here, the alleged promise for a loan modification is subject to the statute of frauds. Absent a written agreement to modify the loan, any claim based upon an oral contract to modify the loan is barred by the statute of frauds. See Secrest, 167 Cal.App.4th at 552, 84 Cal.Rptr.3d 275.
At oral argument, Plaintiff claimed that Countrywide promised him that if he brought the loan current, they would modify his loan. Plaintiff further claims that, in reliance on this promise, he obtained money (approximately $8,000) to bring the loan current, but Countrywide refused the loan modification. Although Plaintiff cannot state a breach of contract claim based upon this conduct, he may be able to state a claim for fraud. In California, the elements for a claim of fraud are: (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud; (4) justifiable reliance; and (5) resulting damage. Small v. Fritz Companies, Inc., 30 Cal.4th 167, 173, 132 Cal.Rptr.2d 490, 65 P.3d 1255 (2003). Upon removal to federal court, all claims for fraud must be pled with sufficient particularity to satisfy Federal Rule of Civil Procedure Rule 9(b). "[W]hile a federal court will examine state law to determine whether the elements of fraud have been pled sufficiently to state a cause of action, the Rule 9(b) requirement ... is a federally imposed rule." Vess, 317 F.3d at 1103.
The Countrywide Defendants' motion to dismiss the second cause of action is GRANTED WITH LEAVE TO AMEND. Plaintiff shall have one final opportunity to amend his complaint to state a fraud claim based upon the conduct discussed at oral argument.
Plaintiff alleges negligence against First Magnus and BANA. The claim against BANA is based solely upon BANA's violation of RESPA. Doc. 16 at ¶¶ 129-132. Plaintiff further alleges that he sent a Qualified Written Request ("QWR") to BANA and the reply was untimely.
To establish a negligence claim, "it must be shown that (1) the defendant owed the plaintiff a legal duty, (2) the defendant breached that duty, and (3) the breach was a proximate or legal cause of the plaintiff's injuries. The absence of any one of these three elements is fatal to a negligence claim." Gilmer v. Ellington, 159 Cal.App.4th 190, 195, 70 Cal.Rptr.3d 893 (2008) (internal citation omitted). "Financial institutions owe no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal.App.3d 1089,
To the extent Plaintiff's negligence claim can be interpreted as a stand-alone claim under RESPA against BANA, Plaintiff has not alleged how BANA failed to respond to the QWR. RESPA requires:
12 U.S.C. § 2605(e)(1)(A). Here, Plaintiff admits that BANA did respond to the QWR, but contends that the response was untimely. However, Plaintiff fails to provide any other details regarding the QWR and the "untimely" response. Plaintiff did not request leave to amend the negligence claim. Countrywide Defendants' motion to dismiss is GRANTED WITHOUT LEAVE TO AMEND.
As a general rule, a financial institution owes no duty of care to a borrower where the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a lender of money. Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal.App.3d 1089, 1096, 283 Cal.Rptr. 53 (1991). There is no fiduciary relationship between Plaintiffs and any defendant. Accordingly, the Countrywide Defendants' motion to dismiss the fiduciary duty claim is GRANTED WITHOUT LEAVE TO AMEND.
The implied covenant of good faith and fair dealing exists in every contract. The implied covenant "is aimed at making effective the agreement's promises." Kransco v. Am. Empire Surplus Lines Ins. Co., 23 Cal.4th 390, 97 Cal.Rptr.2d 151, 2 P.3d 1 (2000). "Broadly stated, that covenant requires that neither party do anything which will deprive the other of the benefits of the agreement." Freeman & Mills, Inc. v. Belcher Oil Co., 11 Cal.4th 85, 44 Cal.Rptr.2d 420, 900 P.2d 669 (1995).
A tortuous breach of the covenant of good faith and fair dealing claim is limited to situations in which a fiduciary or special relationship exists. Mitsui Manuf. Bank v. Superior Court, 212 Cal.App.3d 726, 730, 260 Cal.Rptr. 793 (1989). As no fiduciary relationship exists here, the Countrywide Defendants' motion to dismiss this cause of action is GRANTED WITHOUT LEAVE TO AMEND to the extent it alleges tortuous breach of contract. If it is meant to allege a breach of contract claim, a sufficient independent breach of contract claim must be stated.
Plaintiff's sixth claim against all Defendants is for "economic duress." Plaintiff asserts this claim on the grounds that Countrywide made an oral promise to the Plaintiff to modify the loan. Doc. 16 at ¶¶ 143-148.
A party's consent to a contract must be freely given. Cal. Civ.Code § 1565. Apparent consent is not free when obtained through duress, menace, fraud, undue influence, or mistake. § 1567. "Duress generally exists whenever one is induced by the unlawful act of another to make a contract or perform some act under circumstances that deprive him of the exercise
Here, Plaintiff's claim of economic duress is that defendants proceeded with the foreclosure sale in violation of an oral promise that they would not do so if Plaintiff "brought the loan current." Doc. 1 ¶¶ 146-147. This is an allegation of breach of oral contract, not of economic duress. He also complains that the parties never assigned the deed to one another, an invocation of the "failure to hold the original promissory note" theory, which is meritless. Plaintiff has failed to plead a claim for economic duress.
Plaintiff did not request leave to amend the claim for economic duress. Countrywide Defendants' motion to dismiss the Economic Duress claim is GRANTED WITHOUT LEAVE TO AMEND.
The seventh cause of action is a Civil RICO claim against all Defendants. 18 U.S.C. § 1962 provides in pertinent part:
"A civil RICO complaint must at least allege: (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity (known as "predicate acts") (5) causing injury to plaintiff's `business or property.'" Flores v. Emerich & Fike, 416 F.Supp.2d 885, 911 (E.D.Cal.2006). A civil RICO claim must also comply with Rule 9(b)'s particularity requirement. Id. at 912.
Plaintiff essentially alleges that every defendant was aware that the notice of default was invalid and that every defendant either participated in or rendered substantial assistance in the issuance of the invalid notice. These allegations are not remotely sufficient to support of a Civil RICO violation. Plaintiff did not request leave to amend the Civil RICO claim. Countrywide Defendants' and Chase's motions to dismiss the Civil RICO claim are GRANTED WITHOUT LEAVE TO AMEND.
Plaintiff alleges that Countrywide and ReconTrust failed to comply with California Civil Code § 2923.5 (requiring lenders to contact borrower prior to filing notice of default), Doc. 16 at ¶ 156-160, and that all Defendants failed to comply with 2923.6 (requiring certain waiting periods prior to giving notice of sale). There is no private right of action under either provision. Gaitan v. Mortgage Electronic Registration Systems, 2009 WL 3244729, *7 (C.D.Cal. Oct. 5, 2009), succinctly summarized the state of the law and the relevant analysis:
Neither section 2923.5 or 2923.6 creates a private right of action. Plaintiff offers no contrary authority or argument.
Plaintiff did not request leave to amend the Section 2923.5 claim. The Countrywide Defendants' motion to dismiss the claim brought under California Civil Code Section 2923.5 is GRANTED WITHOUT LEAVE TO AMEND. Plaintiff has been previously afforded leave to amend the Section 2923.6 claim. Countrywide Defendants' and Chase's motion to dismiss the Section 2923.6 claim is GRANTED WITHOUT LEAVE TO AMEND.
The complaint next alleges a violation of the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), Section 1788.17 against all Defendants. The
"The law is clear that foreclosing on a deed of trust does not invoke the statutory protections of the RFDCPA." Collins v. Power Default Servs., Inc., No. 09-4838 S.C. 2010 WL 234902, at *3 (N.D.Cal. Jan. 14, 2010) (collecting numerous cases). "Foreclosure pursuant to a deed of trust does not constitute debt collection under the RFDCPA." Castaneda v. Saxon Mortgage Serve., Inc., 687 F.Supp.2d 1191, 1197 (E.D.Cal.2009); see also Gonzalez v. First Franklin Loan Servs., No. 1:09-CV-00941 AWI-GSA, 2010 WL 144862, at *7 (E.D.Cal. Jan. 11, 2010) ("Foreclosure related actions . . . do not implicate the RFDCPA.") The conduct Plaintiff complains of concerns foreclosure related actions in connection with his residential mortgage. This conduct is not covered by the RFDCPA. For this reason, Plaintiff's RFDCPA claim is subject to dismissal.
Plaintiff has been previously afforded leave to amend the RFDCPA claim. Countrywide Defendants' and Chase's motions to dismiss the RFDCPA claim are GRANTED WITHOUT LEAVE TO AMEND.
Plaintiff's eleventh cause of action is against First Magnus and MERS for violation of California Civil Code § 1572 (Actual Fraud). The complaint alleges:
(Compl. at ¶ 180).
In California, "[t]he elements of fraud, which give[] rise to the tort action for deceit, are (a) misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." Small v. Fritz Companies, Inc., 30 Cal.4th 167, 173, 132 Cal.Rptr.2d 490, 65 P.3d 1255 (2003) (internal quotation marks omitted). Plaintiff's fraud claim is subject to Rule 9(b)'s elevated pleading standard. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).
The allegations in the complaint fail to specify the "who, what, when, where, and how of the misconduct charged." Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir.2009) (internal quotation marks omitted). The complaint provides no particular details on what specific role First Magnus or MERS played in the "scheme" to "fraudulently induce Plaintiff" to enter into his loan transaction, or when and where the scheme occurred. See Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir.2007) (concluding that, in a fraud suit involving multiple defendants, a plaintiff must "identif[y] the role" each defendant played "in the alleged fraudulent scheme," informing "each defendant separately of the allegations surrounding his alleged participation in the fraud") (alteration in original) (internal quotation marks omitted); Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir.2003) (concluding that a fraudulent conspiracy claim failed to satisfy Rule 9(b) because, among other things, the pleading failed to "provide the particulars of when, where, or how the
Plaintiff's sixteenth cause of action restates the allegations from the eleventh cause of action against all Defendants and fails for the same reasons.
Plaintiff has been previously afforded leave to amend the Section 1572 claim. He has not done so. Countrywide Defendants' motion to dismiss the eleventh cause of action is GRANTED WITHOUT LEAVE TO AMEND. Countrywide Defendants' and Chase's motions to dismiss the sixteenth cause of action are GRANTED WITHOUT LEAVE TO AMEND.
Plaintiff reasserts a RESPA claim against each Defendant, alleging: (1) "That the failure to respond to Plaintiff's RESPA constitutes a violation of 12 U.S.C. § 2607(b); and (2) Plaintiff has suffered damages actually and proximately caused by Defendants' violation of the within statute." (Doc. 16 at ¶¶ 196, 198). Plaintiff's claim against each Defendant is unfounded, as he only addressed a RESPA letter to BANA.
Just as Plaintiff's prior alleged RESPA claim failed to state a claim, this RESPA claim fails. The new claim does not allege who or how each Defendant violated RESPA. Instead the allegation simply affords the conclusion of law that the Defendants violated RESPA resulting in damages to the Plaintiff. Plaintiff did not request leave to amend the RESPA claim. Countrywide Defendants' and Chase's motions to dismiss this RESPA cause of action are GRANTED WITHOUT LEAVE TO AMEND.
"[A] mortgagor of real property cannot, without paying his debt, quiet his title against the mortgagee." Miller v. Provost, 26 Cal.App.4th 1703, 1707, 33 Cal.Rptr.2d 288 (1994) (citations omitted). Here, Plaintiff defaulted on the Subject Loan, and does not allege that he has since paid the outstanding balance.
Plaintiff has been previously afforded leave to amend the claim for Quiet Title. Countrywide Defendants' and Chase's motions to dismiss the fourth cause of action are GRANTED WITHOUT LEAVE TO AMEND.
Plaintiff asserts a claim under California's Unfair Competition Law ("UCL"). Cal. Bus. & Prof.Code § 17200. Section 17200 prohibits "any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising." "[A] plaintiff must have suffered an injury in fact' and lost money or property as a result of the unfair competition' to have standing to pursue either an individual or a representative claim under the California Unfair Competition Law." Hall v. Time, Inc., 158 Cal.App.4th 847, 849, 70 Cal.Rptr.3d 466 (2008); see also Cal. Bus. & Prof.Code § 17204.
Defendants argue that Plaintiff did not state a claim under the UCL because: (1) "Plaintiff has not alleged sufficient facts under Fed.R.Civ.P. 8"; (2) Plaintiff did not allege statutory violations or allege that any conduct was unlawful, unfair, or fraudulent; (3) Plaintiff did not plead claims of fraud and misrepresentation with specificity; (4) Plaintiff did not state what money and property was lost.
The UCL prohibits unfair competition including "any unlawful, unfair or fraudulent business act or practice." Cal.
As to the unlawful prong, the UCL incorporates other laws and treats violations of those laws as unlawful business practices independently actionable under state law. Chabner v. United Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir.2000). As to the "unfair" prong, "[a]n unfair business practice is one that either offends an established public policy' or is immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.'" McDonald v. Coldwell Banker, 543 F.3d 498, 506 (9th Cir.2008) (quoting People v. Casa Blanca Convalescent Homes, Inc., 159 Cal.App.3d 509, 530, 206 Cal.Rptr. 164 (1984)). As to the fraudulent prong, "fraudulent acts are ones where members of the public are likely to be deceived." Sybersound Records, Inc. v. UAV Corp., 517 F.3d 1137, 1151-52 (9th Cir.2008). For UCL claims, "[a] plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation." Khoury v. Maly's of Cal., Inc., 14 Cal.App.4th 612, 619, 17 Cal.Rptr.2d 708 (1993).
Plaintiff's UCL claim has several deficiencies. First, Plaintiff's UCL allegations do not specify the basis for his claim, i.e., whether it is based on an unlawful, unfair, or fraudulent practice, let alone state, with reasonable particularity, the facts supporting the statutory elements of the violation. Second, to the extent Plaintiff asserts an UCL claim based on a violation of other law, his complaint fails to state a claim for a violation of law. Accordingly, to the extent the UCL claim is predicated on the violation of other law, it is insufficiently pled. Third, to the extent Plaintiff asserts a UCL claim that is based on or grounded in fraud, it must meet the requirements of Rule 9(b), Kearns, 567 F.3d at 1124-27, Vess, 317 F.3d at 1103-04, which it does not. The complaint fails to specify what particular role Defendants played in the fraudulent scheme, when and where the scheme occurred, or details on the specific misrepresentation(s) involved in the fraudulent scheme.
Plaintiff has been previously afforded leave to amend the Section 17200 claim. Defendants' motion to dismiss the Section 17200 cause of action is GRANTED WITHOUT LEAVE TO AMEND.
The complaint's 15th cause of action against ReconTrust and MERS alleges that no Defendant owns the note and therefore has no right to foreclose. Doc. 16 ¶ 214. As discussed above, this is not the law in California. Plaintiff's demand to produce the note fails as matter of law for the reasons stated above.
Plaintiff did not request leave to amend this claim. Defendants' motion to dismiss the 15th cause of action is GRANTED WITHOUT LEAVE TO AMEND.
Countrywide Defendants and Chase move to dismiss the last cause of action for injunctive relief on the grounds that: (1) injunctive relief is not a cause of action; and (2) it must be tethered to some independent legal duty owed by the defendant to the plaintiff.
Plaintiff alleges "Defendants threaten to, and unless restrained, will foreclose upon Plaintiff's home by conducting a trustee's sale or causing a trustee's sale to be
"Injunctive relief is a remedy and not, in itself, a cause of action, and a cause of action must exist before injunctive relief may be granted." Camp v. Board of Supervisors, 123 Cal.App.3d 334, 356, 176 Cal.Rptr. 620 (1981) (quoting Shell Oil Co. v. Richter, 52 Cal.App.2d 164, 168, 125 P.2d 930 (1942)). Here, as all of the substantive allegations have been dismissed, Plaintiff cannot obtain injunctive relief.
Plaintiff has been previously afforded leave to amend the claim for injunctive relief. Countrywide Defendants' and Chase's motions to dismiss the final cause of action are GRANTED WITHOUT PREJUDICE, but only if Plaintiff states a sufficient fraud claim.
For the reasons set forth above, Defendants' motions to dismiss are GRANTED in their entirety.
Plaintiff requests leave to amend to state a fraud claim against the Countrywide Defendants in connection with the alleged oral promise to modify the loan agreement. Any amended complaint shall be filed within thirty (30) days of electronic service. No claims may be reasserted against Chase.
SO ORDERED.
