Teresa L Amaro v. Option One Mortgage Corp et al

Filing 14

ORDER GRANTING MOTION TO DISMISS by Judge Virginia A. Phillips: For the foregoing reasons, the Court GRANTS Defendant's Motion to Dismiss Plaintiff's claims one, three, five, six and ten. Plaintiff must file any amended Complaint by January 26, 2009. (am)

1 2 3 4 5 6 7 8 9 10 11 TERESA L. AMARO, 12 13 14 15 16 17 18 19 ) ) Plaintiff, ) ) v. ) ) OPTION ONE MORTGAGE ) CORP., QUALITY LOAN ) SERVICES, CORP., and ) DOES 1 through 50 ) inclusive, ) ) Defendants. ) ________________________ ) Case No. EDCV 08-1498-VAP (AJWx) [Motion filed on October 31, 2008] ORDER GRANTING MOTION TO DISMISS UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

The Court has received and considered the papers

20 filed in support of, and in opposition to, Defendant Sand 21 Canyon Corporation's Motion to Dismiss. 23 24 25 A. 26 I. BACKGROUND Factual Allegations On December 2, 2005, Plaintiff Teresa L. Amaro For the 22 following reasons, the Court GRANTS the Motion.

27 ("Plaintiff") obtained an adjustable rate mortgage for 28 $367,920 from Option One Mortgage Corporation ("Option

1 One").

(Compl. ¶ 7.)

Pursuant to the mortgage agreement

2 with Option One, Plaintiff transferred her deed of trust 3 to Option One on December 2, 2005; Option One recorded 4 the deed on December 21, 2005. 5 6 Plaintiff alleges Option One did not explain "the (Id. at ¶ 9.) Furthermore, according to 7 workings of the rate, how it is computed nor its inherent 8 volatility." 9 Plaintiff, Option One "charged and obtained improper fees 10 for the placement of h[er] loan as "sub-prime" when [s]he 11 qualified for a prime rate mortgage which would have 12 generated less fees and interest. 13 14 On May 21, 2008, Quality Loan Service filed a 15 substitution of trustee with the San Bernardino County 16 Recorder, thereby naming itself as the trustee of 17 Plaintiff's deed of trust. (Id. at ¶ 16.) Quality Loan 18 Service also sent to Plaintiff a "Notice of Breach and 19 Default and of Election to Cause Sale of Real Property 20 Under Deed of Trust" ("Notice of Breach") on that day. 21 (Id. at ¶ 17.) 22 23 B. 24 Procedural History Plaintiff filed a Complaint against Defendants Option (Id. at ¶ 10.) (Id. at ¶¶ 12, 13.)

25 One Mortgage Corp. and Quality Loan Services, Corp., in 26 the California Superior Court, San Bernardino County, 27 with the following claims against both Defendants: (1) 28
2

1 Violation of the Truth in Lending Act ("TILA"), 15 U.S.C. 2 § 1611; (2) Violation of the Real Estate Settlement 3 Procedures Act ("RESPA"), 26 U.S.C. § 2605; (3) Violation 4 of the Home Ownership and Equity Protection Act of 1994 5 ("HOEPA"), 15 U.S.C. § 1602; (4) Violation of the Fair 6 Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 7 1692; (5) Breach of fiduciary duty; (6) Breach of 8 covenant of good faith and fair dealing; (7) Injunctive 9 relief; (8) Injunctive relief; (9) Declaratory relief; 10 (10) Fraud. 11 12 Defendant Option One Mortgage Corp., now known as 13 Sand Canyon Corporation, removed the case to this Court 14 on October 24, 2008 on the basis of federal question 15 jurisdiction, 28 U.S.C. § 1331. Defendant Quality Loan 16 Services did not join in the removal; Defendant Quality 17 Loan Services filed a "Declaration of Nonmonetary Status" 18 in the state court proceeding before removal, thereby 19 transforming it, the trustee under the deed of trust, 20 into a nominal third party, no longer required to 21 participate in the action pursuant to California Civil 22 Code § 29241. 23 24 Defendant Sand Canyon Corporation ("Defendant") filed 25 a "Motion to Dismiss the Action [Fed. R. Civ. Proc. 26 12(b)(6)]("Motion") on October 31, 2008 and noticed a 27 hearing on the Motion for December 8, 2008. 28
3

Defendant

1 moves the Court to dismiss Plaintiff's first, third, 2 fifth, sixth, and tenth claims. 4 2008. Plaintiff, appearing in On 3 this action in pro se, filed Opposition on November 21, Defendant filed a Reply on December 1, 2008. 5 December 2, 2008, the Court took the Motion under 6 submission for decision without hearing. 7 8 II. LEGAL STANDARD Under Rule 12(b)(6), a party may bring a motion to As a general matter, the Federal Rules

9 dismiss for failure to state a claim upon which relief 10 can be granted. 11 require only that a plaintiff provide "'a short and plain 12 statement of the claim' that will give the defendant fair 13 notice of what the plaintiff's claim is and the grounds 14 upon which it rests." 16 R. Civ. P. 8(a)(2)). Bell Atlantic Corp. v. Twombly, In addition, the Court must accept 15 550 U.S. 544, 127 S. Ct. 1955, 1964 (2007) (quoting Fed. 17 all material allegations in the complaint -- as well as 18 any reasonable inferences to be drawn from them -- as 19 true. See Doe v. United States, 419 F.3d 1058, 1062 (9th 20 Cir. 2005); ARC Ecology v. U.S. Dep't of Air Force, 411 21 F.3d 1092, 1096 (9th Cir. 2005). 22 23 "While a complaint attacked by a Rule 12(b)(6) 24 motion to dismiss does not need detailed factual 25 allegations, a plaintiff's obligation to provide the 26 'grounds' of his 'entitlement to relief' requires more 27 than labels and conclusions, and a formulaic recitation 28
4

1 of the elements of a cause of action will not do." 2 Atlantic, 127 S. Ct. at 1964-65 (citations omitted).

Bell

3 Rather, the allegations in the complaint "must be enough 4 to raise a right to relief above the speculative level." 5 Id. at 1965. 6 7 Although the scope of review is limited to the 8 contents of the complaint, the Court may also consider 9 exhibits submitted with the complaint, Hal Roach Studios, 10 Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 11 (9th Cir. 1990), and "take judicial notice of matters of 12 public record outside the pleadings," Mir v. Little Co. 13 of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988). 14 15 16 III. DISCUSSION Defendant moves the Court to dismiss Plaintiff's

17 first (TILA violation), third (HOEPA violation), fifth 18 (breach of fiduciary duty), sixth (breach of covenant of 19 good faith and fair dealing), and tenth (fraud) claims. 20 Plaintiff opposes the Motion, only arguing the propriety 21 and sufficiency of her first claim, for TILA violations.1 22 23 24 25 The Court could grant Defendant's Motion with respect to claims three, five, six, and ten based only on 26 Plaintiff's failure to oppose. In the interest of 27 justice, however, the Court evaluates each of Plaintiff's claims, even though Plaintiff only opposes Defendant's 28 Motion as to her first claim.
5
1

1 A. 2

Claim One - TILA Violation Plaintiff alleges Defendant violated 15 U.S.C. § 1601

3 ("TILA") by filing to validate or "make a full accounting 4 and the required disclosures as to the true finance 5 charges and fees," "improperly retained funds belonging 6 to Plaintiff," and failed to "disclose the status of the 7 ownership of the loans. (Compl. at ¶ 23.) Plaintiff 8 seeks rescission of the loan, compensatory damages, 9 attorneys' fees, and punitive damages. 10 27.) 11 12 Defendant argues Plaintiff's claim for compensatory 15 U.S.C. § 1640(e). 13 damages is barred by the applicable statute of 14 limitations period of one-year. 15 Plaintiff executed the loan documents on December 2, 16 2005; Plaintiff did not file this action until September 17 17, 2008. 18 is barred. 19 20 Plaintiff argues the doctrine of recoupment allows (See Opp'n at 8.) 21 her to raise the claim, despite bringing it beyond the 22 statute of limitations period. 23 According to Plaintiff, "a party may assert recoupment as 24 a defense after a statute of limitations period has 25 lapsed." 27 28
6

(Id. at ¶¶ 24-

Based on the face of the Complaint, the claim

(Id.)

Plaintiff argues she may use this

26 defense affirmatively in this case because she brings it

1 in response to Defendant's non-judicial foreclosure 2 proceeding. 3 4 Plaintiff's contention lacks merit. A party may 5 bring a claim for recoupment after TILA's one-year 6 statute of limitations period has expired, but only as a 7 defense in an action to collect a debt. 8 1640(a). 15 U.S.C. § Here, Plaintiff's affirmative use of the claim See (Id.)

9 is improper and exceeds the scope of the TILA exception, 10 permitting recoupment as a defensive claim only. 12 (1998). 14 amend. 15 16 B. 17 Claim Three - HOEPA Violation Plaintiff alleges Defendant violated 15 U.S.C. § 1602 11 id.; Beach v. Ocwen Fed. Bank, 523 U.S. 410, 415-16 Accordingly, the Court grants Defendant's Motion 13 with respect to Plaintiff's first claim, without leave to

18 ("HOEPA") because her loan "was placed and administered 19 and otherwise utilized without regard to Plaintiff's 20 income or cash flow and with the intention of inducing a 21 default." (Compl. at ¶ 37.) As Defendant argues, See 22 HOEPA's protections apply only to certain mortgages. 23 15 U.S.C. § 1602(aa). 24 qualified for HOEPA's additional protections. Without

Plaintiff fails to allege her loan

25 alleging this factual basis for her claim, Plaintiff 26 fails to state a claim for which relief can be granted. 27 Accordingly, the Court grants Defendant's Motion with 28
7

1 respect to Plaintiff's third claim, with leave to amend. 2 3 C. 4 Claim Five - Breach of Fiduciary Duty Plaintiff alleges Defendant breached its fiduciary

5 duty, arising out of Defendant's "position of trust by 6 virtue of [its] expertise," to her by providing her a 7 loan "without due care to the best interest of Plaintiff 8 or for the protection of h[er] rights." 9 47, 49.) 11 4-5.) 12 13 Typically, there is no fiduciary duty between a See Downey v. Humphreys, 14 mortgage lender and a debtor. 10 duty exists between itself and Plaintiff. (Compl. at ¶¶ (See Mot. at In its Motion, Defendant argues no fiduciary

15 102 Cal. App. 2d 323, 332 (1951) ("A debt is not a trust 16 and there is not a fiduciary relationship between debtor 17 and creditor as such"); Price v. Wells Fargo Bank, 213 18 Cal. App. 3d 465, 476 (1989) (applying same principle "to 19 relationship between a bank and its loan customers"). 20 Plaintiff has not alleged any special relationship that 21 could override this principle. Connor v. Great Western 22 Sav. & Loan Assoc., 69 Cal.2d 850, 864 (1968); Wolf v. 23 Superior Court, 107 Cal. App. 4th 25, 29 (2003). 24 Plaintiff does not state a claim for which relief can be 25 granted because no fiduciary relationship exists here. 26 Accordingly, the Court grants Defendant's Motion with 27 28
8

1 respect to Plaintiff's fifth claim, without leave to 2 amend. 3 4 D. 5 6 Claim Six - Breach of Covenant of Good Faith and Fair Dealing Plaintiff alleges Defendant breached the covenant of

7 good faith and fair dealing by "the commencement of 8 foreclosure proceedings upon the property lawfully 9 belonging to Plaintiff without the production of 10 documents demonstrating the lawful rights for the 11 foreclosure." (Compl. at ¶ 54.) Defendant argues this 12 claim does little more than restate Plaintiff's claim for 13 breach of fiduciary duty and that the claim should fail 14 because Defendant does not owe Plaintiff a duty of utmost 15 care. 16 17 The implied covenant of good faith and fair dealing See Price, 213 18 arises between the parties to a contract.

19 Cal. App. 3d at 478; Rest. 2d Contracts § 205 ("Every 20 contract imposes upon each party a duty of good faith and 21 fair dealing in its performance and its enforcement."). 22 Although Defendant, as a party to the mortgage contract, 23 is bound by the covenant, the covenant does not "impose 24 any affirmative duty of moderation in the enforcement of 25 legal rights." Price, 213 Cal. App. 3d at 479. 26 Plaintiff's claim alleges that Defendant lacked 27 documentation to support the foreclosure; this does not 28
9

1 state a claim for a breach of the covenant. 3 (S.D. Cal., Oct. 30, 2008).

See Tina v.

2 Countrywide Home Loans, Inc., 2008 WL 4790906, at *4 Accordingly, the Court 4 grants Defendant's Motion with respect to Plaintiff's 5 sixth claim, with leave to amend. 6 7 E. 8 Claim Ten - Fraud Plaintiff's tenth claim alleges Defendant's

9 representations in the Notice of Default, sent to 10 Plaintiff, contained two false representations: (1) 11 "Documents were not provided to the trustee that showed 12 that Option One was the [b]eneficiary and entitled to the 13 payments;" and (2) "At the time Quality made the 14 representations they [k]new they were false and were made 15 for the sole purpose of inducing reliance." 16 89.) (Compl. at ¶ Plaintiff alleges she relied on those false

17 statements to her detriment and has been damaged "in 18 having [her] home wrongfully placed in foreclosure and a 19 slander of [her] title, and being required to become 20 involved in this litigation." 22 with particularity. 23 24 Fraud must be plead with particularity. See Fed. R. 25 Civ. Proc. 9(b). Even if a complaint does not assert (Id. at ¶ 90.) Defendant 21 argues Plaintiff's claim for fraud has not been plead

26 explicitly a claim for fraud and even if none of the 27 claims in a complaint "sound in fraud," any allegations 28
10

1 of fraudulent conduct in a complaint must be plead with 2 particularity. 4 5 To satisfy must the set requirements forth more of Rule the 9(b), "[a] facts 6 plaintiff than neutral Vess v. Ciba-Geigy Corp. USA, 317 F.3d 3 1097, 1102-05 (9th Cir. 2003).

7 necessary to identify the transaction. 9 and why it is false."

The plaintiff must

8 set forth what is false or misleading about a statement, Id. at 1106 (quoting Decker v. Here, 10 GlenFed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994)).

11 Plaintiff includes the statements she relied upon, but 12 fails to demonstrate what is misleading about them or why 13 they are false. Accordingly, Plaintiff's averments of The 14 fraud do not satisfy the requirements of Rule 9(b). 16 tenth claim, with leave to amend. 17 18 19 IV. CONCLUSION For the foregoing reasons, the Court GRANTS Defendant's Plaintiff must file any amended Complaint by

15 Court grants Defendant's Motion with respect to Plaintiff's

20 Motion to Dismiss Plaintiff's claims one, three, five, six 21 and ten. 23 24 25 26 27 28
11

22 January 26, 2009.

Dated: January 14, 2009 VIRGINIA A. PHILLIPS United States District Judge