Solano v. America's Servicing Company, et al

Filing 54

ORDER signed by Judge Garland E. Burrell, Jr. on 9/26/2011 GRANTING 38 and 40 Motions to Dismiss. Plaintiff to file Second Amended Complaint within 14 days. (Michel, G)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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CONSTANCE SOLANO and the SOLANO
FAMILY TRUST,

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Plaintiffs,
v.

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AMERICA’S SERVICING COMPANY, a
division of WELLS FARGO, NA;
MORTGAGEIT, INC.; MORTGAGE
ELECTRONIC REGISTRATION SYSTEMS,
INC.; NDEX WEST, LLC; FINANCIAL
TITLE COMPANY; U.S. BANK NA;
BANC OF AMERICA FUNDING 2007-6
TRUST; MORTGAGE AND INVESTORS
INVESTMENT CONSULTANTS, INC.,
and DOES 1-10,000, inclusive,

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Defendants.
________________________________

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2:10-cv-02426-GEB-GGH
ORDER GRANTING MOTIONS TO
DISMISS

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Defendant MortgageIT, Inc. (“MortgageIT”) moves for dismissal

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of Plaintiffs’ First Amended Complaint (“Amended Complaint”) under

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Federal Rule of Civil Procedure (“Rule”) 12(b)(6), arguing Plaintiffs

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fail to state a viable claim against it.

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Defendants Wells Fargo Bank, N.A. dba America’s Servicing

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Company (“Wells Fargo Bank”); Mortgage Electronic Registration Systems,

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Inc. (“MERS”); and U.S. Bank N.A. as Trustee for Banc of America Funding

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2007-6 Trust (“U.S. Bank”) (collectively referred to as “Wells Fargo

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Defendants”) also seek dismissal of Plaintiffs’ claims under Rule

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1

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12(b)(6).

2

Defendants’ dismissal motion.

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4

Defendant

NDeX

West,

LLC

(“NDeX”)

joins

Wells

Fargo

For the reasons stated below, the motions to dismiss are
granted.

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I. LEGAL STANDARD

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“In reviewing the dismissal of a complaint, we inquire whether

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the

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inferences, state a plausible claim for relief.” Cafasso, U.S. ex rel.

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v. General Dynamics C4 Systems, 637 F.3d 1047, 1054 (9th Cir. 2011)

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(citing Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009)). The

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material allegations of the complaint are accepted as true and all

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reasonable inferences are drawn in favor of the plaintiff. Al-Kidd v.

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Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, this tenet “is

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inapplicable to legal conclusions.” Iqbal, 129 S. Ct. at 1949. Further,

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“[a] pleading that offers ‘labels and conclusions’ or ‘a formulaic

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recitation of the elements of a cause of action will not do.’ Nor does

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a

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‘further factual enhancement.’” Id. (quoting Bell Atlantic Corp. v.

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Twombly, 550 U.S. 544, 555, 557 (2007)). “In sum, for a complaint to

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survive a motion to dismiss, the nonconclusory ‘factual content,’ and

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reasonable inferences from that content, must be plausibly suggestive of

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a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv.,

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572 F.3d 962, 969 (9th Cir. 2009) (internal citation omitted).

complaint’s

complaint

factual

suffice

if

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25

allegations,

it

tenders

together

‘naked

with

all

assertion[s]’

reasonable

devoid

of

II. BACKGROUND
On

or

about

March

23,

2007,

Plaintiff

Constance

Solano

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(“Solano”) obtained two loans, which were secured by her real property,

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located at 3161 Big Bear Drive, Roseville, CA (the “Property”). (First

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Amended Complaint (“FAC”) ¶¶ 1, 18, 25.) The primary loan was for
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$592,000.00 (the “Primary Loan”), and the second loan was for $83,000.00

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(the “Secondary Loan”). (FAC ¶¶ 19, 25.) However, Plaintiffs do not

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distinguish between the two loans within the Amended Complaint. In their

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opposition brief, Plaintiffs argue “all of the securitization and chain

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of title problems apply equally to [the Secondary Loan].” (Pl.’s Opp’n

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13:14-19.) Therefore, unless otherwise indicated, it is assumed each

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claim refers to both the Primary and Secondary loans.

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On or about May 12, 2007, Solano “grant deeded the subject

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property to . . . Solano-3161 Big Bear, LLC” (“Solano-3161”). (FAC

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¶ 20.) On or about July 1, 2010, Solano-3161 “quitclaimed the subject

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property to the Solano Family Trust.” Id.

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The Deed of Trust on the Primary Loan identifies Mortgage &

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Investment Consultants, Inc., as the lender, Financial Title Company as

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trustee, and MERS as beneficiary. Id. Ex. A. The Deed of Trust on the

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Secondary Loan identifies MortgageIT as the lender, Financial Title

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Company as trustee, and MERS as beneficiary. Id. Ex. B. Plaintiffs

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allege Wells Fargo Bank subsequently began servicing the loans. Id.

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¶¶ 2, 21-22.

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An Assignment of Deed of Trust dated March 29, 2010, assigned

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and transferred to U.S. Bank “all beneficial interest under [the] Deed

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of Trust” on the Primary Loan. Id. Ex. E. U.S. Bank substituted NDeX as

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trustee of the Deed of Trust on the Primary Loan on April 9, 2010. Id.

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Ex. F.

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On or about March 8, 2010, an agent of NDeX signed and

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recorded a Notice of Default, naming NDeX as the trustee. Id. ¶ 24. On

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or about June 9, 2010, NDeX filed a Notice of Trustee Sale in connection

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with the Primary Loan, in which it indicated the Property was in

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foreclosure. Id. ¶ 24, Ex. G.
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On January 5, 2011, U.S. Bank purchased the Property in a

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foreclosure sale from NDeX West, the foreclosing beneficiary. Id. ¶ 24,

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Ex. I.1

Plaintiffs remain in possession of the property. Id. ¶ 24.

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Plaintiffs’ claims stem from their allegations that Defendants

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have acted improperly from the loans’ origin through foreclosure. Id.

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¶¶ 25-30.

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III. DISCUSSION

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Defendants

filed

earlier

dismissal

motions

challenging

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Plaintiffs’ Complaint, which were granted with leave to amend as to all

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but the TILA Rescission claim, which was dismissed with prejudice.

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Plaintiffs subsequently filed their Amended Complaint on May 11, 2011,

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which comprises thirteen claims.

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A.

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Breach of Contract
Movants seek dismissal of Plaintiffs’ following two claims

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based

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Protection Act (“HOEPA”) and a breach of the security instrument.

in

breach

of

contract:

a

violation

of

the

Home

Ownership

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Movants seek dismissal of Plaintiffs’ HOEPA claim, arguing,

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inter alia, the HOEPA rescission claim is barred by the three-year

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statute of limitations and the HOEPA damages claim is barred by the one-

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year statute of limitations. (MortgageIT’s Mot. 6:4-9; Wells Fargo

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Defs.’ Mot. 4:5-6.)

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Plaintiffs

allege

Defendants

Mortgage

&

Investors,

MERS,

MortgageIT, and U.S. Bank violated HOEPA by failing to make certain

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The two Deeds of Trust, Assignment of Deed of Trust,
Substitution of Trustee, Notice of Default, Notice of Trustee Sale, and
Trustee’s Deed upon Sale “may be considered” in ruling on Defendants’
Rule 12(b)(6) motions, since they are attached to Plaintiffs’ Amended
Complaint. Hal Roach Studios, Inc. v. Richard Feiner and Co., Inc., 896
F.2d 1542, 1555 n.19 (9th Cir. 1989) (stating “material which is
properly submitted as part of the complaint may be considered” in ruling
on a Rule 12(b)(6) motion).
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required disclosures prior to when their loan transactions closed; and,

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by

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Plaintiffs without regard to her ability to pay.” (FAC ¶ 64.) Plaintiffs

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allege they “have a legal right to resend [sic] the consumer credit

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transaction”

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[damages].” (FAC ¶¶ 65, 69.)

“[e]ngaging

in

and

a

pattern

“Defendants

and

practice

[are]

liable

of

to

extending

the

credit

Plaintiffs

to

for

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“HOEPA is an amendment of TILA, and therefore is governed by

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the same remedial scheme and statutes of limitations as TILA.” Hamilton

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v. Bank of Blue Valley, 746 F. Supp. 2d 1160, 1179 (E.D. Cal. 2010)

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(citation and internal quotation marks omitted). A borrower’s right to

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rescind a loan transaction under TILA “expire[s] three years after the

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date of the consummation of the transaction[.]” 15 U.S.C. § 1635(f)

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(2010). “Consummation” is defined under the statute as “the time that a

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consumer becomes contractually obligated on a credit transaction.”

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Grimes v. New Century Mortg. Corp., 340 F.3d 1007, 1009 (9th Cir. 2003)

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(quoting 12 C.F.R. § 226.2(a)(13)(2010)). This three-year limitations

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period “represents an absolute limitation on rescission actions [and]

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bars any claims filed more than three years after the consummation of

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the transaction. Therefore, § 1635(f) is a statute of repose, depriving

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the courts of subject matter jurisdiction when a § 1635 claim is brought

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outside of the three-year limitation period.” Miguel v. Country Funding

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Corp., 309 F.3d 1161, 1164 (9th Cir. 2002) (internal quotation marks and

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citation omitted).

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Since Plaintiffs allege “[o]n or about March 23, 2007,” Solano

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“executed

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limitations expired on or about March 23, 2010. (FAC ¶ 19.) However,

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Plaintiffs did not rescind the transaction until they filed their

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Complaint on September 9, 2010. (Compl. ¶ 119; ECF No. 1.) Therefore,

a

written

Promissory

Note,”

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the

three-year

statute

of

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the Court lacks subject matter jurisdiction over Plaintiffs’ HOEPA

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rescission claim, and this claim is dismissed against all Defendants

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with prejudice. See Omar v. Sea-Land Serv., Inc., 813 F.2d 986, 991 (9th

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Cir. 1987) (“A trial court may dismiss a claim sua sponte under Fed. R.

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Civ. P. 12(b)(6) . . . without notice where the claimant cannot possibly

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win relief.”).

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HOEPA damages claims are also subject to TILA’s statute of

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limitations. See Hamilton, 746 F. Supp. 2d at 1179. An action under TILA

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for actual or statutory damages must be brought “within one year from

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the date of the occurrence of the violation.” 15 U.S.C. § 1640(e)(2010).

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“[A]s a general rule[, this] limitations period starts [to run] at the

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consummation of the transaction.” King v. California, 784 F.2d 910, 915

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(9th Cir. 1986). Therefore, the statute of limitations on Plaintiffs’

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HOEPA damages claim expired on or about March 23, 2008.

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Plaintiffs allege equitable tolling for their HOEPA damages
claim as follows:

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Plaintiffs first learned of the actions of
Defendants, including their failure to disclose and
the fraud committed upon them in May of 2010. Any
applicable statute of limitations should run from
this date. . . . Plaintiff could not have learned
of these violations at the time the loan was
obtained by looking at her loan documents and
escrow closing statements as the true facts of the
lender and the securitization of her note and deed
of trust and the fees attached thereto, which were
undisclosed to her, were not apparent from the face
of the loan documents, nor deed of trust.

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(FAC ¶ 72.) Further, Plaintiffs assert “a lay Plaintiff without legal

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knowledge as to the aforementioned federal statutes and state causes of

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action would not have been able to discover what Defendants failed to

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disclose.”

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insufficient to justify equitable tolling since Plaintiffs have not

(Pl.’s

Opp’n

15:12-14.)

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These

tolling

allegations

are

1

alleged

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Defendants’ alleged HOEPA violations within the one-year statutory

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period. See Davis v. Mortgageit, Inc., No. Civ. S-09-3028 FCD/GGH, 2010

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WL 2943162, at *3-4 (E.D. Cal. July 23, 2010) (finding equitable tolling

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inapplicable in a case where Plaintiffs argued it was only after

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performing a Forensic Loan Document Audit that they discovered the

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alleged TILA violations since Plaintiffs “could have conducted an audit

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of their documents, forensic or otherwise” within the limitations

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period); see also Ahmad v. World Savings Bank, at *2 (finding equitable

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tolling inapplicable since plaintiff failed to allege facts explaining

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how she was prevented from comparing her loan documents and disclosures

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with TILA statutory and regulatory requirements to discover alleged TILA

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disclosure violations). Plaintiffs “have offered no factual allegations

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to

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disclosures in the loan documents with the required disclosures under

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. . . HOEPA.” Wadhwa v. Aurora Loan Servs., LLC, 2011 WL 1601593, at *3

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(E.D. Cal. Apr. 27, 2011). Therefore, Plaintiffs’ HOEPA damages claim is

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dismissed against all Defendants.

show

facts

that

demonstrating

they

were

they

unable

were

to

prevented

compare

the

from

discovering

allegedly

improper

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Movants also seek dismissal of Plaintiffs’ breach of security

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instrument claim, arguing “there are no facts pled to support [the]

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elements” of a breach of contract claim. (MortgageIT’s Mot. 19:11-12;

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Wells Fargo Defs.’ Mot. 7:19-22.)

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In California, “[a] cause of action for breach of contract

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requires proof of the following elements: (1) existence of the contract;

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(2)

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defendant’s breach; and (4) damages to plaintiff as a result of the

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breach.” CDF Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239

plaintiff’s

performance

or

excuse

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7

for

nonperformance;

(3)

1

(2008). This breach of contract claim is premised on Plaintiffs’ invalid

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Substitution of Trustee allegation, as follows:
The Substitution of Trustee in this case is void,
due to fraud, and was not executed in compliance
with California Civil Code § 29[2]4(a). The
Substitution of Trustee was invalid also because it
was not executed by the Lender, per requirement of
the Deed of Trust. The duly appointed Trustee under
the Deed of Trust as of the recording of the Notice
of Default on March 8, 2010 was Financial Title Co.
NdexWest was [n]ever effectively substituted as
trustee. . . . The Notice of Default was recorded
PRIOR to the assignment, which if it were the true
holder-in-due-course, it would be mandatory to
obtain beneficial interest in the Deed of Trust,
prior to invoking foreclosure. . . .

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4
5
6
7
8
9
10

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The fraudulent assignment was recorded AFTER
the Notice of Default, which proves the Notice of
Default was void at its inception and recording on
March 8, 2010. . . .

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(FAC ¶¶ 148-49.) Under California Civil Code § 2924(a), “a trustee,

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mortgagee or beneficiary or any of their authorized agents may conduct

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the foreclosure process by filing a Notice of Default.” Wood v. Aegis

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Wholesale Corp., 2009 WL 1948844, at *3 (E.D. Cal. July 6, 2009)

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(internal quotation omitted). “[A]ny of the beneficiary’s authorized

18

agents” may file the Notice of Default, and “it is immaterial to the

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validity of the foreclosure process that [NDeX West] filed the Notice of

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Default before [NDeX West] was officially substituted as trustee.” Id.

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at *4. Therefore, Plaintiffs’ allegation that “the fraudulent assignment

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was recorded AFTER the Notice of Default, which proves the Notice of

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Default was void at its inception and recording” is without merit. (FAC

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¶ 149.) Therefore, Plaintiffs’ breach of security instrument claim is

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dismissed.

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B.

RESPA

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Movants seek dismissal of Plaintiffs’ 12 U.S.C. § 2607 Real

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Estate Settlement Procedures Act (“RESPA”) claim, arguing, inter alia,

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it is barred by the one-year statute of limitations. (MortgageIT’s Mot.

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5:13-16; Wells Fargo Defs.’ Mot. 5:16-20.) Plaintiffs counter that the

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statute of limitations should be equitably tolled. (Pls.’ Opp’n ¶ 35.)

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“The primary ill that § 2607 is designed to remedy is the

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potential for unnecessarily high settlement charges, . . . caused by

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kickbacks,

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competition for settlement services. This ill occurs, if at all, when

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the plaintiff pays for the tainted service, typically at the closing.”

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Jensen v. Quality Loan Serv. Corp., 702 F. Supp. 2d 1183, 1195 (E.D.

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Cal. 2010) (quoting Snow v. First Am. Title Ins. Co., 332 F.3d 356,

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359-60 (5th Cir. 2003)). 12 U.S.C. § 2614 provides that a § 2607 claim

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“may be brought . . .

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occurrence of the violation[.]” “Barring extenuating circumstances, the

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date of the occurrence of the violation is the date on which the loan

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closed.” Ayala v. World Sav. Bank, FSB, 616 F. Supp. 2d 1007, 1020 (C.D.

16

Cal. 2009) (internal quotation marks and citation omitted); see also

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Jensen,

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‘occurrence of the violation’ as the date the loan closed.”).

fee-splitting,

702

F.

Supp.

and

other

practices

that

suppress

price

[within] 1 year . . . from the date of the

2d

at

1195

(“[C]ourts

have

considered

the

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Here, Plaintiffs’ loans “closed” on or about March 23, 2007.

20

Therefore, the one-year statute of limitations expired on March 23,

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2008. However, Plaintiffs did not file their Complaint in this action

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until September 9, 2010. Further, Plaintiffs’ Amended Complaint does not

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sufficiently explain why they could not have discovered Defendants’

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alleged

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Plaintiffs assert the following explanation:

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27
28

§

2607

violation

within

the

one-year

statutory

Plaintiff
could
not
have
learned
of
these
violations at the time the loan was obtained by
looking at her loan documents and escrow closing
statements as the true facts of the lender and the
securitization of her note and deed of trust and
the fees attached, which were undisclosed to her,
9

period.

were not apparent from the
documents, nor deed of trust.

1

face

of

the

loan

2
3

(FAC ¶ 77.) Further, Plaintiffs argue “a lay Plaintiff without legal

4

knowledge as to the aforementioned federal statutes and state causes of

5

action would not have been able to discover what Defendants failed to

6

disclose.” (Pls.’ Opp’n 15:12-14.) These assertions are insufficient to

7

justify equitable tolling of the statute-of-limitations period, since

8

Plaintiffs “failed to plead any facts demonstrating that [they] could

9

not have discovered the alleged RESPA violations by exercising due

10

diligence.” Quiroz v. Countrywide Bank, N.A., WL 3849909, at *6 (C.D.

11

Cal. Nov. 16, 2009). Therefore, Plaintiffs have not shown the doctrine

12

of equitable tolling applies to their § 2607 claim.

13

In the Court’s May 3, 2010 Order, Plaintiffs were granted

14

leave “to file a First Amended Complaint addressing the deficiencies in

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any claim dismissed without prejudice.” (Order, May 3, 2010 (“Order”)

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20:5-6.)

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“Plaintiff has not shown that the doctrine of equitable tolling applies

18

to her section 2607 claim.” Id. 7:11-12. Since Plaintiffs have not cured

19

these deficiencies, it is clear “any amendment would be futile, [and]

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there [is] no need to prolong the litigation by permitting further

21

amendment.” Lipton v. Pathogenesis Corp., 284 F.3d 1027, 1039 (9th Cir.

22

2002). Therefore, Plaintiffs’ RESPA claim is dismissed with prejudice.

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C.

Plaintiff’s

RESPA

claim

was

previously

dismissed

since

TILA Rescission

24

Movants seek dismissal of Plaintiffs’ Truth in Lending Act

25

(“TILA”) rescission claim, since the claim was dismissed with prejudice

26

in the May 3, 2011 Order: “[T]he court lacks subject matter jurisdiction

27

over Plaintiff’s TILA rescission claim, and this claim is dismissed

28

against all Defendants with prejudice.” (Order 8:8-11.) Since Plaintiffs

10

1

allege an identical TILA rescission claim, each Movant’s dismissal

2

motion is granted.

3

D.

FCRA Claim
Movants

4

also

seek

dismissal

of

Plaintiffs’

Fair

Credit

5

Reporting Act (“FCRA”) claim alleged under 15 U.S.C. § 1681s, arguing

6

Plaintiffs have alleged insufficient facts to support a claim under

7

subsection 2(b). (MortgageIT’s Mot. 9:20-10:17; Wells Fargo Defs.’ Mot.

8

7:10-17.)

9

The FCRA imposes responsibilities on the sources that provide

10

credit information to credit reporting agencies (“CRAs”). Gorman v.

11

Wolpoff

12

(quotation omitted). The duties imposed by subsection 2(b) of the FCRA

13

are “triggered only when a [source of credit information] receives

14

notice of a dispute from a [CRA] that has itself received notice of a

15

dispute from a consumer.” Pineda v. GMAC Mortgage, LLC, No. CV 08-5341

16

AHM (PJWx), 2009 WL 1202885, at *4 (C.D. Cal. Apr. 30, 2009) (citation

17

omitted); see also Clark v. FLA Card Services, N.A., No. C 09-5240 SBA,

18

2010 WL 2232161, at *3 (N.D. Cal. June 3, 2010) (citing Gorman, 584 F.3d

19

at 1154).

&

Abramson,

LLP,

584

F.3d

1147,

1153-54

(9th

Cir.

2009)

20

Plaintiffs’ FCRA claim comprises the following allegations:

21

Defendants wrongfully, improperly, and illegally
reported negative information as to Plaintiffs to
one or more credit reporting agencies, resulting in
Plaintiffs having negative information on their
credit reports and the lowering of their FICO
scores.

22
23
24

A.

The negative information included, but
was not limited to, an excessive amount
of debt into which Plaintiffs were
tricked into seed [sic] into signing;

B.

Notwithstanding the above, Plaintiffs
have paid each and every payment on time
from the time of the closing of the loan
and until Plaintiffs’ default.

25
26
27
28

11

1

5

Pursuant
to
15
USC
§
1681
(s)(2)(b),
Plaintiffs are entitled to maintain a private cause
of action against Defendants for an award of
damages in an amount to be proven at the time of
trial for all violations of The Fair Credit
Reporting Act which caused actual damages to
Plaintiffs,
including
emotional
distress
and
humiliation.

6

(FAC ¶¶ 84-85.) These allegations are insufficient to state an FCRA

7

subsection 2(b) claim since Plaintiffs do not allege that they disputed

8

any negative information with a CRA or that notice of such dispute was

9

provided

2
3
4

to

any

Defendant.

See

Clark,

2010

WL

2232161,

at

*

3

10

(dismissing the plaintiff’s FRCA claim where the complaint included “no

11

allegations

12

reporting

13

[defendant]”).

that

bureau

Plaintiff
or

that

disputed

notice

of

any

charges

with

such

dispute

was

any

credit

provided

to

14

Since Plaintiffs’ FCRA claim was previously dismissed with

15

leave to amend for the same reasons and Plaintiffs have failed to cure

16

the insufficiencies in their subsection 2(b) FCRA allegations, further

17

leave to amend would be futile. (Order 9:23-27, 20:5-6.) Therefore,

18

Plaintiffs’ FRCA claim against the Movants is dismissed with prejudice.

19
20

E.

Negligent Misrepresentation
Movants

also

seek

dismissal

of

Plaintiffs’

negligent

21

misrepresentation claim, arguing, inter alia, that this claim fails to

22

comply with Rule 9(b)’s heightened pleading standard. (MortgageIT’s Mot.

23

12:2-10; Wells Fargo Defs.’ Mot. 10:21-22.)

24
25
26
27
28

Plaintiffs’ negligent misrepresentation claim includes the
following allegations:
Defendants
knowingly
and
intentionally
concealed material information from Plaintiffs
which is required by federal and state statutes and
regulations to be disclosed to the Plaintiffs both
before and after closing.
12

Defendants also materially misrepresented
material information to the Plaintiffs with full
knowledge of Defendants at their affirmative
representations
were
false,
fraudulent,
and
misrepresented
the
truth
at
the
time
said
representations were made. Specifically, Defendants
disguised the mortgage transaction to create the
appearance of the lender’s being a properly
chartered and registered financial institution,
authorized to do business and to enter into the
subject transaction, when in fact the real party in
interest was not disclosed to Plaintiffs, and
neither were the various fees, rebates, refunds,
kickbacks, profits and gains of the various parties
who participated in this unlawful scheme. . . .

1
2
3
4
5
6
7
8

As such, this fraudulent scheme . . . was in
fact a sham to use Plaintiffs’ interest in the real
property to collect interest in excess of the legal
rate.

9
10
11
12

(FAC ¶¶ 89-92.)

13

Rule 9(b)’s heightened pleading standard applies to “averments

14

of fraud” in all civil cases, regardless of whether “fraud” is an

15

essential element of the claim.

16

1097, 1103-05 (9th Cir. 2003). Rule 9(b) provides that “[i]n alleging

17

fraud

18

circumstances constituting fraud or mistake.”

The required specificity

19

includes

content

20

representations

21

misrepresentations.”

22

2007) (internal quotation marks and citation omitted). Further, in

23

alleging fraud against multiple defendants,

24
25
26
27

or

mistake,

the

a

“time,
as

party

place,

well

as

Vess v. Ciba-Geigy Corp., 317 F.3d

must

and
the

state

specific
identities

with

of

particularity

the

of

the

parties

the

false
to

the

Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir.

Rule 9(b) does not allow a complaint to merely lump
multiple
defendants
together
but
requires
plaintiff[] to differentiate [her] allegations when
suing more than one defendant . . . and inform each
defendant separately of the allegations surrounding
his alleged participation in the fraud. . . . [A]
plaintiff must, at a minimum, identify the role of
each defendant in the alleged fraudulent scheme.

28
13

1

Id. at 764-65 (internal quotations omitted).

2

Plaintiffs’ conclusory “averments of fraud” do not provide the

3

specificity required by Rule 9(b) since they lack sufficient detail

4

concerning the time, date, and place of the alleged misrepresentations

5

and non-disclosures, and the identity of the individuals who made them.

6

See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125-27 (9th Cir. 2009)

7

(holding

8

non-disclosures “are grounded in fraud” and are subject to Rule 9(b)).

9

Plaintiffs’ allegations also fail to distinguish among the Defendants.

10

Plaintiffs attempt to clarify these allegations in their opposition

11

brief, but their arguments merely demonstrate the lack of requisite

12

specificity in their negligent misrepresentation claim: “Plaintiff’s

13

Cause of Action for negligent misrepresentation is adequately pled in

14

that

15

Defendants.” (Pls.’ Opp. 16:15-16.)

the

that

misrepresentations

Since

16

allegations

Plaintiffs’

concerning

arise

out

negligent

false

of

her

representations

loan

agreement

misrepresentation

claim

and

with

was

17

dismissed with leave to amend for the same reasons and Plaintiffs have

18

failed to sufficiently detail the “averments of fraud” under Rule 9(b)

19

standards, further leave to amend would be futile. (Order 11:7-11, 20:5-

20

6.) Therefore, Plaintiffs’ negligent misrepresentation claim against the

21

Movants is dismissed with prejudice.

22

F.

Breach of Fiduciary Duty

23

Movants also seek dismissal of Plaintiffs’ breach of fiduciary

24

duty claim, arguing Plaintiffs do not allege the necessary existence of

25

a fiduciary relationship with any Movant. (MortgageIT’s Mot. 12:20-21,

26

13:8-17; Wells Fargo Defs.’ Mot. 9:15-10:11.)

27

In California, to state a claim for breach of fiduciary duty,

28

a plaintiff must allege: (1) the existence of a fiduciary relationship;

14

1

(2) the breach of that relationship; and (3) damage proximately caused

2

thereby. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003).

3

“Breach of fiduciary duty is a tort that by definition may be

4

committed by only a limited class of persons.” 1-800 Contacts, Inc. v.

5

Steinberg, 107 Cal. App. 4th 568, 592 (2003). As a general rule, “a loan

6

transaction is at arms-length and there is no fiduciary relationship

7

between the borrower and lender.”

8

145 Cal. App. 4th 453, 466 (2006). Further, loan servicers typically do

9

not have a fiduciary relationship with borrowers. See Linder v. Aurora

10

Loan Servicing, LLC, No. 2:09-cv-03490-JAM-KJM, 2010 WL 1525399, at *5

11

(E.D. Cal. Apr. 15, 2010); Moreno v. Citibank, N.A., No. C-09-5339 CW,

12

2010 WL 103822, at *3 (N.D. Cal. Mar. 19, 2010).
Plaintiffs’

13
14

fiduciary

Oaks Mgmt. Corp. v. Superior Court,

duty

claim

contains

the

following

allegations:
Defendants, by . . . contracting to provide
mortgage loan services and a loan program to
Plaintiff which was not only to be best suited to
the Plaintiffs given their income and expenses, but
by which Plaintiffs would also be able to satisfy
their obligations without risk of losing their
home, were “fiduciaries” in which Plaintiffs
reposed trust and confidence . . . .

15
16
17
18
19

Defendants breached their fiduciary duties to
Plaintiffs by fraudulently inducing Plaintiffs to
enter into a mortgage transaction which was
contrary to Plaintiffs’ stated intentions; contrary
to Plaintiffs’ interest; and contrary to the
Plaintiffs’ preservation of their home.

20
21
22
23

(FAC

¶¶

99-100.)

These

allegations

24

existence of a fiduciary relationship between Plaintiffs and any Movant.

25

See Pajarillo v. Bank of Am., No. 10CV937 DMS (JMA), 2010 WL 4392551, at

26

*5 (S.D. Cal. Oct. 28, 2010) (dismissing a breach of fiduciary claim

27

based upon identical allegations to those plead in this case).

28
15

are

insufficient

to

show

the

Since

1

Plaintiffs’

breach

of

fiduciary

duty

claim

was

2

previously dismissed with leave to amend for the same reasons and

3

Plaintiffs have failed to cure the insufficient allegations in their

4

Amended Complaint, further leave to amend would be futile. (Order 12:19-

5

20, 20:5-6.) Therefore, Plaintiffs’ breach of fiduciary duty claim

6

against the Movants is dismissed with prejudice.

7

G.

Unjust Enrichment

8

Movants also seek dismissal of Plaintiffs’ unjust enrichment

9

claim, arguing, inter alia, an unjust enrichment claim cannot be stated

10

“where

there

exists

between

the

parties

a

valid

express

contract

11

covering the same subject matter.” (MortgageIT’s Mot. 15:6-22; Wells

12

Fargo Defs.’ Mot. 10:14-23.)

13

Plaintiffs’ unjust enrichment claim is based upon an alleged

14

“implied contract” ensuring they “understood all fees which would be

15

paid to the Defendants to obtain credit on [their] behalf” and that they

16

would

17

settlement of the loan and without full disclosure” of the same. (FAC

18

¶ 105.) However, under California law, “it is well settled that an

19

action based upon an implied-in-fact or quasi-contract cannot lie where

20

there exists between the parties a valid express contract covering the

21

same subject matter.” Lance Camper Mfg. Corp. v. Republic Indem. Co., 44

22

Cal. App. 4th 194, 203 (1996); see also Paracor Fin., Inc. v. Gen. Elec.

23

Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996) (stating under

24

California law “unjust enrichment is an action in quasi-contract, which

25

does not lie when an enforceable, binding agreement exists defining the

26

rights of the parties”). Here, Plaintiffs obtained two loans, secured by

27

Deeds

28

modification agreement with Wells Fargo. (FAC ¶¶ 18-19, 21, 25, 160.)

not

of

be

“charge[d]

Trust,

and

any

allege

fees

to

which

have

16

were

entered

not

into

related

a

to

written

the

loan

1

None of Plaintiffs’ allegations plausibly suggest that valid contracts

2

did not exist between the parties. See Smith v. Aurora Loan Servs., No.

3

CIV S-10-0198 MCE DAD P, 2010 WL 3504899, at *4 (E.D. Cal. Sept. 7,

4

2010) (“The complaint does not allege sufficient facts to maintain a

5

plausible claim for unjust enrichment [where the Plaintiff] alleges

6

Plaintiff and Defendants entered into the Loan, and no allegations in

7

the complaint support a claim that no contract exists between the

8

parties.”).
Since

9

Plaintiffs’

unjust

enrichment

claim

was

previously

10

dismissed with leave to amend for the same reasons and Plaintiffs have

11

failed to cure the deficiencies in their Amended Complaint, further

12

leave to amend would be futile. (Order 1:20-23, 20:5-6.) Therefore,

13

Plaintiffs’ unjust enrichment claim against the Movants is dismissed

14

with prejudice.
H.

15

Civil RICO

16

Movants also seek dismissal of Plaintiffs’ civil Racketeer

17

Influenced and Corrupt Organizations Act (“RICO”) claim, arguing, inter

18

alia,

19

specificity. (MortgageIT’s Mot. 15:9-18; Wells Fargo Defs.’ Mot. 13:3-6,

20

14:2.)

Plaintiffs’

allegations

were

not

pled

with

the

required

21

The Ninth Circuit “applie[s] the particularity requirements of

22

[R]ule 9(b) to [averments of fraud in] RICO claims.” Moore v. Kayport

23

Package Express, Inc., 885 F.2d 531, 541 (9th Cir. 1989). Therefore,

24

Plaintiffs’ fraud allegations in their RICO claim must “identify the

25

time, place and manner of each fraud plus the role of each defendant in

26

each scheme.” Id. (internal quotation omitted).

27
28

Plaintiffs’

civil

RICO

allegations:

17

claim

contains

the

following

Defendants’ actions and use of multiple
corporate entities, multiple parties, and concerted
and predetermined acts and conduct specifically
designed to defraud Plaintiffs constitutes an
“enterprise”, with the aim and objective of the
enterprise being to perpetuate a fraud upon the
Plaintiffs
through
the
use
of
intentional
nondisclosure, material misrepresentation, and
creation of the fraudulent loan documents. . . .

1
2
3
4
5

Plaintiffs allege that the exhibits attached
to this Amended Complaint, show the false and
fraudulent documents filed with the Placer County
Recorder Office constitutes probable cause for
granting all relief requested in this First Amended
Complaint. Plaintiffs allege that Defendants did,
each, act wrongfully to take and deprive them of
their property, knowing that they, without their
knowledge converted their note and deed of trust to
a Mortgage Backed Security, to charge them for
insurance and other forms of credit enhancements,
which have paid Plaintiffs’ note, thereby falsely
claiming a “default” on the obligation.

6
7
8
9
10
11
12

At various times and places enumerated, all
Defendants did acquire and/or maintain, directly or
indirectly, an interest in or control of a RICO
enterprise of individuals who were associated in
fact and who did engage in, and whose activities
did affect, interstate and foreign commerce . . . .

13
14
15
16

During the pertinent time in question, all
Defendants did cooperate jointly and severally in
the commission of two or more of the RICO predicate
acts . . . .

17
18
19

(FAC ¶¶ 121, 126-28.)

20

These allegations are insufficient to state a civil RICO

21

claim. Plaintiffs do not allege facts concerning the time, date, and

22

place

23

identity of who made them, or the role of each Defendant in the

24

“enterprise.”

25

attached to this Amended Complaint, show the false and fraudulent

26

documents” does not meet the requisite specificity required under Rule

27

9(b). (FAC ¶ 126.)

of

the

alleged

Further,

misrepresentations

Plaintiffs’

28
18

vague

and

non-disclosures,

allegation

that

the

“exhibits

1

Since Plaintiffs’ civil RICO claim was previously dismissed

2

with leave to amend for the same reasons, and Plaintiffs have again

3

failed to meet the requisite specificity required under Rule 9(b),

4

further

5

Therefore, Plaintiffs’ civil RICO claim against the Movants is dismissed

6

with prejudice.

7

I.

leave

to

amend

would

be

futile.

(Order

15:4-12,

20:5-6.)

Quiet Title

8

Movants also seek dismissal of Plaintiffs’ quiet title claim,

9

arguing, inter alia, Plaintiffs have not pled their ability to tender

10

the amount of their debt. (MortgageIT’s Mot. 21:20-22:3; Wells Fargo

11

Defs.’ Mot. 11:1-5.)

12

Under California law, it is well-settled that “a mortgagor

13

cannot quiet his title against the mortgagee without paying the debt

14

secured.” Briosos v. Wells Fargo Bank, 737 F. Supp. 2d 1018, 1032 (N.D.

15

Cal. 2010) (citing Shimpones v. Stickney, 219 Cal. 637, 649 (1934)).

16

Therefore, “to maintain a quiet title claim, a plaintiff ‘is required to

17

allege tender of the proceeds of the loan at the pleading stage.’” Id.

18

(quoting Velasquez v. Chase Home Fin., LLC, No. C 10-01641 SI, 2010 WL

19

3211905, at *4 (N.D. Cal. Aug. 12, 2010)); see also Hensley v. Bank of

20

New York Mellon, No. 1:10-CV-1316 AWI SMS, 2010 WL 5418862, at *3 (E.D.

21

Cal. Dec. 23, 2010) (dismissing a quiet title claim where the plaintiff

22

did “not allege that she has tendered, or is able to tender”).

23

Plaintiffs do not satisfy this pleading requirement. They

24

allege the following under their breach of contract claim, which is

25

incorporated by reference into the quiet title claim: “Upon the true

26

‘lenders’ full performance of its obligations under HOEPA, Plaintiffs

27

shall tender all sums to which the true lender is entitled.” (FAC ¶¶ 68,

28

173.) However, “[a] tender must be one of full performance and must be

19

1

unconditional to be valid.” Arnolds Mgmt. Corp. v. Eischen, 158 Cal.

2

App. 3d 575, 578 (1984) (citations omitted). Plaintiffs argue this

3

pleading requirement need not be satisfied here: “[t]ender is not

4

required . . . when the owner’s action attacks the validity of the

5

underlying debt because the tender would constitute an affirmation of

6

the debt.” (Pls.’ Opp’n 24:4-7 (citing Onofrio v. Rice, 55 Cal. App. 4th

7

413, 424 (1997).) However, Plaintiffs have not sufficiently attacked the

8

validity of the underlying debt in their Amended Complaint.

9

Since Plaintiffs’ quiet title claim was previously dismissed

10

with leave to amend for the same reasons, and Plaintiffs have again

11

failed to “allege tender of the amount of debt owed,” further leave to

12

amend would be futile. (Order 16:3-4, 20:5-6.) Therefore, Plaintiffs’

13

quiet title claim against the Movants is dismissed with prejudice.

14

J.

Usury and Fraud

15

Movants also seek dismissal of Plaintiffs’ “usury and fraud”

16

claim, arguing Plaintiffs failed to allege that the interest rate on

17

either loan exceeded the statutory minimum. (MortgageIT’s Mot. 18:16-18;

18

Wells Fargo Defs.’ Mot. 13:12-18.) Further, Movants argue Plaintiffs

19

have not sufficiently amended their complaint to “satisfy Rule 9(b)’s

20

heightened pleading standards.” (MortgageIT’s Mot. 19:1-3; Wells Fargo

21

Defs.’ Mot. 11:7-9.)

22
23
24
25
26
27
28

Plaintiffs’ “usury and fraud” claim contains the following
allegations:
[T]he subject loan, notes, and mortgage were
structured so as to create the appearance of a
higher value of real property than the actual fair
market value.
Defendants disguised the transaction to create
the appearance of the lender’s being a properly
chartered and registered financial institution . .
. when in fact the real party in interest was not
disclosed to Plaintiffs, and neither were the
20

various fees, rebates, refunds, kickbacks, profits
and gains of the various parties who participated
in this unlawful scheme.

1
2

Said real party in interest . . . was neither
a financial institution nor an entity . . .
authorized . . . to do business in the state, nor
to act as banking, lending or other financial
institution anywhere else.

3
4
5

As such, this fraudulent scheme . . . was in
fact a sham to use Plaintiffs’ interest in the real
property to collect interest in excess of the legal
rate. . . .

6
7
8

The transaction of all the loan of money was
pursuant to a written agreement, and as such,
subject to the rate limitation set forth under
state and federal law. The “formula break” a
reference to end these laws was exceeded by a
factor in excess of 10 contrary to the applicable
law.

9
10
11
12

(FAC ¶¶ 140-44.)

13

Although Plaintiffs alleged “usury and fraud” as a single

14

claim, they are separate claims under California law. Therefore, the

15

sufficiency of Plaintiffs’ allegations are addressed separately under

16

each claim.

17

Under California law, the elements of a usury claim are: “(1)

18

The transaction must be a loan or forbearance; (2) the interest to be

19

paid must exceed the statutory maximum; (3) the loan and interest must

20

be absolutely repayable by the borrower; and (4) the lender must have a

21

willful intent to enter into a usurious transaction.” Ghirardo v.

22

Antonioli, 8 Cal. 4th 791, 798 (1994). “A loan that charges an interest

23

rate greater than 10 percent per annum is usurious.” 321 Henderson

24

Receivables Origination LLC v. Sioteco, 173 Cal. App. 4th 1059, 1076

25

(2009).

26

Plaintiffs do not allege the rate of interest charged on

27

either of the two loans, or that either rate exceeded the maximum rate

28

allowable by law. Therefore, Plaintiffs’ usury claim is insufficient to
21

1

state an actionable claim. See Pajarillo v. Bank of America, No. 10CV937

2

DMS (JMA), 2010 WL 4392551, at *8 (S.D. Cal. Oct. 28, 2010) (dismissing

3

a usury claim when the plaintiff failed to “sufficiently allege how the

4

interest . . . received by Defendants exceeded the statutory maximum

5

rate”).

6

Under California law, the elements of a fraud claim are: (1)

7

misrepresentation (including, false representation, concealment, or

8

nondisclosure); (2) knowledge of falsity; (3) intent to induce reliance;

9

(4)

justifiable

reliance;

and

(5)

resulting

damage.

Engalla

v.

10

Permanente Med. Grp., Inc., 15 Cal. 4th 951, 974 (1997).

11

involving

12

requirements. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1103 (9th Cir.

13

2003).

fraud

must

Plaintiffs’

14

satisfy

conclusory

Rule

9(b)’s

allegations

heightened

concerning

A claim
pleading

Defendants’

15

“fraudulent scheme” do not provide the specificity required by Rule

16

9(b). In their Amended Complaint, Plaintiffs allege no additional facts

17

concerning

18

profits and gains” or the “rate limitation set forth under state and

19

federal law.” (FAC ¶¶ 141, 144.) Plaintiffs repeat the allegation that

20

Defendants entered the disguised transaction “to create the appearance

21

of being a properly chartered and registered financial institution,” but

22

do not specify which Defendants engaged in the transaction or identify

23

which transaction is at issue, as is required by Rule 9(b). (FAC ¶¶ 90-

24

92, 112-114, 141-43.) In fact, Plaintiffs state in their opposition

25

brief that “[d]iscovery is necessary to determine each Defendant’s role

26

and liability in the case.” (Pls.’ Opp. 21:26-27.)

either

the

“various

fees,

rebates,

refunds,

kickbacks,

27

Since Plaintiffs’ “usury and fraud” claim was previously

28

dismissed with leave to amend for the same reasons, and Plaintiffs have

22

1

failed to cure the deficiencies in their Amended Complaint, further

2

leave to amend would be futile. (Order 12:19-20, 20:5-6.) Therefore,

3

Plaintiffs’ “usury and fraud” claim against the Movants is dismissed

4

with prejudice.
K.

5

Wrongful Foreclosure
Movants

6

also

seek

dismissal

of

Plaintiffs’

wrongful

7

foreclosure claim, arguing, inter alia, that Plaintiffs lack standing to

8

challenge the foreclosure since Plaintiffs failed to allege tender of

9

the amounts due. (MortgageIT’s Mot. 20:13-17; Wells Fargo Defs.’ Mot.

10

11:1-5.)

11

To state a wrongful foreclosure claim, “a plaintiff must

12

allege a credible tender of the amount of the secured debt . . . .”

13

Roque v. Suntrust Mortg., Inc., No. C-09-00040 RMW, 2010 WL 546896, at

14

*4 (N.D. Cal. Feb. 10, 2010) (citing Abdallah v. United Savings Bank, 43

15

Cal. App. 4th 1101, 1109 (1996)); see also Guerrero v. Greenpoint Mortg.

16

Funding, Inc., No. 10-15333, 2010 WL 4117102, at *1 (9th Cir. Oct. 20,

17

2010) (stating the plaintiffs “lacked standing to bring a claim for

18

‘wrongful foreclosure,’ because they failed to allege actual, full and

19

unambiguous tender of the debt owed on the mortgage”). Plaintiffs do not

20

allege credible tender of the amount of debt owed, or their ability to

21

tender, notwithstanding having previously been given opportunity.

22

Since Plaintiffs’ wrongful foreclosure claim was previously

23

dismissed with leave to amend for the same reasons, and Plaintiffs have

24

again failed to “allege tender of the amount of debt owed,” further

25

leave to amend would be futile. (Order 19:1-3, 20:5-6.) Therefore,

26

Plaintiffs’ wrongful foreclosure claim against the Movants is dismissed

27

with prejudice.

28

///

23

L.

1

Civil Conspiracy

2

Movants also seek dismissal of Plaintiffs’ civil conspiracy

3

claim, arguing, inter alia, it is not an independent cause of action and

4

Plaintiffs have not pled an underlying tort against them. (MortgageIT’s

5

Mot. 15:24-28; Wells Fargo Defs.’ Mot. 15:11-15.)

6

“Conspiracy is not a cause of action, but a legal doctrine

7

that imposes liability on persons who, although not actually committing

8

a tort themselves, share with the immediate tortfeasors a common plan or

9

design in its perpetration.” Applied Equip. Corp., Litton Saudi Arabia

10

Ltd., 7 Cal. 4th 503, 510 (1994) (internal citation omitted). “Standing

11

alone, a conspiracy does no harm and engenders no tort liability. It

12

must be activated by the commission of an actual tort.” Id. at 511.

13

Further, to allege a civil “conspiracy to defraud,” a complaint must

14

meet the particularity requirements of Rule 9(b). Sandry v. First

15

Franklin Fin. Corp., No. 1:10-cv-01923-OWW-SKO, 2011 WL 202285, at *4

16

(E.D. Cal. Jan. 20, 2011).
Plaintiffs’

17

tort

claims

have

been

dismissed

against

the

18

Movants, and Plaintiffs’ conclusory allegations that Defendants “agreed

19

. . . to engage in [a] conspiracy to defraud” Plaintiffs “for the common

20

purpose of accruing economic gains for themselves at the expense of and

21

detriment to Plaintiffs” do not provide the specificity required by Rule

22

9(b). (FAC ¶ 115.)
Since

23

Plaintiffs’

civil

conspiracy

claim

was

previously

24

dismissed with leave to amend for the same reasons, and Plaintiffs have

25

again failed to allege sufficient underlying tort claims, further leave

26

to

27

Plaintiffs’ civil conspiracy claim against the Movants is dismissed with

28

prejudice.

amend

would

be

futile.

(Order

24

12:19-20,

20:5-6.)

Therefore,

IV. CONCLUSION

1
2

For the stated reasons, each Movant’s dismissal motion is

3

GRANTED. Plaintiff is granted fourteen (14) days from the date on which

4

this order is filed to file a Second Amended Complaint addressing the

5

deficiencies in any claim dismissed without prejudice.

6

Plaintiff is warned that a dismissal with prejudice could be

7

entered under Federal Rule of Civil Procedure 41(b) if Plaintiff fails

8

to file an amended complaint within the prescribed time period.

9

Dated:

September 26, 2011

10
11
12

GARLAND E. BURRELL, JR.
United States District Judge

13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
25