Boessenecker et al v. JPMorgan Chase Bank
Filing
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ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S 15 MOTION TO DISMISS. Signed by Judge Maxine M. Chesney on July 24, 2013. (mmclc2, COURT STAFF) (Filed on 7/24/2013)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
For the Northern District of California
United States District Court
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JOSEPH AND LINDA BOESSENECKER,
Plaintiffs,
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANT’S
MOTION TO DISMISS
v.
JPMORGAN CHASE BANK,
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Defendant.
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No. C 13-491 MMC
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Before the Court is defendant’s motion, filed May 16, 2013, to dismiss the above-
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titled action. Plaintiffs have filed opposition, to which defendant has replied. Having read
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and considered the papers filed in support of and in opposition to the motion, the Court
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hereby rules as follows.1
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BACKGROUND2
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On August 3, 2007, Plaintiffs purchased a home in Livermore, California; defendant
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provided the original loan for the purchase of the property. (See Compl. ¶¶ 7-8.) On April
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14, 2010, plaintiffs and defendant finalized a refinancing of plaintiffs’ loan. (See Compl.
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¶¶ 8-9.) Plaintiffs “closed out the initial loan” and, on April 27, 2010, “received a letter from
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By order filed July 23, 2013, the Court deemed the matter suitable for decision on
the parties’ written submissions and vacated the hearing set for July 26, 2013.
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The following facts are taken from the complaint.
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[defendant] that the loan was paid in full on April 20, 2010.” (See Compl. ¶¶ 9-10.) On July
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9, 2010, however, plaintiffs received a letter from defendant, informing them that they owed
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$5176 “due to ‘shortage’ in pay off amount.” (See Compl. ¶ 11.) Plaintiffs sent letters and
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emails to defendant, requesting an explanation and clarification; on August 4, 2010,
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plaintiffs received an email stating the shortage “pertain[ed] to an internal issue regarding
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the payoff amount that [defendant] confirmed during the refinancing,” but were told to “not
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be alarmed” and that they would “not be negatively impacted.” (See Compl. ¶ 16.)
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Thereafter, on August 26, 2010, plaintiffs received a letter from defendant, stating
“the payoff in March was short by $3672.81.” (See Compl. ¶ 19 & Ex. M.) Plaintiffs again
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contacted defendant to request an explanation, and defendant, on September 8, 2010,
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informed plaintiffs the $5176.81 shortage “pertained to an insurance disbursement” that
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“has been resolved” and that the $3672.81 shortage occurred because the tax department
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had “overpaid [the] county” and was awaiting a refund. (See Compl. ¶ 23 & Ex. O.) In a
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subsequent email the same date, defendant informed plaintiffs it might have to take the
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funds out of the escrow account maintained for the refinanced loan, requiring plaintiffs “to
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increase [their] monthly payment in order to recover the escrow shortage.” (See Compl.
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¶ 25 & Ex. Q.) On September 9, 2010, plaintiffs “requested a reconciliation and closure of
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the issue.” (See Compl. ¶ 27.)
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Plaintiffs received no communication from defendant until May 2, 2011, when they
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received a letter stating their “mortgage payments were increasing by $465.00 due to ‘an
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impound shortage.’” (See Compl. ¶ 28.) Plaintiffs called defendant and were informed that
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“the increase was due to a ‘shortage in the escrow account.’” (See Compl. ¶ 28.)
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Throughout the month of May, plaintiffs contacted defendant several times, but did not
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receive an explanation that allowed them to “understand what was happening with the
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loan.” (See Compl. ¶¶ 28-36.) “[H]aving no further information on their account, and
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receiving no assistance from [defendant], [plaintiffs] continued to make their increased
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monthly mortgage payments to avoid credit problems.” (See Compl. ¶ 35.)
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Nearly one year later, on May 22, 2012, defendant informed plaintiffs their monthly
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mortgage payment was decreasing by $320.80 per month. (See Compl. ¶ 37.) Plaintiffs
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again requested a reconciliation of the account, but did not receive one. (See Compl.
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¶ 37.) On two separate thereafter, plaintiffs sent, through counsel, a Qualified Written
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Request (“QWR”) to defendant. (See Compl. ¶¶ 38, 44.) Defendant did not include the
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requested information in its response to the first and did not respond to the second. (See
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Compl. ¶¶ 43, 47.)
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As of the time of the filing of the above-titled action, plaintiffs “ha[d] not received a
response regarding their refinanced loan” and “ha[d] received no closure regarding whether
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or not their loan is paid in full, or if they owe any money, why their payments increased,
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then decreased.” (See Compl. ¶ 48.) “During the time [p]laintiffs were trying to determine
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what was happening with their loan, the interest rates reached a historic low”; “[p]laintiffs
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wanted to refinance their loan to capture these low rates and reduce their monthly
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payments, but could not understand what was happening with the loan so did not do so.”
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(See Compl. ¶ 36.)
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On February 4, 2013, plaintiffs filed the above-titled action, alleging the following
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seven causes of action: “RESPA Violation” (First Cause of Action); “Violation of California’s
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Unfair Competition Law” (Second Cause of Action); “Negligence” (Third Cause of Action);
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“Negligent Infliction of Emotional Distress” (Fourth Cause of Action); “Intentional Infliction of
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Emotional Distress” (Fifth Cause of Action); “Declaratory Relief” (Sixth Cause of Action);
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and “California Rosenthal Act” (Seventh Cause of Action).
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LEGAL STANDARD
Dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure can be based
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on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a
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cognizable legal theory. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.
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1990). Rule 8(a)(2), however, “requires only ‘a short and plain statement of the claim
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showing that the pleader is entitled to relief.’” See Bell Atlantic Corp. v. Twombly, 550 U.S.
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544, 555 (2007) (quoting Fed. R. Civ. P. 8(a)(2)). Consequently, “a complaint attacked by
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a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.” See id.
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Nonetheless, “a plaintiff’s obligation to provide the grounds of his entitlement to relief
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requires more than labels and conclusions, and a formulaic recitation of the elements of a
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cause of action will not do.” See id. (internal quotation, citation, and alteration omitted).
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In analyzing a motion to dismiss, a district court must accept as true all material
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allegations in the complaint, and construe them in the light most favorable to the
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nonmoving party. See NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986).
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“To survive a motion to dismiss, a complaint must contain sufficient factual material,
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accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
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556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “Factual allegations must
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be enough to raise a right to relief above the speculative level[.]” Twombly, 550 U.S. at
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555. Courts “are not bound to accept as true a legal conclusion couched as a factual
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allegation.” See Iqbal, 556 U.S. at 678 (internal quotation and citation omitted).
DISCUSSION
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A. Real Estate Settlement Procedures Act (“RESPA”)
RESPA, 12 U.S.C. §§ 2601 et seq., requires a mortgage loan servicer, after
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receiving a QWR from a borrower, to “provide the borrower with a written explanation or
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clarification that includes information requested by the borrower or an explanation of why
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the information requested is unavailable or cannot be obtained by the servicer.” See 12
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U.S.C. § 2605(e)(2)(C)(i). As noted, plaintiffs allege they sent two QWRs to defendant.
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With respect to the first, sent August 6, 2012, plaintiffs allege defendant responded but did
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not provide the requested information. (See Compl. ¶ 55.) With respect to the second,
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sent November 20, 2012, plaintiffs allege defendant provided no response. (See Compl.
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¶¶ 56-58.)
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Defendant argues plaintiffs’ claim must be dismissed for the asserted reason that it
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“is premised on the allegation that [defendant] failed to respond to their QWR”; defendant
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points out that the complaint itself shows defendant responded on October 29, 2012. (See
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Mot. at 2:25; Compl. Ex. Z.) Defendant, however, does not address plaintiffs’ allegation
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that, on November 20, 2012, plaintiffs sent a second QWR, to which defendant allegedly
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did not respond. Further, plaintiffs do not allege there was no response to their first QWR,
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but, rather, that defendant’s response was legally inadequate. (See Compl. ¶ 55 (noting
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defendant “only provided some information, but not all”).
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Defendant next argues plaintiffs’ claim is subject to dismissal for the reason that
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plaintiffs have not alleged a pecuniary loss. Pursuant to RESPA, “whoever fails to comply
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with any provision [of § 2605], shall be liable to the borrower for each such failure . . . in an
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amount equal to the sum of any actual damages to the borrow as a result of the failure.”
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See 12 U.S.C. § 2605(f)(1)(B). Consequently, to state a claim under RESPA, a plaintiff
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must allege the defendant’s failure to comply resulted in an actual pecuniary loss. See
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Allen v. United Fin. Mortgage Corp., 660 F. Supp. 2d 1089, 1097 (N.D. Cal. 2009). Here,
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plaintiffs allege that as a result of defendant’s failure to respond to their QWRs, they “have
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not been able to refinance their loan to take advantage of the low interest rates and save
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thousands per year on their mortgage payments.” (See Compl. ¶ 50.) Such allegation is
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sufficient to plead actual damages. See, e.g., Hutchinson v. Delaware Sav. Bank FSB, 410
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F. Supp. 2d 374, 383 (D.N.J. 2006) (holding plaintiffs sufficiently pleaded actual damages
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where they alleged “they suffered ‘negative credit ratings on their credit reports and the
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inability to obtain and borrow another mortgage loan and other financing’”).
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Accordingly, plaintiffs’ First Cause of Action is not subject to dismissal.
B. California’s Unfair Competition Law
Plaintiffs allege defendant has violated California’s Unfair Competition Law, Cal.
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Bus. & Prof. Code §§ 17200 et seq., by violating RESPA as discussed above. (See Compl.
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¶¶ 63-67.) “By proscribing ‘any unlawful business practice,’ section 17200 borrows
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violations of other laws and treats them as unlawful practices that the unfair competition law
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makes independently actionable.” See Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular
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Tel. Co., 20 Cal. 4th 163, 180 (1999) (internal quotation and citation omitted).
Defendant argues plaintiffs lack standing to bring a § 17200 claim for the asserted
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reason that they “do not allege that they have suffered any actual harm.” (See Mot. at 4:3);
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Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 322 (2011) (holding, to satisfy standing
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under § 17200, “a party must . . . (1) establish a loss or deprivation of money or property
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sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that economic
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injury was the result of, i.e., caused by, the unfair business practice or false advertising that
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is the gravamen of the claim”). Defendant further argues plaintiffs’ claim must be
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dismissed for the asserted reason that plaintiffs fail to state a claim for a RESPA violation,
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and, consequently, fail to allege an unlawful business practice. As discussed above,
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however, plaintiffs have sufficiently alleged both a cognizable pecuniary loss and a claim
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under RESPA.
Accordingly, plaintiffs’ Second Cause of Action is not subject to dismissal.
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C. Negligence and Negligent Infliction of Emotional Distress
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Plaintiffs allege defendant was negligent in its servicing of their loan, the refinancing
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of their loan, and in its failure to provide adequate information. (See Compl. ¶¶ 70-71, 73.)
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Defendant argues plaintiffs have failed to plead facts showing it owed plaintiffs any duty of
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care.
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“As a general rule, a financial institution owes no duty of care to a borrower when
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the institution’s involvement in the loan transaction does not exceed the scope of its
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conventional role as a mere lender of money.” See Nymark v. Heart Fed. Sav. & Loan
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Assn., 231 Cal. App. 3d 1089, 1096 (1991). “Liability to a borrower for negligence arises
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only when the lender actively participates in the financed enterprise beyond the domain of
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the usual money lender.” Id. In this instance, plaintiffs base their claims on allegedly
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negligent conduct occurring in the ordinary course and scope of defendant’s participation in
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the loan transaction. See Castaneda v. Saxon Mortgage Servs., Inc., 687 F. Supp. 2d
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1191, 1198 (E.D. Cal. 2009) (holding, “absent special circumstances a loan transaction is
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at arms-length and no duties arise from the loan transaction outside of those in the
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agreement”) (internal quotation and citation omitted). Put another way, plaintiffs have not
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alleged defendant acted in any manner outside or “beyond the domain of the usual money
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lender.” See Connor v. Great W. Sav. & Loan Ass’n, 69 Cal. 2d 850, 864 (1968) (holding
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defendant owed plaintiff duty of care where it “became much more than a lender content to
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lend money at interest on the security of real property” and “became an active participant in
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a home construction enterprise” with “the right to exercise extensive control of the
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enterprise”).
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Accordingly, plaintiffs’ Third and Fourth Causes of Action are subject to dismissal.
D. Intentional Infliction of Emotional Distress
Plaintiffs’ claim of intentional infliction of emotional distress alleges defendant’s
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above-described actions “have resulted in [p]laintiffs suffering severe humiliation, mental
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anguish, and emotional, physical and economic distress, and they have been injured in
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mind and body.” (See Compl. ¶ 82.)
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To state a claim for intentional infliction of emotional distress, a plaintiff must allege
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facts demonstrating “(1) extreme and outrageous conduct by the defendant with the
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intention of causing, or reckless disregard of the probability of causing, emotional distress;
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(2) the plaintiff’s suffering severe or extreme emotional distress; and (3) actual and
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proximate causation of the emotional distress by the defendant's outrageous conduct.”
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See Christensen v. Superior Court, 54 Cal. 3d 868, 903 (1991). “Conduct to be outrageous
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must be so extreme as to exceed all bounds of that usually tolerated in a civilized
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community.” See id. (internal quotation and citation omitted). “Generally, conduct will be
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found to be actionable where the recitation of the facts to an average member of the
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community would arouse his resentment against the actor, and lead him to exclaim,
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‘Outrageous!’” McMahon v. Craig, 176 Cal. App. 4th 1502, 1515-16 (2009) (internal
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quotation and citation omitted).
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Defendant argues plaintiffs have failed to plead extreme and outrageous conduct.
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The Court agrees. Although defendant, for several years, allegedly failed to give plaintiffs
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any certainty regarding the state of their loan, plaintiffs have not alleged facts that would
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make an average member of the community exclaim, “Outrageous!” See, id.; see also
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Davenport v. Litton Loan Servicing, LP, 725 F. Supp. 2d 862, 884 (N.D. Cal. 2010)
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(dismissing claim for intentional infliction of emotional distress where no showing defendant
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acted in bad faith in foreclosing on plaintiff’s home).
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Accordingly, plaintiffs’ Seventh Cause of Action is subject to dismissal.
E. Declaratory Relief
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Defendant argues plaintiffs have failed to state a claim for declaratory relief, for the
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asserted reason that plaintiffs have failed to allege the existence of an actual controversy
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and, alternatively, because each of plaintiffs’ underlying claims assertedly fails. As
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discussed above, however, plaintiffs allege defendant has overcharged plaintiffs based on
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an error made by defendants; plaintiffs seek a declaration as to the parties’ “respective
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rights and duties” in that regard (see Compl. ¶¶ 25-27, 93-94), and, further, as discussed
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above and as set forth below, plaintiffs have sufficiently stated claims for which relief can
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be granted.
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Accordingly, plaintiffs’ Sixth Cause of Action is not subject to dismissal.
F. Rosenthal Fair Debt Collection Practices Act (“RFDCPA”)
Plaintiffs allege defendant has violated the RFDCPA, Cal. Civ. Code §§ 1788.1 et
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seq., by “falsely stating the amount of a debt; increasing the amount of a debt by including
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amounts that are not permitted by law or contract; and using unfair and unconscionable
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means in an attempt to collect a debt.” (See Compl. ¶ 101.) The RFDCPA prohibits “debt
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collector[s]” from using certain practices. See, e.g., Cal. Civ. Code § 1788.10 (prohibiting
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use of threats); id. § 1788.13 (prohibiting misrepresentations in communications with
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debtors). “Debt collector” is defined as “any person who, in the ordinary course of
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business, regularly, on behalf of himself or herself or others, engages in debt collection.”
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Cal. Civ. Code § 1788.2(c). “Debt collection” is defined as “any act or practice in
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connection with the collection of consumer debts.” Cal. Civ. Code § 1788.2(b). “Consumer
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debt” is defined as “money, property or their equivalent, due or owing or alleged to be due
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or owing from a natural person by reason of a consumer credit transaction.” Cal. Civ. Code
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§ 1788.2(f). A “consumer credit transaction” is, in turn, defined as “a transaction between a
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natural person and another person in which property, services or money is acquired on
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credit by that natural person from such other person primarily for personal, family, or
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household purposes.” Cal. Civ. Code § 1788.2(e). Defendant contends plaintiffs fail to
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state a claim under the RFDCPA.
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In asserting plaintiffs fail to state a claim, defendant, citing Gamboa v. Tr. Corps, No.
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09-0007, 2009 WL 656285 (N.D. Cal. Mar. 12, 2009), first argues its communications with
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plaintiffs regarding their residential home loan do not qualify as “debt collection.” The issue
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in Gamboa, however, was whether a claim under the RFDCPA can be based on a
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foreclosure. See id. (holding “foreclosing on a property pursuant to a deed of trust is not a
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debt collection within the meaning of the RFDCPA”). Here, by contrast, plaintiffs’ claim is
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based on conduct other than a foreclosure, and, consequently, defendant’s reliance on
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Gamboa is unavailing. See Walters v. Fid. Mortgage of CA, 730 F. Supp. 2d 1185, 1203
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(E.D. Cal. 2010) (holding allegations that defendant engaged in pattern of improper conduct
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in course of servicing loan sufficient to plead debt collection under RFDCPA).
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Defendant next cites to several district court decisions holding a home loan does not
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constitute “consumer debt” under the RFDCPA. See, e.g., Dunfee v. Truman Capital
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Advisors, No. 12-1925, 2013 WL 1285152 (S.D. Cal. Mar. 25, 2013). Other district courts,
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however, have not so found, see, e.g., Walters, 730 F. Supp. 2d at 1203-04 (holding,
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where defendant allegedly violated RFDCPA in servicing plaintiff’s mortgage loan, plaintiff
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had sufficiently made out claim under RFDCPA), and as one such court has observed,
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“[n]othing in the plain meaning of [the] statutory definition [of “consumer debt”] suggests
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that a mortgage, which is money owing to a person . . . , is outside the purview of the
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RFDCPA.” See Roche v. Bank of Am., Nat. Ass’n, No. 12-2002, 2013 WL 3450016 at *6
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(S.D. Cal. July 9, 2013) (denying motion to dismiss RFDCPA claim); see also Lee v.
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American Brokers Conduit, No. RG12622175, 2013 WL 3153857 (Superior Ct., Alameda
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Cnty, Ca. March 5, 2013) (noting absence of California case authority addressing issue;
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acknowledging disparate findings among district courts; declining to dismiss RFDCPA claim
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against mortgage servicer).
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Moreover, the RFDCPA is patterned on the Fair Debt Collection Practices Act
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(“FDCPA”), 15 U.S.C. §§ 1962 et seq., which defines “debt” in language similar to that used
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in the RFDCPA, see 15 U.S.C. § 1692a (defining debt as “any obligation or alleged
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obligation of a consumer to pay money arising out of a transaction in which the money,
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property, insurance, or services which are the subject of the transaction are primarily for
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personal, family, or household purposes, whether or not such obligation has been reduced
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to judgment”), and the federal courts of appeals that have addressed the issue have found
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the FDCPA is applicable to mortgage loans. See, e.g., Reese v. Ellis, Painter, Ratterree &
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Adams, LLP, 678 F.3d 1211, 1217-18 (11th Cir. 2012) (holding mortgage lender’s allegedly
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dunning letter constituted debt collection; noting “[a] debt is still a ‘debt’ even if it is
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secured”); Gburek v. Litton Loan Servicing LP, 614 F.3d 380, 386 (7th Cir. 2010) (holding
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communication attempting to collect on defaulted home loan “qualifies as a communication
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in connection with an attempt to collect a debt”); Wilson v. Draper & Goldberg, P.L.L.C.,
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443 F.3d 373, 376 (4th Cir. 2006) (holding mortgage constitutes debt under FDCPA).
Accordingly, the Seventh Cause of Action is not subject to dismissal.
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CONCLUSION
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For the reasons stated above, defendant’s motion to dismiss is hereby GRANTED in
part and DENIED in part as follows:
1. To the extent the motion seeks dismissal of the Third, Fourth, and Fifth Causes
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of Action, the motion is hereby GRANTED, and the Third, Fourth, and Fifth Causes of
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Action are DISMISSED, with leave to amend.
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2. In all other respects the motion is DENIED.
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3. Plaintiffs amended complaint, if any, shall be filed no later than August 16, 2013.
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IT IS SO ORDERED.
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Dated: July 24, 2013
MAXINE M. CHESNEY
United States District Judge
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