Tasaranta et al v. Homecomings Financial, LLC et al

Filing 10

ORDER: The Motion to Dismiss (Doc. 8 ) is granted. The action against Defendant Homecomings is dismissed without prejudice. Signed by Judge William Q. Hayes on 9/21/2009. (All non-registered users served via U.S. Mail Service.) (mdc) (jrl).

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ERIC TASARANTA and DARILOU TASARANTA, vs. HOMECOMINGS FINANCIAL LLC; AMERICAN MORTGAGE NETWORK, INC.; and DOES 1 through 50, HAYES, Judge: The matter before the Court is the Motion to Dismiss, filed by Defendant Homecomings Financial, LLC ("Homecomings"). (Doc. # 8). I. Background On July 2, 2009, Plaintiffs, proceeding pro se, initiated this action by filing a Complaint for Damages and Rescission ("Complaint") in San Diego County Superior Court. (Notice of Removal, Doc. # 1, Ex. A ("Compl.")). On July 31, 2009, Homecomings removed the action to this Court, alleging federal question jurisdiction. (Doc. # 1). The Notice of Removal was accompanied by an affidavit from Homecomings' counsel, stating that Defendant American Mortgage Network, Inc. had not been properly served as of July 31, 2009. (Doc. # 3, ¶ 5). American Mortgage Network, Inc. has not yet entered an appearance, and Plaintiffs have filed no proof of service as to American Mortgage Network, Inc. with this Court. On August 5, 2009, Homecomings filed a Motion to Dismiss the Complaint. (Doc. #
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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
CASE NO. 09cv1666 WQH (JMA) ORDER

Plaintiffs,

Defendants.

1 8). Plaintiffs have not filed an opposition to the Motion to Dismiss. 2 II. 3 Allegations of the Complaint "The real property [at issue] is a single family residence commonly known as follows:

4 1918 Harrils Mill Ave., Chula Vista, California 91913." (Compl. at 1). "On or about May 6, 5 2005, Plaintiffs executed an `Adjustable Rate Note' promising to pay [Defendant] American 6 Mortgage Network, Inc. the sum of $619,000.00 by monthly payments." (Compl. ¶5). 7 "[C]rucial terms regarding the loan documentation were ... never fully explained to Plaintiffs, 8 if at all as required by statute, including the exact interest rate set forth in the `Note', how and 9 when any adjustments to that interest rate and the recurring monthly payment would occur." 10 (Compl. ¶ 7). "Further, ... the Defendants charged and obtained improper fee for the placement 11 of their loan as `sub-prime' when they qualified for a prime rate mortgage which would have 12 generated less in fees and interest." (Compl. ¶ 8). 13 The Complaint alleges eight causes of action: (1) violation of the Truth In Lending Act

14 ("TILA"), 15 U.S.C. §§ 1611 et seq.; (2) violation of the Real Estate Settlement Procedures 15 Act ("RESPA"), 12 U.S.C. §§ 2605 et seq.; (3) violation of the Home Ownership and Equity 16 Protection Act ("HOEPA"), 15 U.S.C. §§ 1602 and 1639; (4) violation of the Fair Debt 17 Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692; (5) breach of fiduciary duty; (6) 18 breach of the covenant of good faith and fair dealing; (7) injunctive relief; and (8) declaratory 19 relief. The Complaint requests compensatory and punitive damages, and "rescission of the 20 contract and loan." (Compl. at 12). 21 III. 22 Standard of Review Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim

23 upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) 24 is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support 25 a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 26 1990). 27 To sufficiently state a claim to relief and survive a Rule 12(b)(6) motion, a complaint

28 "does not need detailed factual allegations" but the "[f]actual allegations must be enough to
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1 raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 2 555 (2007). "[A] plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' 3 requires more than labels and conclusions, and a formulaic recitation of the elements of a cause 4 of action will not do." Id. (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to 5 dismiss, a court must accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal, 6 --- U.S. ---, 129 S. Ct. 1937, 1950 (2009). However, a court is not "required to accept as true 7 allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 8 inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see also 9 Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 683 (9th Cir. 2009) ("Plaintiffs' general 10 statement that Wal-Mart exercised control over their day-to-day employment is a conclusion, 11 not a factual allegation stated with any specificity. We need not accept Plaintiffs' unwarranted 12 conclusion in reviewing a motion to dismiss."). "In sum, for a complaint to survive a motion 13 to dismiss, the non-conclusory factual content, and reasonable inferences from that content, 14 must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret 15 Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations omitted). 16 Pro se complaints are held to a less stringent standard than formal pleadings by lawyers.

17 See Haines v. Kerner, 404 U.S. 519, 520 (1972). A pro se plaintiff's complaint must be 18 construed liberally to determine whether a claim has been stated. See Zichko v. Idaho, 247 19 F.3d 1015, 1020 (9th Cir. 2001). "Although a pro se litigant ... may be entitled to great leeway 20 when the court construes his pleadings, those pleadings nonetheless must meet some minimum 21 threshold in providing a defendant with notice of what it is that it allegedly did wrong." See 22 Brazil v. U.S. Dep't of Navy, 66 F.3d 193, 199 (9th Cir. 1995). Additionally, "[a]lthough 23 [courts] construe pleadings liberally in their favor, pro se litigants are bound by the rules of 24 procedure." Ghazali v. Moran, 46 F.3d 52, 54 (9th Cir. 1995). When dismissing a pro se 25 complaint for failure to state a claim, "the district court must give the plaintiff a statement of 26 the complaint's deficiencies." Karim-Panahi v. L.A. Police Dep't, 839 F.2d 621, 623-24 (9th 27 Cir. 1988). 28 IV. Discussion
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1 2 3 4 5 6 7

A.

TILA

The Complaint alleges: Defendants ... have violated the requirements of [TILA] in that among other things: A. They have refused and continued to refuse to validate or otherwise make full accounting and the required disclosures as to the true finance charges and fees; B. They have improperly retained funds belonging to Plaintiffs in amounts to be determined; C. They have failed to disclose that status of the ownership of the loans.

8 (Compl. ¶ 13). 9 10 1. Pleading Standards

Plaintiffs did not attach to the Complaint any of the "loan documentation" referenced

11 in the Complaint, nor did they make any specific factual allegations as to the contents of the 12 "loan documentation." (Compl. ¶ 7). Plaintiffs do not allege which provisions of the TILA 13 were violated by which Defendant, nor do Plaintiffs allege "non-conclusory factual content" 14 which is "plausibly suggestive of a [TILA] claim entitling the plaintiff to relief." Moss, 572 15 F.3d at 969. The allegations related to the TILA claim fail to satisfy the pleading standards 16 of Rule 8(a) of the Federal Rules of Civil Procedure. See Twombly, 550 U.S. at 555 ("[A] 17 plaintiff's obligation to provide the `grounds' of his `entitle[ment] to relief' requires more than 18 labels and conclusions, and a formulaic recitation of the elements of a cause of action will not 19 do.") (quoting Fed. R. Civ. P. 8(a)(2)). Therefore, Plaintiffs' TILA claim is dismissed without 20 prejudice. 21 22 2. Statute of Limitations

There are two potential remedies to a TILA claim­damages or rescission. See 15

23 U.S.C. §§1635, 1640. The statute of limitations for a TILA damages claim is one year. See 24 15 U.S.C. §1640(e). The statute of limitations for a TILA rescission claim is three years. See 25 15 U.S.C. §1635(f). The period begins to run from the date the loan closed. See King v. 26 California, 784 F.2d 910, 915 (9th Cir. 1986) ("the limitations period in [the TILA] runs from 27 the date of consummation of the transaction...."). Plaintiffs allege they bought the property at 28 issue on May 6, 2005. (Compl. ¶5). They filed the Complaint on July 2, 2009, more than four
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1 years after the loan closed. Thus, the statute of limitations has run on both the TILA damages 2 claim and the TILA rescission claim. Finally, Plaintiffs do not allege sufficient facts indicating 3 that the doctrine of equitable tolling should suspend the TILA limitations period. Cf. King, 784 4 F.2d at 915. For this independent reason, Plaintiffs' TILA claim is dismissed without 5 prejudice. 6 7 8 B. RESPA 1. Section 2605(b)

The Complaint alleges that Defendants, "individually or jointly, are `Servicers' as that

9 term is used within the RESPA act and either individually or jointly violated the requirements 10 of [12] U.S.C. § 2605(B) in that the servicing contract or duties thereunder were transferred 11 ... without the required notice." (Compl. ¶ 21). 12 Section 2605(b) provides that "[e]ach servicer of any federally related mortgage shall

13 notify the borrower in writing of any assignment, sale or transfer of the servicing of the loan 14 to any other person." 12 U.S.C. § 2605(b). The remedies available for violation of § 2605(b) 15 are: "an amount equal to the sum of ­ (A) any actual damages to the borrower as a result of the 16 failure; and (B) any additional damages, ... in the case of a pattern or practice of 17 noncompliance with the requirements of this section, in an amount not to exceed $1,000." 12 18 U.S.C. § 2605(f)(1). 19 The Complaint fails to allege facts related the alleged transfer of servicing contract,

20 including when the transfer occurred and to whom the contract was transferred. The 21 Complaint also fails to allege that Plaintiffs suffered "any actual damages ... as a result of the 22 failure" to provide notice, or any "pattern or practice of noncompliance." Id. The allegations 23 of the Complaint related to the § 2605(b) RESPA claim fail to satisfy the pleading standards 24 of Rule 8(a). See Twombly, 550 U.S. at 555. 25 26 2. Yield Spread Fees

The Complaint also alleges that "Defendants ... placed loans for the purpose of

27 unlawfully increasing or otherwise obtaining yield spread fees and sums in excess of what 28 would have been lawfully earned." (Compl. ¶ 20).
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1

"No per se rule exists in applying RESPA ... to [yield spread fees]." Bjustrom v. Trust

2 One Mortgage Corp., 322 F.3d 1201, 1208 (9th Cir. 2003) (citation omitted). Instead, a court 3 must conduct a loan-specific analysis of whether the total mortgage broker compensation was 4 reasonable. See id. The single allegation quoted above is insufficient state a RESPA claim 5 that the yield spread fees charged by Defendants in Plaintiffs' case were unreasonable. For 6 example, Plaintiffs fail to allege what services were performed by each Defendant, when they 7 were performed, and what fees were charged by each Defendant for those services. See 8 Bjustrom, 322 F.3d at 1208. The RESPA claims are dismissed without prejudice for failure 9 to satisfy the pleading standards of Rule 8(a). See Twombly, 550 U.S. at 555. 10 11 C. HOEPA

Plaintiffs' third Cause of Action seeks damages under HOEPA, an amendment to TILA

12 codified at 15 U.S.C. § 1639, which creates "a special class of regulated loans that are made 13 at higher interest rates or with excessive costs and fees." Lynch v. RKS Mortgage, Inc., 588 14 F. Supp. 2d 1254, 1260 (E.D. Cal. 2008) (quotation omitted). In order to be subject to the 15 protections afforded by HOEPA, one of two factors has to be established. Either the annual 16 percentage rate of the loan at consummation must exceed by more than 10 percent the 17 applicable yield on treasury securities, or the total points and fees payable by the consumer at 18 or before closing has to be greater than 8 percent of the total loan amount, or $400.00. See 15 19 U.S.C. § 1602(aa)(1) & (3); see also Lynch, 588 F. Supp. 2d at 1260. 20 The Complaint contains no factual allegations concerning the loan at issue, including

21 the percentage rate of the loan at consummation or the total points and fees payable at or 22 before closing. (Compl. ¶¶ 25-29 (the HOEPA allegations)). The HOEPA claim is dismissed 23 without prejudice because "Plaintiffs' Complaint does not demonstrate that the mortgage they 24 obtained qualified for protection under HOEPA in the first place...." Lynch, 588 F. Supp. 2d 25 at 1260 (citing Marks v. Chicoine, No. C 06-6806, 2007 WL 160992 at *8 (N.D. Cal., Jan. 18, 26 2007) (court dismissed claim for violation of HOEPA where plaintiff failed to allege facts that 27 would support a conclusion that HOEPA applied to the loan at issue); Justice v. Countrywide 28 Home Loans, Inc., No. 05-cv-008, 2006 WL 141746 at *2 (E.D. Tenn., Jan. 18, 2006) (where
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1 complaint alleged that excessive fees were charged in violation of HOEPA but failed to specify 2 such fees, dismissal was appropriate, since "the bare incantation of statutory terms, without 3 corresponding allegations to support recovery, does not state a claim.")). 4 5 D. FDCPA

The Complaint alleges that Plaintiffs "requested validation of the `debt' under 15 U.S.C.

6 § 1692, the Fair Debt Collection Practices Act.... Defendants did not respond to their demands 7 in such a way as to meet the requirements of the act." (Compl. ¶¶ 32-33). 8 Plaintiffs do not include sufficient factual allegations to support the conclusion that

9 Defendants violated the FDCPA, such as how, when and to whom Plaintiffs "requested 10 validation," and how and when each Defendant responded. (Compl. ¶ 32). The FDCPA claim 11 is dismissed without prejudice for failure to satisfy the pleading standards of Rule 8(a). See 12 Twombly, 550 U.S. at 555. 13 14 E. Breach of Fiduciary Duty

The Complaint alleges that "Defendants breached their fiduciary duties owed to

15 Plaintiffs as they have acted and continue to act for their own benefit and to the detriment of 16 Plaintiffs." (Compl. ¶ 38). 17 "[T]o plead a cause of action for breach of fiduciary duty, there must be shown the

18 existence of a fiduciary relationship, its breach, and damage proximately caused by that breach. 19 The absence of any one of these elements is fatal to the cause of action." Pierce v. Lyman, 1 20 Cal. App. 4th 1093, 1101 (1991). "The relationship between a lending institution and its 21 borrower-client is not fiduciary in nature. A commercial lender is entitled to pursue its own 22 economic interests in a loan transaction." Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal. 23 App. 3d 1089, 1096 (1991) (citations omitted). "[I]t is established that absent special 24 circumstances..., a loan transaction is at arms-length and there is no fiduciary relationship 25 between the borrower and lender." Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 26 453, 466 (2006) (collecting cases). 27 The Complaint fails to allege "special circumstances" demonstrating that there existed

28 a fiduciary relationship between Plaintiffs and Defendants. Therefore, the breach of fiduciary
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1 duty claim is dismissed without prejudice. 2 3 F. Breach of the Covenant of Good Faith and Fair Dealing

"Every contract imposes upon each party a duty of good faith and fair dealing in its

4 performance and its enforcement." Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th 5 Cir. 1999) (applying California law). That duty, known as the covenant of good faith and fair 6 dealing, requires "that neither party ... do anything which will injure the right of the other to 7 receive the benefits of the agreement." Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 8 589 (2005). However, "recovery for breach of the covenant is available only in limited 9 circumstances, generally involving a special relationship between the contracting parties, such 10 as the relationship between an insured and its insurer." Bionghi v. Metro. Water Dist., 70 Cal. 11 App. 4th 1358, 1370 (1999). Additionally, the "covenant is limited to assuring compliance 12 with the express terms of the contract, and cannot be extended to create obligations not 13 contemplated in the contract." Racine & Laramie, Ltd. v. Dep't of Parks & Recreation, 11 Cal. 14 App. 4th 1026, 1032 (1992). 15 The Complaint does not allege that there exists "a special relationship between the

16 contracting parties." Bionghi, 70 Cal. App. 4th at 1370; see also Mitsui Mfrs. Bank v. Super. 17 Ct., 212 Cal. App. 3d 726, 729 (1989) ("reject[ing] [the] argument that [the covenant] ... should 18 encompass normal commercial banking transactions"). Also, the Complaint does not allege 19 that Defendants failed to comply with "the express terms of the contract" between the parties. 20 Racine & Laramie, Ltd., 11 Cal. App. 4th at 1032. Therefore, the claim for breach of the 21 implied covenant of good faith and fair dealing is dismissed without prejudice. 22 23 G. Injunctive Relief

Under California law, a "cause of action for an injunction [i]s improper as an injunction

24 is a remedy, not a cause of action." Roberts v. Los Angeles County Bar Ass'n, 105 Cal. App. 25 4th 604, 618 (2003) (citing McDowell v. Watson, 59 Cal. App. 4th 1155, 1159 (1997)). 26 Plaintiffs' purported cause of action for injunctive relief is dismissed. 27 28 H. Declaratory Relief

The Complaint alleges that "a declaration of the rights and duties of the parties herein
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1 is essential to determine the actual status and validity of the loan, Deed of Trust, nominated 2 beneficiaries, actual beneficiaries, loan servicers, trustees instituting foreclosure proceedings 3 and related matters." (Compl. ¶ 53). 4 "The fundamental basis of declaratory relief is the existence of an actual, present

5 controversy over a proper subject." City of Cotati v. Cashman, 29 Cal. 4th 69, 79 (2002) 6 (quotation omitted). To determine whether declaratory relief is appropriate, a court must 7 determine: "(1) whether the dispute is sufficiently concrete that declaratory relief is 8 appropriate; and (2) whether withholding judicial consideration will result in the parties 9 suffering hardship." Stonehouse Homes v. City of Sierra Madre, 167 Cal. App. 4th 531, 540 10 (2008) (citations omitted). 11 The Complaint fails to allege sufficient facts indicating that declaratory relief is

12 appropriate. For example, there are no factual allegations indicating the status of the 13 relationship between the parties, or whether either Defendant has attempted to foreclose on the 14 property at issue. The declaratory relief cause of action is dismissed without prejudice. 15 V. 16 Conclusion IT IS HEREBY ORDERED that the Motion to Dismiss is GRANTED. (Doc. # 8).

17 The action against Defendant Homecomings is DISMISSED without prejudice. 18 DATED: September 21, 2009 19 20 21 22 23 24 25 26 27 28
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WILLIAM Q. HAYES United States District Judge