Park et al v. U.S. Bank National Association (TTEE) et al

Filing 109

ORDER: The (Doc. 97 ) Motion to Dismiss filed by Lender Processing Services, Inc. is granted. The (Doc. 100 ) Motion to Dismiss filed by U.S. Bank National Association, Credit Suisse Financial Corporation, Select Portfolio Servicing, and Mortgage E lectronic Registration Systems is granted in part and denied in part. All claims against Lender Processing Services, Inc., U.S. Bank National Association, Credit Suisse Financial Corporation, and Mortgage Electronic Registration Systems are dismissed without prejudice. All claims against Select Portfolio Servicing are dismissed without prejudice, except the intentional misrepresentation, negligent misrepresentation, promissory estoppel, and Section 17200 claims. The moving Defendants' request for an award of attorneys' fees and costs is denied. Signed by Judge William Q. Hayes on 9/13/2011. (All non-registered users served via U.S. Mail Service.) (mdc)

1
2
3
4
5

UNITED STATES DISTRICT COURT

6

SOUTHERN DISTRICT OF CALIFORNIA

7
8

SEAN M. PARK; MICHELLE PARK,

CASE NO. 10cv1546-WQH-WMc

9

ORDER

23

Plaintiffs,
vs.
U.S. BANK NATIONAL
ASSOCIATION; CREDIT SUISSE
FINANCIAL CORPORATION;
QUALITY LOAN SERVICE
CORPORATION; OLD REPUBLIC
TITLE COMPANY; SELECT
PORTFOLIO SERVICING;
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS – “MERS”;
BILL KOCH in his official capacity as
assistant secretary to Mortgage Electronic
Registration Systems and as document
control officer for Select Portfolio
Servicing; LENDER PROCESSING
SERVICES, INC.; Auctioneer JAY
GAFNER in his capacity as agent for
Lender Processing Services, Inc.;
SUNDANCE LLC; DANIEL GROIS,
acting in his capacity as manager for
Sundance LLC; and DOES individuals 1
to 100, inclusive; and ROES corporations
1 to 30, inclusive; and all other persons
and entities unknown claiming any right,
title, estate, lien, or interest in the real
property described in the complaint
adverse to Plaintiffs’ ownership, or any
cloud upon Plaintiffs’ title thereto,

24

Defendants.

10
11
12
13
14
15
16
17
18
19
20
21
22

25 HAYES, Judge:
26

The matters before the Court are the Motions to Dismiss filed by Defendants Lender

27 Processing Services, Inc. (“Lender Processing Services”), U.S. Bank National Association
28 (“U.S. Bank”), Credit Suisse Financial Corporation (“Credit Suisse”), Select Portfolio
-1-

10cv1546-WQH-WMc

1 Servicing, and Mortgage Electronic Registration Systems (collectively, “moving Defendants”).
2 (ECF Nos. 97, 100).
3 I.

Background

4

On May 4, 2011, Plaintiffs, proceeding pro se, filed the “First Amended Verified

5 Complaint” (“First Amended Complaint”), which is the operative pleading. (ECF No. 90).
6 The First Amended Complaint alleges that, on August 15, 2007, Plaintiffs “entered into a
7 contractual agreement ... borrowing $840,000 from lender Credit Suisse Financial Corporation
8 refinancing the real property commonly known as 7421-7423 Draper Avenue, La Jolla,
9 California....” Id. at 2. “The core of this action arises out of a breach of contractual agreement
10 between Plaintiffs ... and lender Defendant Credit Suisse Financial Corporation, followed by
11 an invalid and flawed non-judicial foreclosure on the subject property, and subsequent
12 wrongful and invalid assignments recorded on Subject Property title.” Id. at 2-3. The First
13 Amended Complaint alleges that “[a]ll ... named Defendants participated in improperly
14 alleging an incorrect debt of $896,843.86 as owing on the subject property when Plaintiff only
15 borrowed $840,000, and faithfully performed all the required covenants of the Subject Loan
16 Agreement making well over $100,100 in timely payments until ... Defendants instructed and
17 advised Plaintiffs to stop making monthly payments.” Id. at 3. The First Amended Complaint
18 alleges that the “foreclosing Notice of Trustee Sale, was recorded by unauthorized party
19 Defendant Quality Loan Service,” and “Defendant Jay Gafner, as auctioneer and an
20 unidentified ‘highest bidder’ acted wrongfully as agents for Defendants in proceeding with the
21 public auction sale after being put on constructive notice of a fraudulent sale transaction by
22 Plaintiff Sean Park.” Id.
23

The First Amended Complaint alleges seventeen causes of action against all

24 Defendants: (1) violation of the Truth in Lending Act (“TILA”); (2) violation of California’s
25 Rosenthal Fair Debt Collection Practices Act (“RFDCPA”); (3) violation of the Fair Debt
26 Collection Practices Act (“FDCPA”); (4) wrongful foreclosure; (5) violation of the Real Estate
27 Settlement Procedures Act (“RESPA”); (6) breach of fiduciary duty; (7) fraud – intentional
28 misrepresentation; (8) fraud – negligent misrepresentation; (9) violations of California
-2-

10cv1546-WQH-WMc

1 Business and Professions Code § 17200; (10) breach of contract – promissory estoppel; (11)
2 breach of the implied covenant of good faith and fair dealing; (12) conversion; (13) violation
3 of California Civil Code § 2923.5; (14) quiet title; (15) injunctive relief; (16) rescission; and
4 (17) accounting. The First Amended Complaint alleges federal question subject matter
5 jurisdiction pursuant to 28 U.S.C. § 1331. Plaintiffs seek damages, injunctive relief and
6 declaratory relief.
7

On May 24, 2011, Defendants Sundance LLC and Daniel Grois filed an Answer to the

8 First Amended Complaint. (ECF No. 96).
9

On May 26, 2011 and May 27, 2011, the moving Defendants filed the Motions to

10 Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), and a Request for Judicial
11 Notice. (ECF Nos. 97, 100).
12

On June 22, 2011, Plaintiffs filed oppositions to the Motions to Dismiss. (ECF Nos.

13 102, 103, 104). Plaintiffs contend that the Motions to Dismiss should be denied, or
14 alternatively, that Plaintiffs should be granted leave to amend the First Amended Complaint.
15

On June 28, 2011, the moving Defendants filed reply briefs. (ECF Nos. 105, 106).

16 II.

Discussion

17

A.

18

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for “failure to state a claim

Standard of Review

19 upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6)
20 is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support
21 a cognizable legal theory. See Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.
22 1990). To sufficiently state a claim to relief and survive a Rule 12(b)(6) motion, a complaint
23 “does not need detailed factual allegations” but the “[f]actual allegations must be enough to
24 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
25 555 (2007). “[A] plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
26 requires more than labels and conclusions, and a formulaic recitation of the elements of a cause
27 of action will not do.” Id. (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to
28 dismiss, a court must accept as true all “well-pleaded factual allegations.” Ashcroft v. Iqbal,
-3-

10cv1546-WQH-WMc

1 --- U.S. ----, 129 S. Ct. 1937, 1950 (2009). However, a court is not “required to accept as true
2 allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable
3 inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “In sum,
4 for a complaint to survive a motion to dismiss, the non-conclusory factual content, and
5 reasonable inferences from that content, must be plausibly suggestive of a claim entitling the
6 plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations
7 omitted). “Courts have a duty to construe pro se pleadings liberally.” Bernhardt v. Los
8 Angeles County, 339 F.3d 920, 925 (9th Cir. 2003) (citation omitted).
9
10

B.

Request for Judicial Notice

“A district court ruling on a motion to dismiss may consider documents whose contents

11 are alleged in a complaint and whose authenticity no party questions, but which are not
12 physically attached to the plaintiff’s pleading.” Parrino v. FHP, Inc., 146 F.3d 699, 705-06
13 (9th Cir. 1998) (quotation omitted). Also, “a district court ruling on a motion to dismiss may
14 consider a document the authenticity of which is not contested, and upon which the plaintiff’s
15 complaint necessarily relies.” Id. at 706.
16

The moving Defendants request that the Court take judicial notice of the documents

17 executed by Plaintiff and relating to the property at issue, including the Deed of Trust, the
18 Notice of Default, the Notice of Trustee’s Sale, the Corporate Assignment of Deed of Trust,
19 and the Trustee’s Deed Upon Sale. (ECF No. 100-1). Plaintiffs do not oppose the Request for
20 Judicial Notice.
21

The First Amended Complaint either references or necessarily relies upon each of the

22 documents which are attached to the Request for Judicial Notice. The authenticity of the
23 documents has not been challenged. Accordingly, the Request for Judicial Notice is granted.
24

C.

Motions to Dismiss

25

Plaintiffs allege each of the seventeen causes of action against each of the Defendants.

26 Each of the moving Defendants move for the dismissal of each cause of action.
27
28

1.

TILA

Plaintiffs allege that Defendants violated TILA, 15 U.S.C. §§ 1601, et seq., and seek
-4-

10cv1546-WQH-WMc

1 damages, and “rescission of the Subject Loan [and] an order requiring Defendants ... to
2 terminate any security interest in the Subject Property.” (ECF No. 90 at 19).
3

The moving Defendants move for the dismissal of the TILA claim for damages on the

4 basis that the statute of limitations has expired. The moving Defendants move for the
5 dismissal of the TILA claim for rescission on the basis that Plaintiffs have failed to adequately
6 allege tender.1
a.

7
8

TILA Claim for Damages

Damages claims under TILA must be brought “within one year from the date of the

9 occurrence of the violation.” 15 U.S.C. § 1640(e). “[A]s a general rule the limitations period
10 starts at the consummation of the transaction.” King v. California, 784 F.2d 910, 915 (9th Cir.
11 1986). “[E]quitable tolling may be applied if, despite all due diligence, a plaintiff is unable
12 to obtain vital information bearing on the existence of his claim.” Santa Maria v. Pacific Bell,
13 202 F.3d 1170, 1178 (9th Cir. 2000) (citation omitted). Generally, a litigant seeking equitable
14 tolling of a limitations period bears the burden of establishing entitlement to equitable tolling.
15 Pace v. DiGuglielmo, 544 U.S. 408, 418 (2005). Where a plaintiff alleges TILA violations
16 during initial disclosures, equitable tolling is not appropriate if “nothing prevented [plaintiff]
17 from comparing the loan contract, [the] initial disclosures, and TILA’s statutory and regulatory
18 requirements.” Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 70 (9th Cir. 1996) (citing King,
19 784 F.2d at 915).
20

The First Amended Complaint alleges that Plaintiffs obtained the loan on August 15,

21 2007. Plaintiffs filed this lawsuit on July 26, 2010, nearly three years after the loan transaction
22 was consummated. Accordingly, Plaintiffs’ TILA claim for damages is barred by the one-year
23 statute of limitations, unless equitable tolling applies. In their opposition brief, Plaintiffs state
24 that “[t]he statute of limitations to recover Plaintiffs’ damages under TILA may be equitably
25 tolled.” (ECF No. 103 at 17). However, the First Amended Complaint does not adequately
26 allege facts indicating that, “despite all due diligence, [Plaintiffs were] unable to obtain vital
27
1

The moving Defendants move for the dismissal of all claims in the First Amended
28 Complaint seeking an equitable remedy on the basis of Plaintiffs’ failure to adequately allege
tender. The Court will address each claim as it is alleged in the First Amended Complaint.
-5-

10cv1546-WQH-WMc

1 information bearing on the existence of [their] claim.” Santa Maria, 202 F.3d at 1178.
2 Because Plaintiffs fail to adequately allege the availability of equitable tolling, Plaintiffs’ claim
3 for damages pursuant to TILA is barred by the statute of limitations.
4
5

b.

TILA Claim for Rescission

In order to ultimately prevail on a TILA rescission claim, the borrower will be obligated

6 to tender the property the borrower received from the creditor under the loan. See 15 U.S.C.
7 § 1635(b); 12 C.F.R. § 226.23(d); cf. Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1173 (9th Cir.
8 2003) (holding that “courts [are] free to exercise equitable discretion to modify rescission
9 procedures.”). “By far, the majority of Courts to address the issue recently have required that
10 borrowers allege an ability to tender the principal balance of the subject loan in order to state
11 a claim for rescission under TILA.” Garcia v. Wachovia Mortg. Corp., 676 F. Supp. 2d 895,
12 901 (2009) (collecting cases). This rule is in recognition of the principle that “[e]quity will not
13 interpose its remedial power in the accomplishment of what seemingly would be nothing but
14 an idly and expensively futile act, nor will it purposely speculate in a field where there has
15 been no proof as to what beneficial purpose may be subserved through its intervention.”
16 Karlsen v. Am. Sav. & Loan Ass’n, 15 Cal. App. 3d 112, 118 (1971) (quotation omitted); see
17 also Garza v. Am. Home Mortg., No. CV 08-1477, 2009 WL 188604, at *5 (E.D. Cal. Jan. 27,
18 2009) (“The complaint fails to hint that [plaintiff] is able to fulfill her [tender] obligations
19 under 15 U.S.C. § 1635(b) and 12 C.F.R. § 226.23(d). Rescission is an empty remedy without
20 [plaintiff’s] ability to pay back what she has received.”).
21

Plaintiffs allege that the loan amount was $840,000. Plaintiffs allege: “As soon as

22 Defendants meet their required obligations, ... Plaintiffs are ready and able to tender whatever
23 remaining mortgage debt has been judicially determined. If for any reason Plaintiffs cannot
24 tender the full amount due, Plaintiffs have several qualified buyers ready to submit letters of
25 intent to this ... Court.” (ECF No. 90 at 19).
26

Plaintiffs do not allege any specific facts related to the “qualified buyers.” Plaintiffs

27 do not otherwise allege specific facts as to how Plaintiffs would be able to able to tender the
28 loan proceeds. Even construing the First Amended Complaint liberally, the Court finds that
-6-

10cv1546-WQH-WMc

1 Plaintiffs’ allegations are insufficient to plausibly show an ability to tender. See Iqbal, 129 S.
2 Ct. at 1950.
3

The Motions to Dismiss are granted as to the first cause of action for violation of TILA.
2.

4
5

Fair Debt Collection Practices Acts

The second and third causes of action allege violations of the FDCPA, 15 U.S.C. §§

6 1692, et seq., and the RFDCPA, Cal. Civ.Code § 1788, et seq.
7

The moving Defendants move for the dismissal of the FDCPA and RFDCPA claims on

8 the basis that “foreclosing on a Deed of Trust does not invoke the statutory protections” of the
9 FDCPA and RFDCPA. (ECF No. 100 at 16).
10

The FDCPA and RFDCPA prohibit debt collectors from engaging in abusive, deceptive

11 and unfair practices in the collection of consumer debts. See 15 U.S.C. § 1692; Cal. Civ. Code
12 § 1788.1. A defendant must be a “debt collector” to be liable pursuant to the FDCPA and the
13 RFDCPA. Heintz v. Jenkins, 514 U.S. 291, 294 (1995); see also Cal. Civ. Code § 1788.2(c).
14

“The legislative history of section 1692a(6) indicates conclusively that debt collector does not

15 include ... a mortgage servicing company, or an assignee of a debt, as long as the debt was not
16 in default at the time it was assigned.” Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th
17 Cir. 1985).
18

The FDCPA and RFDCPA do not apply to foreclosure activities. See Walker v. Equity

19 1 Lenders Group, Case No. 09cv325 WQH (AJB), 2009 WL 1364430 at *7 (S.D. Cal. May
20 14, 2009) (“The activity of foreclosing on [a] property pursuant to a deed of trust is not the
21 collection of a debt within the meaning of the FDCPA or the RFDCPA.”) (quotation omitted);
22 Champlaie v. BAC Home Loans Servicing, LP, 706 F. Supp. 2d 1029, 1054-55 (E.D. Cal.
23 2009) (“Foreclosure on a property as security on a debt is not debt collection activity
24 encompassed by the Rosenthal Act.”); Hulse v. Ocwen Fed. Bank, FSB, 195 F. Supp. 2d 1188,
25 1204 (D. Or. 2002) (“Foreclosing on a trust deed is distinct from the collection of the
26 obligation to pay money. The FDCPA is intended to curtail objectionable acts occurring in the
27 process of collecting funds from a debtor.... Payment of funds is not the object of the
28 foreclosure action. Rather, the lender is foreclosing its interest in the property.”); but see
-7-

10cv1546-WQH-WMc

1 Austero v. Aurora Loan Servs., Inc., Case No. C-11-490, 2011 WL 1585530, at *9 (N.D. Cal
2 Apr. 27, 2011) (holding that “[w]here the claim arises out of debt collection activities beyond
3 the scope of the ordinary foreclosure process, however, a remedy may be available under the
4 Rosenthal Act”) (quotation omitted).
5

The First Amended Complaint alleges:

6

Defendants’ actions constitute a violation of the [RFDCPA], in that they took
and threatened to take actions prohibited by law, including, without limitation:
an illegal auction falsely stating the amount of the debt; increasing the amount
of the debt by including amounts not permitted by law or contract; improperly
foreclosing on the Subject Property; and using unfair and unconscionable means
in an attempt to collect a debt.

7
8
9

(ECF No. 90 at 21-22; see also id. at 24 (same, with respect to FDCPA)).
10
To the extent the First Amended Complaint alleges violations of the FDCPA and
11
RFDCPA related to the ordinary foreclosure process, the acts do not apply because the
12
allegations are not related to collection activities. To the extent Plaintiffs allege Defendants
13
acted outside of the scope of the ordinary foreclosure process, the First Amended Complaint
14
fails to adequately allege how each Defendant constitutes a debt collector pursuant to the acts,
15
and how each Defendant violated the acts. See Iqbal, 129 S. Ct. at 1950.
16
The Motions to Dismiss are granted as to the second and third causes of action for
17
violations of the FDCPA and RFDCPA.
18
3.

Wrongful Foreclosure

19
Wrongful foreclosure is an action in equity, where a plaintiff seeks to set aside a
20
foreclosure sale. See Abdallah v. United Sav. Bank, 43 Cal. App. 4th 1101, 1009 (1996);
21
Karlsen, 15 Cal. App. 3d at 117. Under California law, “[w]hen a debtor is in default of a
22
home mortgage loan, and a foreclosure is either pending or has taken place, the debtor must
23
allege a credible tender of the amount of the secured debt to maintain any cause of action for
24
wrongful foreclosure.” Alicea v. GE Money Bank, No. C-09-91, 2009 WL 2136969, at *3
25
(N.D. Cal. July 16, 2009). “A valid and viable tender of payment of the indebtedness owing
26
is essential to an action to cancel a voidable sale under a deed of trust.” Karlsen, 15 Cal. App.
27
3d at 117-18; see also FPCI RE-HAB 01 v. E&G Invs., Ltd., 207 Cal. App. 3d 1018, 1021
28
(1989) (same). “A valid and viable offer of tender means that it is made in good faith, the
-8-

10cv1546-WQH-WMc

1 party making the tender has the ability to perform, and the tender must be unconditional.”
2 Alicea, 2009 WL 2136969, at *3 (citation omitted).
3

As discussed above, the allegations in the First Amended Complaint are insufficient to

4 plausibly show an ability and willingness to tender. See Iqbal, 129 S. Ct. at 1950.
5

The Motions to Dismiss are granted as to the fourth cause of action for wrongful

6 foreclosure.
7
8

4.

RESPA

The fifth cause of action of the First Amended Complaint alleges that “Defendants

9 violated RESPA at the time of closing of the Loan Agreement by failing to properly and
10 accurately comply with disclosure requirements in that ... Defendants did not provide a
11 Servicing Statement as set forth in 12 U.S.C. § 2605(a); ... and did not properly respond to a
12 Qualified Written Request as set forth in 12 U.S.C. § 2605(e)....” (ECF No. 90 at 28).
13

The moving Defendants move to dismiss the claim for violation of RESPA on the basis

14 that any claims originating at the time of the loan transaction are barred by the statute of
15 limitations, and otherwise “Plaintiffs have ... failed to allege any actual damages they have
16 sustained, or improper fees they have incurred, as a result of any RESPA violations.” (ECF
17 No. 100 at 20).
18
19

a.

Statute of Limitations

Violations of RESPA section 2605 are subject to a one-year statute of limitations. See

20 12 U.S.C. § 2614. The RESPA statute of limitations runs “from the date of the occurrence of
21 the violation.” Id. Apart from Plaintiffs’ allegations related to the failure to respond to a
22 Qualified Written Request (addressed below), Plaintiffs’ RESPA claim appears to be based on
23 allegations of failure to disclose information “at the time of closing of the Loan Agreement”
24 on August 15, 2007. (ECF No. 90 at 28). Plaintiffs filed this lawsuit on July 26, 2010, nearly
25 three years after the closing of the loan transaction. As discussed above, Plaintiffs fail to
26 allege facts which would support equitable tolling of the statute of limitations. Accordingly,
27 Plaintiffs’ claim for violations of RESPA related to nondisclosure at the time of the loan
28 transaction is barred by the statute of limitations.
-9-

10cv1546-WQH-WMc

1
2

b.

Qualified Written Request

Section 2605 of RESPA requires that “[i]f any servicer of a federally related mortgage

3 loan receives a qualified written request from the borrower (or an agent of the borrower) for
4 information relating to the servicing of such loan, the servicer shall provide a written response
5 acknowledging receipt of the correspondence within 20 days ... unless the action requested is
6 taken within such period.” 12 U.S.C. § 2605(e)(1)(A); see also 12 U.S.C. § 2605(e)(2)
7 (describing the action required to be taken in response to a qualified written request). If a loan
8 servicer fails to comply with the provisions of § 2605, a borrower shall be entitled to “any
9 actual damages to the borrower as a result of the failure” and “any additional damages, as the
10 court may allow, in the case of a pattern or practice of noncompliance with the requirements
11 of [§ 2605].” 12 U.S.C. § 2605(f)(1).
12

Plaintiffs allege that they sent a Qualified Written Request to Defendant Select Portfolio

13 Servicing on May 13, 2010, and Defendants “did not properly respond.” (ECF No. 90 at 28;
14 see also id. at 92). The moving Defendants move to dismiss on the basis that Plaintiffs failed
15 to adequately allege damages.
16
17

i.

Actual Damages

“Numerous courts have read Section 2605 as requiring a showing of pecuniary damages

18 to state a claim.” Molina v. Wash. Mut. Bank, No. 09cv894, 2010 WL 431439, at *7 (S.D. Cal.
19 Jan. 29, 2010) (collecting cases). “This pleading requirement has the effect of limiting the
20 cause of action to circumstances in which plaintiff can show that a failure to respond or give
21 notice has caused them actual harm.” Shepherd v. Am. Home Mortg. Servs., Inc., No. 09-1916,
22 2009 WL 4505925, at *3 (E.D. Cal. Nov. 20, 2009) (citation omitted); cf. Yulaeva v.
23 Greenpoint Mortg. Funding, Inc., No. 09-1504, 2009 WL 2880393, at *15 (E.D. Cal. Sept. 9,
24 2009) (plaintiff sufficiently pled actual damages where plaintiff alleged she was required to
25 pay a specific referral fee prohibited under RESPA).
26

The First Amended Complaint alleges:

27

Defendants’ failure to comply with RESPA has directly and proximately caused
Plaintiffs to suffer actual damages including, without limitation: monetary loss,
loss of appetite, frustration, fear, anger, helplessness, nervousness, anxiety,
sleeplessness, sadness and depression and other significant emotional suffering

28

- 10 -

10cv1546-WQH-WMc

1
2

and distress, loss of ability to refinance other property due to loss of previously
outstanding credit, loss of business opportunities due to damage in contractual
relationships with Plaintiffs’ tenants, out of pocket costs of legal research, audit
and other professional fees, court costs, and future damages....

3
(ECF No. 90 at 29).
4
Even construing the First Amended Complaint liberally, Plaintiffs fail to plead non5
conclusory factual allegations indicating how they were damaged by the alleged failure to
6
properly respond to the Qualified Written Request. Cf. Allen v. United Fin. Mortg. Corp., 660
7
F. Supp. 2d 1089, 1097 (N.D. Cal. 2009) (“Allen only offers the conclusory statement that
8
‘damages consist of the loss of plaintiff’s home together with his attorney fees.’ He has not
9
actually attempted to show that the alleged RESPA violations caused any kind of pecuniary
10
loss (indeed, his loss of property appears to have been caused by his default).”). Plaintiffs fail
11
to allege how the failure of the Defendants to comply with RESPA, as opposed to Plaintiffs’
12
default or the other alleged actions of Defendants, plausibly caused the damages alleged in the
13
First Amended Complaint. Cf. Lawther v. OneWest Bank, No. C-10-54, 2010 WL 4936797,
14
at *7 (N.D. Cal. Nov. 30, 2010) (granting motion to dismiss RESPA claim for failure to
15
adequately allege actual damages because “[w]hat remains unexplained ... is how the QWR
16
failure itself is causally connected to the claimed distress of Lawther or his family”); Lal v. Am.
17
Home Servicing, Inc., 680 F. Supp. 2d 1218, 1223 (E.D. Cal. 2010) (“[S]imply having to file
18
suit [does not] suffice as a harm warranting actual damages. If such were the case, every
19
RESPA suit would inherently have a claim for damages built in.”). Plaintiffs fail to allege how
20
the failure to respond to the Qualified Written Request caused the reduction in their credit
21
rating and the “loss of ability to refinance other property.” ECF No. 90 at 28. The Court finds
22
that Plaintiffs’ RESPA claim for actual damages for failure to respond to the Qualified Written
23
Request is inadequately pled. See Iqbal, 129 S. Ct. at 1950.
24
ii.

Statutory Damages

25
To recover statutory damages, a plaintiff must plead a pattern or practice of
26
noncompliance with RESPA. See 12 U.S.C. § 2605(f)(1)(b).
27
The First Amended Complaint alleges that Plaintiffs are entitled to statutory and
28
punitive damages because Select Portfolio Servicing has “engaged in a pattern or practice of
- 11 -

10cv1546-WQH-WMc

1 non-compliance” with RESPA. (ECF No. 90 at 29). “For the purpose of establishing and
2 supporting” this allegation, Plaintiffs attach to the First Amended Complaint a press release
3 from the Federal Trade Commission dated November 12, 2003. Id. The press release concerns
4 settlements reached by the Federal Trade Commission and the U.S. Department of Housing
5 and Urban Development with Fairbanks Holding Corporation, Fairbanks Capital Corporation,
6 and their former CEO, Thomas D. Basmajian, for alleged violations of RESPA and other
7 statutes. See id. at 121-24. Plaintiffs appear to contend that Select Portfolio Servicing has a
8 relationship to the parties discussed in the press release, but Plaintiffs fail to adequately allege
9 the nature of the relationship, and why the alleged RESPA violations of Fairbanks Holding
10 Corporation and Fairbanks Capital Corporation should be imputed to Select Portfolio
11 Servicing. The Court finds that the allegations of a pattern or practice of noncompliance with
12 RESPA are conclusory, and do not plausibly show a pattern and practice of RESPA violations
13 by Select Portfolio Servicing or the other Defendants in this action. See Iqbal, 129 S. Ct. at
14 1950; cf. Lal, 680 F. Supp. 2d at 1223 (RESPA claim deficient because “Plaintiffs flatly claim
15 a pattern of noncompliance but state no facts other than the assurance that at trial they will
16 present other customers who also did not receive QWR responses from Defendant.”); Garvey
17 v. Am. Home Mortg. Servicing, Inc., No. CV-09-973, 2009 WL 2782128, at *2 (D. Ariz. Aug.
18 31, 2009) (same). The Court finds that Plaintiffs’ RESPA claim for statutory damages is
19 inadequately pled.
20

The Motions to Dismiss are granted as to the fifth cause of action for violation of

21 RESPA.2
5.

22
23

Breach of Fiduciary Duty

The moving Defendants move for the dismissal of the sixth cause of action for breach

24 of fiduciary duty on the basis that the moving Defendants did not have a fiduciary relationship
25 with Plaintiffs.
26
27

2

The Court has dismissed all federal law claims as to the moving Defendants. At this
stage in the proceedings, the Court will exercise supplemental jurisdiction over the state law
28 claims pursuant to 28 U.S.C. § 1367 because this case will proceed on the federal law claims
against other Defendants, see ECF No. 96.
- 12 -

10cv1546-WQH-WMc

1

“The elements of a cause of action for breach of fiduciary duty are: (1) existence of a

2 fiduciary duty; (2) breach of the fiduciary duty; and (3) damage proximately caused by the
3 breach.” Stanley v. Richmond, 35 Cal. App. 4th 1070, 1086 (1995). Under California law:
4
5
6
7

Absent special circumstances a loan transaction is at arm’s length and there is
no fiduciary relationship between the borrower and lender. A commercial lender
pursues its own economic interests in lending money. A lender owes no duty
of care to the borrowers in approving their loan. A lender is under no duty to
determine the borrower’s ability to repay the loan. The lender’s efforts to
determine the creditworthiness and ability to repay by a borrower are for the
lender’s protection, not the borrower’s.

8 Perlas v. GMAC Mortg., LLC, 187 Cal. App. 4th 429, 436 (2010) (quotations and citations
9 omitted); see also Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal. App. 3d 1089, 1095-96
10 (1991) (“As a general rule, a financial institution owes no duty of care to a borrower when the
11 institution’s involvement in the loan transaction does not exceed the scope of its conventional
12 role as a mere lender of money.”). A lender does not have a duty to procure a loan
13 modification for a borrower. See Dooms v. Fed. Home Loan Mortg. Corp., Case No. 11-cv14 352, 2011 WL 1303272 at *9 (E.D. Cal. Mar. 31, 2011); Curtis v. Option One Mortg. Corp.,
15 Case No. 09-cv-1608, 2010 WL 599816 at *12 (E.D. Cal. Feb. 18, 2010).
16

The First Amended Complaint alleges generally that, “all Defendants owed a duty of

17 loyalty and a duty to deal fairly with Plaintiffs at all times.” (ECF No. 90 at 31). The First
18 Amended Complaint fails to adequately allege any “special circumstances” that establish a
19 fiduciary relationship between Plaintiffs and each Defendant. Perlas, 187 Cal. App. 4th at
20 436. The Court finds that Plaintiffs’ claim for breach of fiduciary duty is inadequately pled.
21

The Motions to Dismiss are granted as to the sixth cause of action for breach of

22 fiduciary duty.
23
24

6.

Fraud

The moving Defendants move for the dismissal of the seventh and eighth causes of

25 action for “fraud – intentional misrepresentation” and “fraud – negligent misrepresentation,”
26
27
28
- 13 -

10cv1546-WQH-WMc

1 ECF No. 90 at 32, 34, on the basis that the claims are inadequately pled.3
2

“To establish a claim for fraudulent misrepresentation, the plaintiff must prove: (1) the

3 defendant represented to the plaintiff that an important fact was true; (2) that representation
4 was false; (3) the defendant knew that the representation was false when the defendant made
5 it, or the defendant made the representation recklessly and without regard for its truth; (4) the
6 defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably
7 relied on the representation; (6) the plaintiff was harmed; and, (7) the plaintiff’s reliance on
8 the defendant’s representation was a substantial factor in causing that harm to the plaintiff.”
9 Perlas, 187 Cal. App. 4th at 434 (citation omitted).

The elements of a negligent

10 misrepresentation claim are: “(1) a misrepresentation of a past or existing material fact, (2)
11 without reasonable ground for believing it to be true, (3) with the intent to induce another’s
12 reliance on the fact misrepresented, (4) justifiable reliance on the misrepresentation, and (5)
13 resulting damages.” Nat’l Union Fire Ins. Co. v. Cambridge Integrated Servs. Group, Inc.,
14 171 Cal. App. 4th 35, 50 (2009). “It is well-established in the Ninth Circuit that both claims
15 for fraud and negligent misrepresentation must meet Rule 9(b)’s particularity requirement.”
16 Neilson v. Union Bank of Cal., N.A., 290 F. Supp. 2d 1101, 1141 (C.D. Cal. 2003) (citation
17 omitted). Pursuant to Rule 9(b), “in alleging fraud or mistake, a party must state with
18 particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). Rule 9(b)
19 does not allow a complaint to merely lump multiple defendants together but “require[s]
20 plaintiffs to differentiate their allegations when suing more than one defendant ... and inform
21 each defendant separately of the allegations surrounding his alleged participation in the fraud.”
22 Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007). “[T]he plaintiffs must, at a
23 minimum, identify the role of each defendant in the alleged fraudulent scheme.” Id.; see also
24 Moore v. Kayport Package Express, Inc., 885 F.2d 531, 541 (9th Cir. 1989) (“While
25
3

The moving Defendants also contend that the Court should “disregard” the fraud
26 allegations in the First Amended Complaint as “merely a sham” because “Plaintiffs’ original
Complaint alleged fraud in connection with the loan’s origination,” but “Plaintiffs now have
27 changed their tune” and alleged fraud after loan origination. (ECF No. 100 at 22). In support
of this contention, Defendants rely upon Lee v. Hensley, 103 Cal. App. 2d 697, 708-09 (1951).
28 The Court does not find that application of this California pleading rule is appropriate in this
case.
- 14 -

10cv1546-WQH-WMc

1 statements of the time, place and nature of the alleged fraudulent activities are sufficient, mere
2 conclusory allegations of fraud are insufficient.”).
3

The First Amended Complaint alleges:

4

At 10am on June 30, 2009, Plaintiffs called 888-818-6032 and spoke with
[Select Portfolio Servicing] agent Brandon Overstreet who instructed Plaintiffs
that they must stop making monthly payments and allow the subject property to
go into default in order to qualify for a lower monthly payment.

5
6
7
8

Plaintiffs ... justifiably relied on SPS agent Brandon Overstreet[’s]
representations which were material to Plaintiffs’ decision to refrain from selling
or arranging refinancing of the subject property, and to cease making payments
in connection with the Subject Loan, and Defendants knew these representations
were false.

9
10

Defendants and their agent Brandon Overstreet made the representations to
Plaintiffs with knowledge of the falsity and with reckless disregard for their
truth or falsity.

11
12
13
14
15
16
17

Defendants and their agent Brandon Overstreet made the representations to
Plaintiffs with the knowledge and intent that Plaintiffs would rely on the
representations and with the intent to deceive Plaintiffs ... and to wrongfully
induce Plaintiffs into relying on a future permanently modified loan contract.
In reasonable and justifiable reliance on Defendants’ and their agents’
representations, ... Plaintiffs were induced to their detriment to believe the
subject property was secure and any prospective foreclosure had been
indefinitely postponed and the subject property was not subject to sale by nonjudicial foreclosure.
But for Defendants’ representations, Plaintiffs would have sold or refinanced the
subject property to recover their equity before the sale....

18
19

Defendants’ above mentioned fraudulent misrepresentation ... has directly and
proximately caused Plaintiffs to suffer actual damages....

20 (ECF No. 90 at 32-33; see also id. at 34-35 (same, with respect to cause of action for negligent
21 misrepresentation)).
22

Viewing these allegations liberally, the Court finds that the First Amended Complaint

23 adequately alleges causes of action for intentional and negligent misrepresentation against
24 Defendant Select Portfolio Servicing. The First Amended Complaint specifically identifies
25 the identity of the Select Portfolio Servicing agent who made the alleged misrepresentation and
26 the date and time when the alleged misrepresentation was made. The First Amended
27 Complaint adequately alleges the contents of the alleged misrepresentation, and adequately
28 alleges the remaining elements of the intentional and negligent misrepresentation causes of
- 15 -

10cv1546-WQH-WMc

1 action as to Select Portfolio Servicing.
2

The Court finds that the First Amended Complaint fails to adequately allege causes of

3 action for intentional and negligent misrepresentation as to the remainder of the moving
4 Defendants. The First Amended Complaint fails to “inform each [remaining] defendant
5 separately of the allegations surrounding his alleged participation in the fraud,” and fails to
6 “identify the role of each [remaining] defendant in the alleged fraudulent scheme.” Swartz,
7 476 F.3d at 764-65.
8

The Motion to Dismiss is denied as to the claims for intentional and negligent

9 misrepresentation against Select Portfolio Servicing. The Motions to Dismiss are granted as
10 to the claims for intentional and negligent misrepresentation against all other moving
11 Defendants.
12
13

7.

Breach of Contract – Promissory Estoppel

In the tenth cause of action for “breach of contract – promissory estoppel,” the First

14 Amended Complaint alleges:
15
16
17

Plaintiffs fully and faithfully performed all of the covenants, terms, conditions,
and obligations required under the permanently modified mortgage loan
agreement for the Subject property on their part to be performed, as alleged in
the previous paragraphs of Plaintiffs’ complaint. Defendants unexpectedly
rejected their earlier agreement to permanently modify the subject loan contract
and proceeded with a wrongful and unwarranted foreclosure sale.

18
19

The doctrine of promissory estoppel makes Defendants’ ... promise to modify
the subject loan agreement if Plaintiffs voluntarily entered a default on the
subject loan agreement binding under the circumstances.

20
(ECF No. 90 at 37).
21
The moving Defendants move to dismiss this cause of action on the following two
22
grounds: “[B]ecause Plaintiffs have not alleged the purported modification agreement was
23
reduced to a writing, it fails to satisfy the Statute of Frauds and, as a result, is not binding on
24
either party. Plaintiffs also do not provide any facts to suggest that they performed their
25
obligations under the purported modification agreement (or that they were excused from doing
26
so).” (ECF No. 100 at 24-25).
27
Mortgages and deeds of trust are subject to the statute of frauds. See Cal. Civ. Code §
28
2922. “An agreement to modify a contract that is subject to the statute of frauds is also subject
- 16 -

10cv1546-WQH-WMc

1 to the statute of frauds.” Seacrest v. Security Nat’l Mortg. Loan Trust 2002-2, 167 Cal. App.
2 4th 544, 553 (2008) (citing Cal. Civ. Code § 1698). To the extent Plaintiffs’ tenth cause of
3 action alleges a claim for breach of contract, the claim as pled is barred by the statute of frauds.
4 See id. at 547 (holding that a mortgage loan forbearance agreement was barred by the statute
5 of frauds). The Motions to Dismiss are granted as to the tenth cause of action, to the extent
6 it alleges a claim for breach of contract.
7

In the tenth cause of action, Plaintiffs also purport to state a claim for promissory

8 estoppel. To the extent Plaintiffs allege a promissory estoppel claim, the Court finds that it is
9 inappropriate to dismiss the claim at this stage on the basis of the statute of frauds. See Garcia
10 v. World Sav., FSB, 183 Cal. App. 4th 1031, 1041 n.10 (2010) (denying motion for summary
11 judgment on borrower’s promissory estoppel claim related to an alleged promise to delay
12 foreclosure and holding that “to the extent [plaintiffs]’ claim is premised on promissory
13 estoppel, neither section 1698 nor the statute of frauds will defeat their claim”).
14

Defendants also move to dismiss on the basis that “Plaintiffs ... do not provide any facts

15 to suggest that they performed their obligations under the purported modification agreement
16 (or that they were excused from doing so).” (ECF No. 100 at 24-25). To the extent Plaintiffs
17 allege a promissory estoppel claim, it is not necessary for Plaintiffs to allege that Plaintiffs
18 performed–or even had–any obligations to Defendants. See Garcia, 183 Cal. App. 4th at
19 1040-41 (“The absence of consideration or benefit to the promisor does not, however, defeat
20 a claim based on promissory estoppel. The doctrine of promissory estoppel makes a promise
21 binding under certain circumstances, without consideration in the usual sense of something
22 bargained for and given in exchange.”) (quotation omitted). The Court finds that it is
23 inappropriate to dismiss the promissory estoppel claim because “Plaintiffs ... do not provide
24 any facts to suggest that they performed their obligations under the purported modification
25 agreement (or that they were excused from doing so).” (ECF No. 100 at 24-25).
26

The only specific promises alleged to have been made in the First Amended Complaint

27 are alleged to have been made by representatives of Defendant Select Portfolio Servicing. See
28 ECF No. 90 at 10-11 (alleging promises made related to loan modification by Select Portfolio
- 17 -

10cv1546-WQH-WMc

1 Servicing agents Brandon Overstreet and Miguel Gonzales). Because Plaintiffs fail to
2 adequately allege that any other Defendant made promises to Plaintiffs, the Motions to Dismiss
3 are granted as to the promissory estoppel claim against all moving Defendants other than
4 Select Portfolio Servicing.
5

In its Motion to Dismiss, Select Portfolio Servicing does not address the promissory

6 estoppel claim in the tenth cause of action, and does not contend that any specific element of
7 the promissory estoppel claim is inadequately pled. See ECF No. 100 at 24-25. Accordingly,
8 the Court does not decide whether the promissory estoppel claim is adequately pled. The
9 Court finds that the two grounds on which Select Portfolio Servicing challenged the tenth
10 cause of action does not merit dismissal of the promissory estoppel claim. Accordingly, the
11 Motion to Dismiss is denied as to the promissory estoppel claim against Select Portfolio
12 Servicing.
13
14

8.

Breach of the Implied Covenant of Good Faith and Fair Dealing

The moving Defendants move to dismiss the eleventh cause of action for breach of the

15 covenant of good faith and fair dealing on the basis that “Plaintiffs must show a special
16 relationship between themselves and the lender,” and “as a matter of law, there is no fiduciary
17 relationship between a lender and borrower.” (ECF No. 100 at 25-26).
18

“Generally, no cause of action for the tortious breach of the implied covenant of good

19 faith and fair dealing can arise unless the parties are in a special relationship with fiduciary
20 characteristics.” Pension Trust Fund v. Fed. Ins. Co., 307 F.3d 944, 955 (9th Cir. 2002)
21 (applying California law). “[T]he implied covenant tort is not available to parties of an
22 ordinary commercial transaction where the parties deal at arms’ length.” Id. (citation omitted).
23 California courts do not invoke a special relationship between a lender and borrower. See Kim
24 v. Sumitomo Bank, 17 Cal. App. 4th 974, 979 (1993) (“the relationship of a bank-commercial
25 borrower does not constitute a special relationship for the purposes of the covenant of good
26 faith and fair dealing”); Mitsui Mfrs. Bank v. Superior Court, 212 Cal. App. 3d 726, 729
27 (1989) (borrower precluded to assert tortious breach of implied covenant of good faith and fair
28 dealing claim against lender). An exception to this general rule may exist if “the financial
- 18 -

10cv1546-WQH-WMc

1 dependence or personal security by the damaged party has been entrusted to the other” or
2 “when [the lender] excessively controls or dominates the borrower.” Pension Trust Fund, 307
3 F.3d at 955 (citations omitted).
4

The First Amended Complaint alleges that Plaintiffs were “full time landlords” who

5 own “several income generating properties,” and leased to subject property to tenants. (ECF
6 No. 90 at 16). Although Plaintiffs allege that they have been damaged by Defendants’ actions,
7 the First Amended Complaint fails to adequately allege that Plaintiffs’ “financial dependence
8 or personal security ... has been entrusted to” Defendants or that Defendants “excessively
9 control[] or dominate[]” Plaintiffs. Pension Trust Fund, 307 F.3d at 955. The Court finds that
10 the First Amended Complaint fails to adequately allege that Plaintiffs and any Defendant “are
11 in a special relationship with fiduciary characteristics.” Id. Accordingly, the Motions to
12 Dismiss are granted as to the eleventh cause of action for breach of the covenant of good faith
13 and fair dealing.
14
15

9.

Conversion

The moving Defendants move to dismiss the twelfth cause of action for conversion

16 because it “fails to state a valid cause of action”; “[c]onversion does not apply to real
17 property”; and “Plaintiffs have no standing to allege conversion, where, as here, Plaintiffs do
18 not allege that they have actual possession of the property (securities instruments) or the right
19 to immediate possession at the time of the conversion.” (ECF No. 100 at 26-27).
20

The First Amended Complaint alleges that “the subject property promissory note” was

21 purchased by investors “who illegally converted Plaintiffs’ note ... into unregistered securities,
22 and illegally sold the rights and interest in those unregistered securities to investors all over
23 the world as certificates, all without Plaintiffs’ informed consent as drawer ... of the note, in
24 violation of 15 U.S.C. section 77 et seq.” (ECF No. 90 at 41).
25

In the twelfth cause of action, Plaintiffs appear to be alleging a claim related to the

26 unlawful sale of unregistered securities in violation of federal law. In general, 15 U.S.C. § 77e
27 makes it unlawful to sell unregistered securities. The elements of a § 77e claim are “(1) lack
28 of a registration statement as to the subject securities; (2) the offer or sale of the securities; and
- 19 -

10cv1546-WQH-WMc

1 (3) the use of interstate transportation or communication and the mails in connection with the
2 offer or sale.” Europe & Overseas Commodity Traders, S.A. v. Banque Paribas London, 147
3 F.3d 118, 124 n.4 (2d Cir. 1998). The Court finds that the First Amended Complaint fails to
4 plausibly allege a cause of action for violation of § 77e as to any of the moving Defendants.
5 See Iqbal, 129 S. Ct. at 1950.
6
7
8

The Motions to Dismiss are granted as to the twelfth cause of action for conversion.
10.

California Civil Code § 2923.5

The thirteenth cause of action in the First Amended Complaint alleges that Defendants

9 violated California Civil Code § 2923.5, which provides that “[a] mortgagee, trustee,
10 beneficiary, or authorized agent may not file a notice of default ... until 30 days after” the
11 “mortgagee, beneficiary, or authorized agent ... contact[s] the borrower in person or by
12 telephone in order to assess the borrower’s financial situation and explore options for the
13 borrower to avoid foreclosure.” Cal. Civ. Code § 2923.5(a)(1), (2). “There is nothing in
14 section 2923.5 that requires the lender to rewrite or modify the loan.” Mabry v. Superior
15 Court, 185 Cal. App. 4th 208, 214 (2010). “[T]he remedy for noncompliance is a simple
16 postponement of the foreclosure sale, nothing more.” Id. If the foreclosure sale has already
17 occurred, there is no remedy and failure to comply with the statute does not cause a cloud on
18 the title. See id. at 235 (“There is nothing in section 2923.5 that even hints that noncompliance
19 with the statute would cause any cloud on title after an otherwise properly conducted
20 foreclosure sale.... [U]nder the plain language of section 2923.5, read in conjunction with
21 section 2924g, the only remedy provided is a postponement of the sale before it happens.”)
22 (emphasis in original).
23

Based upon the allegations of the First Amended Complaint, the foreclosure sale has

24 occurred, and accordingly Civil Code § 2923.5 does not provide a remedy for Plaintiffs. The
25 Motions to Dismiss are granted as to the thirteenth cause of action for violation of California
26 Civil Code § 2923.5.
27
28

11.

Quiet Title

The fourteenth cause of action in the First Amended Complaint is a claim to quiet title.
- 20 -

10cv1546-WQH-WMc

1 “[A] mortgagor of real property cannot, without paying his debt, quiet his title against the
2 mortgagee.” Miller v. Provost, 26 Cal. App. 4th 1703, 1707 (1994). “The cloud upon [one’s]
3 title persists until the debt is paid.” Aguilar v. Bocci, 39 Cal. App. 3d 475, 477 (1974).
4 Accordingly, “[i]n order to allege a claim to quiet title, Plaintiff must allege tender or offer of
5 tender of the amounts borrowed.” Ricon v. Recontrust Co., No. 09cv937, 2009 WL 2407396,
6 at *6 (S.D. Cal. Aug. 4, 2009); see Arnolds Mgmt. Corp. v. Eischen, 158 Cal. App. 3d 575, 578
7 (1984); Karlsen, 15 Cal. App. 3d at 117-18.
8

As discussed above, Plaintiffs fail to adequately allege an ability to tender. See Iqbal,

9 129 S. Ct. at 1950. The Motions to Dismiss are granted as to the fourteenth cause of action for
10 quiet title.
11
12

12.

Injunctive Relief and Rescission

The moving Defendants move for the dismissal of the fifteenth cause of action for

13 injunctive relief and the sixteenth cause of action for rescission on the basis that they are
14 remedies and not a causes of action.
15

Under California law, injunctive relief “is a remedy and not, in itself, a cause of action,

16 and a cause of action must exist before injunctive relief may be granted.” Shell Oil Co. v.
17 Richter, 52 Cal. App. 2d 164, 168 (1942) (citation omitted); see also Vissuet v. Indymac Mortg.
18 Servs., No. 09cv2321, 2010 WL 1031013, at *7 (S.D. Cal. Mar. 19, 2010) (same); Jozinovich
19 v. JP Morgan Chase Bank, N.A., No. C-09-3326, 2010 WL 234895, at *7 (N.D. Cal. Jan. 14,
20 2010) (“Rescission is not an independent cause of action, but rather a remedy.”).
21

The Motions to Dismiss are granted as to the fifteenth cause of action for injunctive

22 relief and the sixteenth cause of action for rescission.
23
24

13.

Accounting

The moving Defendants move for the dismissal of the seventeenth cause of action for

25 an accounting on the basis that it is not adequately pled because “Plaintiffs do not allege that
26 there is a balance due to Plaintiffs on the underlying loan.” (ECF No. 100 at 30).
27

Under California law, an accounting is generally a remedy under equity. See Batt v.

28 City & County of San Francisco, 155 Cal. App. 4th 65, 82 (2007). In certain cases, an
- 21 -

10cv1546-WQH-WMc

1 accounting can be a cause of action. “A cause of action for an accounting requires a showing
2 that a relationship exists between the plaintiff and defendant that requires an accounting, and
3 that some balance is due the plaintiff that can only be ascertained by an accounting.” Teselle
4 v. McLoughlin, 173 Cal. App. 4th 156, 179 (2009) (citations omitted).
5

Plaintiffs fails to allege that “some balance is due the plaintiff.” Id. Accordingly,

6 Plaintiffs have failed to allege an essential element of a cause of action for an accounting. The
7 Motions to Dismiss are granted as to the seventeenth cause of action for an accounting.
8
9

14.

California Business and Professions Code § 17200

The ninth cause of action in the First Amended Complaint alleges violation of

10 California Business and Professions Code § 17200.
11

The moving Defendants first move to dismiss this cause of action on the basis that

12 “unfair practices under Section 17200 applies to ongoing conduct, and relief is not available
13 to remedy past conduct. Because Plaintiffs’ allegations with this cause of action refer to past
14 conduct by parties other than Defendants, they do not meet the requirement set forth in Section
15 17200.” (ECF No. 100 at 23 (citing Mangini v. Aerojet-General Corp., 230 Cal. App. 3d
16 1125, 1155-56 (1991)). This contention relies on a prior version of the unfair competition
17 statute. In 1992, the California legislature amended § 17200 to expand the definition of unfair
18 competition to include “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus.
19 & Prof. Code § 17200 (emphasis added). The California Supreme Court has interpreted the
20 1992 amendment as overruling prior court precedent that required an ongoing pattern of
21 conduct. See Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal. 4th 553, 570 (1998).
22 “[U]nder the current version of the statute, even a single act may create liability.” United
23 Farm Workers of Am., AFL-CIO v. Dutra Farms, 83 Cal. App. 4th 1146, 1163 (2000); see also
24 CRST Van Expedited, Inc. v. Werner Enter., Inc., 479 F.3d 1099, 1107 (2007) (“A business act
25 or practice need not be an ongoing pattern of conduct.”).
26

The moving Defendants also contend that “this cause of action does not indicate that

27 Plaintiffs have actually been damaged by the alleged conduct.” (ECF No. 100 at 23-24
28 (emphasis in original)). The Court finds that the First Amended Complaint adequately alleges
- 22 -

10cv1546-WQH-WMc

1 that Plaintiffs have been damaged by the alleged conduct of Defendants. (ECF No. 90 at 162 17, 36).
3

California Business and Professions Code § 17200 “borrows violations of other laws

4 and treats” them as unlawful business practices “independently actionable under section
5 17200.” Farmers Ins. Exch. v. Superior Court, 2 Cal. 4th 377, 383 (1992) (quotation omitted).
6 “Violation of almost any federal, state, or local law may serve as the basis for a[n] [unfair
7 competition] claim.” Plascencia v. Lending 1st Mortg., 583 F. Supp. 2d 1090, 1098 (N.D. Cal.
8 2008) (citing Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-39 (1994)). The Court
9 has found that the Motion to Dismiss should be denied as to the intentional misrepresentation,
10 negligent misrepresentation, and promissory estoppel claims against Select Portfolio Servicing.
11 To the extent Plaintiffs’ § 17200 claim is predicated on the intentional misrepresentation,
12 negligent misrepresentation, and promissory estoppel claims against Select Portfolio Servicing,
13 the Motion to Dismiss Plaintiffs’ § 17200 claim against Select Portfolio Servicing is denied.
14 Otherwise, the Motions to Dismiss are granted as to Plaintiffs’ § 17200 claim.
15 III.

Conclusion

16

IT IS HEREBY ORDERED that the Motion to Dismiss filed by Lender Processing

17 Services, Inc. (ECF No. 97) is GRANTED, and the Motion to Dismiss filed by U.S. Bank
18 National Association, Credit Suisse Financial Corporation, Select Portfolio Servicing, and
19 Mortgage Electronic Registration Systems (ECF No. 100) is GRANTED in part and DENIED
20 in part, as discussed above. All claims against Lender Processing Services, Inc., U.S. Bank
21 National Association, Credit Suisse Financial Corporation, and Mortgage Electronic
22 Registration Systems are dismissed without prejudice. All claims against Select Portfolio
23 Servicing are dismissed without prejudice, except the intentional misrepresentation, negligent
24 misrepresentation, promissory estoppel, and § 17200 claims. The moving Defendants’ request
25 for an award of attorneys’ fees and costs is denied.
26 DATED: September 13, 2011
27
28

WILLIAM Q. HAYES
United States District Judge
- 23 -

10cv1546-WQH-WMc