Conley et al v. The Bank of New York Mellon Corporation et al
Filing
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ORDER: (1) GRANTING DEFENDANTS' 7 MOTION TO DISMISS; (2) GRANTING LEAVE TO AMEND; AND (3) VACATING THE HEARING: "the Court GRANTS Defendants' Motion to Dismiss (Doc. # 7), and GRANTS Plaintiffs leave to amend. The hearing set for this matter is hereby VACATED. IT IS SO ORDERED." Signed by District JUDGE DAVID ALAN EZRA on February 7, 2012. (bbb, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
MARK J. CONLEY and SUSAN B. )
CONLEY,
)
)
Plaintiffs,
)
)
vs.
)
)
THE BANK OF NEW YORK
)
MELLON CORPORATION; BANK )
OF AMERICA, N.A.; JOHN DOES )
1–10; JANE DOES 1–10; DOE
)
PARTNERSHIPS 1–10; DOE
)
CORPORATIONS 1–10; and DOE )
ENTITIES 1–10,
)
)
Defendants.
)
_____________________________ )
CV. NO. 11-00582 DAE-BMK
ORDER: (1) GRANTING DEFENDANTS’ MOTION TO DISMISS; (2)
GRANTING LEAVE TO AMEND; AND (3) VACATING THE HEARING
Pursuant to Local Rule 7.2(d), the Court finds this matter suitable for
disposition without a hearing. After reviewing Defendants’ Motion and the
supporting and opposing memoranda, the Court GRANTS Defendants’ Motion to
Dismiss with leave to amend (Doc. # 7).
BACKGROUND
On September 23, 2011, Plaintiffs Mark J. Conley and Susan B.
Conley (collectively, “Plaintiffs”) filed a Complaint against Defendants The Bank
of New York Mellon Corporation (“BONY”) and Bank of America N.A.
(“BANA”) (collectively, “Defendants”), as well as John Does 1–10, Jane Does
1–10, Doe Partnerships 1–10, Doe Corporations 1–10, and Doe Entities 1–10.
(“Compl.,” Doc # 1.) The Complaint alleges the following claims: Count I –
Violation of the Truth in Lending Act (Compl. ¶¶ 14–22); Count II –
Unconscionability (id. ¶¶ 23–26).
According to the Complaint, Plaintiffs obtained two loans from
Countrywide Home Loans Inc. that were secured by real property located at 72
Kahana Ridge Dr., Lahaina, Hawaii 96761. (Id. ¶ 8.) The mortgages were
recorded on January 14, 2005. (Id. ¶ 15.) Plaintiffs assert that BANA is the
servicer of the first and second mortgages. (Id. ¶ 9.) According to the Complaint,
BONY became the new lender for the first mortgage “between the establishment
with Countrywide Home Loans, Inc. in 2005 and September 8, 2010.” (Id. ¶ 16.)
BONY became the new lender for the second mortgage “between the establishment
with Countrywide Home Loans, Inc. in 2005 and September 23, 2010.” (Id. ¶ 17.)
The Complaint alleges that Plaintiffs were never notified of BONY’s assignment
of the mortgages. (Id. ¶ 18.) The Complaint also alleges that BANA would
“preempt [Plaintiffs’] right to buy property insurance for the Property by setting up
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an escrow account and charging far in excess over the market value for said
insurance.” (Id. ¶ 24.)
On November 8, 2011, Defendants filed the instant Motion to
Dismiss. (Doc. # 7.) On January 19, 2012, Plaintiffs filed a Memorandum in
Opposition to Defendants’ Motion to Dismiss (“Opposition”). (“Opp’n,” Doc.
# 14.) On January 27, 2012, Defendants filed a Reply. (“Reply,” Doc. # 15.)
STANDARD OF REVIEW
I.
Federal Rule of Civil Procedure 12(b)(6)
Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure
(“Rule”), a motion to dismiss will be granted where the plaintiff fails to state a
claim upon which relief can be granted. Review is limited to the contents of the
complaint and matters properly subject to judicial notice. See Colony Cove
Properties, LLC v. City of Carson, 640 F.3d 948, 955 (9th Cir. 2011). A complaint
may be dismissed as a matter of law for one of two reasons: “(1) lack of a
cognizable legal theory, or (2) insufficient facts under a cognizable legal claim.”
Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984)
(citation omitted). Allegations of fact in the complaint must be taken as true and
construed in the light most favorable to the plaintiff. See Livid Holdings Ltd. v.
Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).
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A complaint need not include detailed facts to survive a Rule 12(b)(6)
motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555–56 (2007).
In providing grounds for relief, however, a plaintiff must do more than recite the
formulaic elements of a cause of action. See id. at 556–57; see also McGlinchy v.
Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988) ( “[C]onclusory allegations
without more are insufficient to defeat a motion to dismiss for failure to state a
claim.”) (citation omitted). “The tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions,” and
courts “are not bound to accept as true a legal conclusion couched as a factual
allegation.” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations
and citations omitted). Thus, “bare assertions amounting to nothing more than a
formulaic recitation of the elements” of a claim “are not entitled to an assumption
of truth.” Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[T]he
non-conclusory ‘factual content,’ and reasonable inferences from that content,
must be plausibly suggestive of a claim entitling the plaintiff to relief.”) (internal
quotations and citations omitted).
A court looks at whether the facts in the complaint sufficiently state a
“plausible” ground for relief. See Twombly, 550 U.S. at 570. A plaintiff must
include enough facts to raise a reasonable expectation that discovery will reveal
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evidence and may not just provide a speculation of a right to relief. Id. at 586.
When a complaint fails to adequately state a claim, such deficiency should be
“exposed at the point of minimum expenditure of time and money by the parties
and the court.” Id. at 558 (citation omitted). If a court dismisses the complaint or
portions thereof, it must consider whether to grant leave to amend. Lopez v.
Smith, 203 F .3d 1122, 1130 (9th Cir. 2000) (finding that leave to amend should be
granted “if it appears at all possible that the plaintiff can correct the defect”)
(internal quotations and citations omitted).
II.
Federal Rule of Civil Procedure 8
Federal Rule of Civil Procedure 8 mandates that a complaint include a
“short and plain statement of the claim,” Fed. R. Civ. P. 8(a)(2), and that each
allegation “be simple, concise, and direct.” Fed. R. Civ. P. 8(d)(1). A complaint
that is so confusing that its “‘true substance, if any, is well disguised’” may be
dismissed sua sponte for failure to satisfy Rule 8. Hearns v. San Bernardino Police
Dep’t, 530 F.3d 1124, 1131 (9th Cir. 2008) (quoting Gillibeau v. City of
Richmond, 417 F.2d 426, 431 (9th Cir. 1969); see also McHenry v. Renne, 84 F.3d
1172, 1180 (9th Cir. 1996) ( “Something labeled a complaint but written ..., prolix
in evidentiary detail, yet without simplicity, conciseness and clarity as to whom
plaintiffs are suing for what wrongs, fails to perform the essential functions of a
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complaint.”); Nevijel v. N. Coast Life Ins. Co., 651 F.2d 671, 673 (9th Cir. 1981)
(“A complaint which fails to comply with [Rule 8] may be dismissed with
prejudice[.]”).
Put slightly differently, a complaint may be dismissed for failure to
comply with Rule 8 where it fails to provide the defendants fair notice of the
wrongs they have allegedly committed. See McHenry, 84 F.3d at 1178–80
(affirming dismissal of complaint where “one cannot determine from the complaint
who is being sued, for what relief, and on what theory, with enough detail to guide
discovery”); cf. Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1105 n.
4 (9th Cir. 2008) (finding dismissal under Rule 8 was in error where “the
complaint provide[d] fair notice of the wrongs allegedly committed by defendants
and [did] not qualify as overly verbose, confusing, or rambling”). Rule 8 requires
more than “the-defendant-unlawfully-harmed-me accusation[s].” Ashcroft v. Iqbal,
129 S. Ct. 1937, 1949 (2009) (internal quotations omitted). Further, “[a] pleading
that offers labels and conclusions or a formulaic recitation of the elements of a
cause of action will not do.” Id. (internal quotations omitted). “Nor does a
complaint suffice if it tenders naked assertions devoid of further factual
enhancement.” Id. (internal quotations omitted). “The propriety of
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dismissal for failure to comply with Rule 8 does not depend on whether the
complaint is wholly without merit.” McHenry, 84 F.3d at 1179.
The court may “begin by identifying pleadings that, because they are
no more than conclusions, are not entitled to the assumption of truth.” Iqbal, 129 S.
Ct. at 1950. Legal conclusions must be supported by factual allegations. Id.
“When there are well-pleaded factual allegations, a court should assume their
veracity and then determine whether they plausibly give rise to an entitlement to
relief.” Id.
DISCUSSION
I.
Count I: Truth in Lending Act
Count I of the Complaint alleges that Plaintiffs were not notified of
BONY’s assignment of their first and second mortgages. Specifically, the
Complaint alleges that BONY violated Regulation Z Section 131(g) of the Truth in
Lending Act (“TILA”) by failing to provide Plaintiffs with their identity as the new
creditor, the date of transfer, the contact information of their agent, and where the
transfer document was recorded. (Compl. ¶¶ 18–20.) Plaintiffs assert that BONY
is therefore liable for “any actual damage sustained by [Plaintiffs] as a result of the
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failure” to disclose, which includes “attorneys fees and costs, all punitive damages
and consequential damages” totaling more than $75,000.1 (Id. ¶¶ 21–22.)
Section 131(g), codified at 15 U.S.C. § 1641(g), states that if a
“mortgage loan is sold or otherwise transferred or assigned to a third party, the
creditor that is the new owner or assignee of the debt shall notify the borrower in
writing of such transfer” within thirty days. 15 U.S.C. § 1641(g). Failure to
comply with this provision can result in civil liability for “any actual damage
sustained by such person as a result of the failure[.]” 15 U.S.C. § 1640(a)(1). “[I]n
the case of an individual action,” damages are limited to “twice the amount of any
finance charge in connection with the transaction” and, in cases involving real
property, “not less than $400 or greater than $4,000.” Id. § 1640(a)(2)(A)(i), (iv).
In order to state a TILA claim for actual damages, a plaintiff must demonstrate
detrimental reliance upon an inaccurate or incomplete disclosure. Gold Country
Lenders v. Smith, 289 F.3d 1155, 1157 (9th Cir. 2002); see also In re Ferrell, 358
B.R. 777, 790 (9th Cir. BAP 2006) (“The Ninth circuit has adopted the majority
rule that ‘detrimental reliance’ must be demonstrated in order to recover actual
damages for a TILA disclosure violation.”).
1
Plaintiffs state in their Opposition that they do not allege a TILA
rescission claim. (Opp’n at 6.)
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Here, Plaintiffs have not alleged any facts demonstrating or
supporting the inference that they relied to their detriment on the lack of TILA
disclosures nor have they alleged any actual damages or finance charges related to
BONY’s alleged TILA violation.2 Thus, their TILA claim for actual damages fails.
See Borowiec v. Deutsche Bank Nat. Trust Co., 2011 WL 2940489, at *3 (D. Haw.
July 19, 2011) (“Plaintiff here has not demonstrated any actual damages related to
Deutsche’s failure to provide the notice of assignment required under Section
1641(g), thus Plaintiff fails to state a claim under TILA.”); Byrd v. Guild Mortg.
Co., 2011 WL 6736049, at *5 (S.D. Cal. Dec. 20, 2011) (same).
Accordingly, the Court GRANTS Defendants’ Motion as to Count I.
2
Plaintiffs appear to attempt to amend their Complaint by stating in their
Opposition that if they “had not detrimentally relied on this lack of disclosure, they
would have secured a better interest rate elsewhere or foregone the loan
completely.” However, Plaintiffs may not amend their Complaint in this fashion.
See Schneider v. Cal. Dep’t of Corr., 151 F.3d 1194, 1197 n. 1 (9th Cir. 1998) (“In
determining the propriety of a Rule 12(b)(6) dismissal, a court may not look
beyond the complaint to a plaintiff’s moving papers . . . .”) (citations omitted);
Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994) (finding that
for purposes of a motion to dismiss, the court’s review is limited to the contents of
the complaint). Moreover, such an allegation is vague as it does not indicate why
notice of assignment would trigger a need or desire to obtain a better interest rate;
it is also unclear how notice would prompt Plaintiffs to “forego[ ] the loan.”
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II.
Count II: Unconscionability
In Count II, Plaintiffs allege that BANA “would preempt [Plaintiffs’]
right to buy property insurance for the Property by setting up an escrow account
and charging far in excess over the market value for said insurance.” (Compl.
¶ 24.) Plaintiffs further allege that “Section 5 of the Uniform Covenants of the 1st
Mortgage and Section 4 of the Uniform Covenants of the 2nd Mortgage are
unconscionable by any standard and certainly shocks the conscious [sic] of any
reasonable person.”3 (Id. ¶ 25.) Plaintiffs seek a “refund and credit of this
unconscionable rate of insurance” along with punitive and consequential damages.
(Id. ¶ 26.)
“Unconscionability” is generally a defense to the enforcement of a
contract and is not a proper claim for affirmative relief. See, e.g., Gaitan v. Mortg.
3
Section 5 of the first mortgage and section 4 of the second mortgage
provide, inter alia, that the borrower shall insure the property and that if borrower
fails to maintain property insurance coverage, the lender may obtain insurance
coverage at lender’s option. (Doc. # 1 Ex. 1 & Ex. 2.) Plaintiffs attached as
exhibits to their Complaint copies of the subject mortgages. “When ruling on a
motion to dismiss, [courts] may ‘generally consider [ ] allegations contained in the
pleadings, exhibits attached to the complaint, and matters properly subject to
judicial notice.’” Colony Cove Properties, LLC v. City of Carson, 640 F.3d 948,
955 (9th Cir. 2011) (quoting Outdoor Media Grp., Inc. v. City of Beaumont, 506
F.3d 895, 899–900 (9th Cir. 2007)). Accordingly, it is appropriate for the Court to
consider these documents when ruling on the Motion to Dismiss.
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Elec. Registration Sys., 2009 WL 3244729, at *13 (C.D. Cal. Oct. 5, 2009)
(“Unconscionability may be raised as a defense in a contract claim, or as a legal
argument in support of some other claim, but it does not constitute a claim on its
own.”). To the extent that unconscionability can be affirmatively raised as part of
an independent cause of action, such a claim is asserted to prevent the enforcement
of a contract where “the clauses are so one-sided as to be unconscionable under the
circumstances existing at the time of the making of the contract . . . .” Lewis v.
Lewis, 748 P.2d 1362, 1366 (Haw. 1988) (citations omitted).
The Court finds that Plaintiffs fail to state a claim. First, Plaintiffs’
claim is insufficiently pled. Plaintiffs allege that BANA “would preempt”
Plaintiffs’ ability to buy property insurance4 but fail to state whether Plaintiffs
attempted to buy their own insurance, whether Defendants actually procured
insurance on the property, or what the “unconscionable rate of insurance” and
market rate for such insurance was. Plaintiffs’ allegation that the provisions of the
4
The Court notes that to the extent that Plaintiffs are alleging that
Defendants’ actions are unconscionable, courts in this district have rejected
unconscionability claims that challenge only conduct and not any specific
contractual term. See, e.g., Marzan v. Bank of Am., 779 F. Supp. 2d 1140,
1154–55 (D. Haw. 2011); Enriquez v. Countrywide Home Loans, FSB, —F. Supp.
2d. —, 2011 WL 3861402, at *23 (D. Haw. Aug. 31, 2011).
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mortgage contracts are unconscionable is also a bare conclusory assertion;
Plaintiffs fail to state how or why the provisions are so one-sided as to be
unconscionable.
Second, to the extent that Plaintiffs allege that the lender’s option to
obtain property insurance if Plaintiffs failed to do so is unconscionable regardless
of whether the lender attempted to insure the property, such a theory fails. Section
5 of the first mortgage and Section 4 of the second mortgage places responsibility
on Plaintiffs, as borrower, to secure property insurance and grants them the
opportunity to do so. Therefore, the lender’s option to secure insurance would
never arise if Plaintiffs insured the property.5
Accordingly, the Court GRANTS Defendants’ Motion as to Count II.
III.
Leave to Amend
Pursuant to Rule 15(a)(2), courts should “freely give leave [to amend]
when justice so requires.” Further, “requests for leave should be granted with
extreme liberality.” Moss v. U.S. Secret Service, 572 F.3d 962, 792 (9th Cir.
5
Because the Court finds that Plaintiffs fail to state a viable
unconscionability claim, the Court need not reach Defendants’ argument that
Defendants cannot be liable because they were not a party to the original
mortgages.
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2009). “Dismissal without leave to amend is improper unless it is clear . . . that the
complaint could not be saved by an amendment.” Id. “However, ‘liberality in
granting leave to amend is subject to several limitations.’” Cafasso, U.S. ex rel. v.
Gen. Dynamics C4 Sys., 637 F.3d 1047, 1058 (9th Cir. 2011) (quoting Ascon
Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989)). “Those
limitations include undue prejudice to the opposing party, bad faith by the movant,
futility, and undue delay.” Id. (citing Ascon Props., 866 F.2d at 1160). “Further,
‘[t]he district court's discretion to deny leave to amend is particularly broad where
plaintiff has previously amended the complaint.’” Id. (quoting Ascon Props., 866
F.2d at 1160).
Plaintiffs’ Complaint is DISMISSED WITHOUT PREJUDICE with
leave to amend. Plaintiffs are granted leave to amend no later than thirty (30) days
from the filing of this Order. Failure to do so and to cure the pleading deficiencies
may result in dismissal of this action with prejudice. Plaintiffs are advised that the
amended complaint must clearly identify the specific causes of action alleged and
the factual allegations upon which those claims are based.
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CONCLUSION
For these reasons, the Court GRANTS Defendants’ Motion to
Dismiss (Doc. # 7), and GRANTS Plaintiffs leave to amend. The hearing set for
this matter is hereby VACATED.
IT IS SO ORDERED.
Dated: Honolulu, Hawaii, February 7, 2012.
_____________________________
David Alan Ezra
United States District Judge
Conley v. The Bank of New York Mellon Corp. et al., Cv. No. 11-00582 DAEBMK; ORDER: (1) GRANTING DEFENDANTS’ MOTION TO DISMISS; (2)
GRANTING LEAVE TO AMEND; AND (3) VACATING THE HEARING
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