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Watts v. Countrywide Home Loans


March 9, 2009


The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge


On October 9, 2008, Plaintiff Eva L. Watts ("Plaintiff") originally filed a complaint in the Superior Court of the State of California, County of San Diego, raising claims arising out of a mortgage loan transaction. (Doc. No. 1, Exh. A, "Complaint.") The proceeds of the loan were used to purchase Plaintiff's principal dwelling (the "Property"), which is now subject to non-judicial foreclosure . Following service of the Summons and Complaint, Defendant Countrywide Home Loans, Inc. ("Countrywide") timely removed the action to federal court on January 12, 2009. (Doc. No. 1.) On January 20, 2009, Defendants Countrywide and Mortgage Electronic Registration Systems, Inc. ("MERS") submitted the pending motion to dismiss under Fed.R.Civ.P. ("Rule") 12(b)(6). ("Mot.," Doc. No. 5.) Defendant Saxon Mortgage Services, Inc. ("Saxon" and collectively with Countrywide and MERS, "Defendants") joined the motion by notice dated January 30, 2009.*fn1 (Doc. No. 7.) It does not appear Defendant Decision One Mortgage Company ("Decision One") has been served in this action.

Under the Civil Local Rules, Plaintiff's response to the motion was due on or before February 6, 2009. See Civ.L.R. 7.1(e)(2). To date, Plaintiff has neither filed an opposition nor sought additional time to do so. On February 11, 2009, Defendants filed a reply requesting the motion be granted based on Plaintiff's non-opposition. (Doc. No. 9.) When an opposing party does not file papers in the manner required by Civ.L.R. 7.1(d)(2), the court may deem the failure to "constitute a consent to the granting of a motion or other request for ruling by the court." Civ.L.R. 7.1(f)(3)(c). Notwithstanding Plaintiff's failure to respond, the court reviews the motion on the merits to ensure dismissal is appropriate. Pursuant to Civ.L.R. 7.1(d), the matter was taken under submission by the court on February 20, 2009.


According to the Complaint, Decision One offered Plaintiff a home mortgage loan to finance the purchase of the Property and the loan closed on August 7, 2006. (Compl. at ¶¶ 12, 26.) Plaintiff later defaulted on the loan, leading to entry of a Notice of Default on September 2, 2008. (Compl. at ¶ 35.) The present status of any pending or completed sale is unclear from the parties' submissions. Plaintiff assert federal causes of action under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. § 1961 et seq. ("RICO"), the Truth in Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"), and the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. ("RESPA"). Plaintiff also raises state law claims to quiet title and for fraud, negligent infliction of emotional distress, negligence, cancellation based on impossibility, and slander of title. Plaintiff seeks injunctive relief (labeled as a "first cause of action"), damages, attorneys' fees and costs, declaration that the loan and Deed of Trust are null and void, and rescission.

I. Legal Standards

A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the pleadings. De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). In evaluating the motion, the court must construe the pleadings in the light most favorable to the plaintiff, accepting as true all material allegations in the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). While Rule 12(b)(6) dismissal is proper only in "extraordinary" cases, the complaint's "factual allegations must be enough to raise a right to relief above the speculative level...." U.S. v. City of Redwood, 640 F.2d 963, 966 (9th Cir. 1981); Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007) (allegations must provide "plausible grounds to infer" that plaintiff is entitled to relief). The court should grant 12(b)(6) relief only if the complaint lacks either a "cognizable legal theory" or facts sufficient to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

Where a plaintiff sues multiple defendants and sets forth multiple causes of action, he "must allege the basis of his claim against each defendant to satisfy Federal Rule of Civil Procedure 8(a)(2), which requires a short and plain statement of the claim to put defendants on sufficient notice of the allegations against them." Gauvin v. Trombatore, 682 F.Supp. 1067, 1071 (N.D.Cal. 1988). Even absent other pleading deficiencies, such "confusion of which claims apply to which defendants would require that the complaint be dismissed with leave to file an amended complaint." Gen-Probe, Inc. v. Amoco Corp., 926 F.Supp. 948, 961 (S.D.Cal. 1996)(citing Gauvin, 682 F.Supp. at 1071.) "Specific identification of the parties to the activities alleged is enable the defendant[s] to plead intelligently." Van Dyke Ford, Inc. v. Ford Motor Co., 399 F.Supp. 277, 284 (E.D.Wis. 1975).

II. Analysis

A. Failure of the Pleadings to Allege Facts Sufficient to Survive a Rule 12(b)(6) Motion to Dismiss

As a first consideration, as Defendants note, the Complaint relates almost no facts demonstrating any wrongs by particular defendants, but rather ascribes nearly all allegations collectively to "Defendants." Outside the section identifying the parties, Countrywide is mentioned only as assignee of a "beneficial interest" in the loan and having "approved loans with higher and higher debt-to-income...ratios" to "expand market share." (Compl. at ¶¶ 24, 35.) MERS is mentioned only once, as "the current but unascertained beneficiary of the Deed of Trust." (Compl. at ¶ 95.) These averments are insufficient to state a claim on Plaintiff's behalf. Further, Plaintiff has not specified which claims are brought against which defendants for what conduct. Rather, Plaintiff simply asserts all defendants are acting in concert and therefore alleges all claims indiscriminately. This "shotgun" approach does not meet the Rule 8 pleading standard. While this failing alone warrants dismissal of the Complaint, the motion's substantive arguments are addressed in the following sections.

B. RICO and Fraud

Countrywide and MERS argue Plaintiff's fraud and RICO causes of action must be dismissed because they have not been pled with particularity with respect to any defendants, as required by Rule 9(b). (Mot. at 7-10.) The court agrees.

"Rule 9(b)'s particularity requirement applies to state-law causes of action." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). On a claim for fraud, then, a "pleading is sufficient under rule 9(b) if it identifies the circumstances constituting fraud so that a defendant can prepare an adequate answer from the allegations." Moore v. Kayport Package Express, Inc., 885 F.2d 531, 540 (9th Cir. 1989)(citations omitted). "While statements of the time, place and nature of the alleged fraudulent activities are sufficient, mere conclusory allegations of fraud" are not. Id. Further, Rule 9(b) requires a plaintiff to attribute particular fraudulent statements or acts to individual defendants. Id. Here, Plaintiff has not identified any particular statements or misrepresentations, much less linked them to specific defendants.

A claim under RICO must also satisfy Rule 9(b)'s particularity requirements. In her RICO claim, brought under 18 U.S.C. § 1962(c), Plaintiff alleges Defendants were involved in "racketeering activity" by virtue of their allegedly collusive participation in indictable activities including mail fraud (18 U.S.C. § 1341), wire fraud (§ 1343), obstruction of justice (§ 1503), obstruction of criminal investigations (§ 1510), and obstruction of State or local law enforcement (§ 1511). See 18 U.S.C. § 1961(B). However, Plaintiff's Complaint is completely void of factual support for these wildly broad, conclusory, and largely irrelevant statements. "To state a claim under 18 U.S.C. § 1962(c), a plaintiff must allege '(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'" Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007)(quoting Sedima, S.P.R.L. v. Imprex Co., 473 U.S. 479, 496 (1985). Citation of random statutory language does not a viable claim make. Plaintiff's allegations do not state a claim for relief and do not meet the Rule 9(b) particularity standard.

Plaintiff's RICO and fraud causes of action are therefore dismissed without prejudice as to all defendants.


Plaintiff alleges Defendants failed to provide her with the required early Disclosure Statement under 12 C.F.R. § 226 ("Regulation Z"), and did not properly disclose material loan terms, including applicable finance charges, interest rate, and total payments as required by 15 U.S.C. § 1632. (Compl. at ¶¶ 74-75.) Plaintiff seeks rescission of the mortgage loan as well as damages and attorneys' fees. (Compl. at ¶ 78, p. 19.).

Plaintiff's request for damages relating to improper disclosures under TILA is subject to a one-year statute of limitations, typically running from the date of loan execution. See 15 U.S.C. §1640(e) (any claim under this provision must be made "within one year from the date of the occurrence of the violation."). Plaintiff alleges the loan closed on August 7, 2006. (Compl. at ¶ 12.) The instant suit was not filed until October 9, 2008, well over two years later. (Compl. Summons.)

The Ninth Circuit has held equitable tolling of civil damages claims brought under TILA may be appropriate "in certain circumstances," such as when a borrower might not have had a reasonable opportunity to discover the nondisclosures at the time of loan consummation. King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986). Courts then have discretion to "adjust the limitations period accordingly." Id. The applicability of equitable tolling often depends on matters outside the pleadings. Supermail Cargo, Inc. v. U.S., 68 F.3d 1204, 1206 (9th Cir. 1995) (citing Cervantes v. City of San Diego, 5 F.3d 1273, 1276 (9th Cir. 1993). Therefore, the determination "is not generally amenable to resolution on a Rule 12(b)(6) motion." Id. Here, however, not only has Plaintiff failed to state relevant facts to support a TILA claim, she has not demonstrated any entitlement to equitable tolling. For these reasons, Plaintiff's claim for damages under TILA is dismissed with prejudice as to all defendants.

Defendants argue Plaintiff's request for rescission under TILA, 15 U.S.C. § 1635, fails as a matter of law because, as an assignee, Countrywide could only be liable "if violations of TILA are apparent on the face of the loan documents." 15 U.S.C. § 1641; (Mot. at 12-13.) Plaintiff's purported right to rescission does flow as against any assignee. 15 U.S.C. § 1641(c) ("Any consumer who has the right to rescind a transaction under section 1635...may rescind the transaction as against any assignee of the obligation."). In addition, assessment of the facial sufficiency of the loan documents is a question of fact inappropriate for a Rule 12(b)(6) motion to dismiss, particularly where such documents are not properly before the court. This argument is moot, however, because Plaintiff's claim is fatally flawed. Under 15 U.S.C. § 1635(e),"residential mortgage transactions" are excluded from the three-year right of rescission. A "residential mortgage transaction" is defined by 15 U.S.C. § 1602(w) to include "a mortgage, deed of trust, ... or equivalent consensual security interest...created...against the consumer's dwelling to finance the acquisition...of such dwelling." Thus, while home equity loans and refinancing transactions would be amenable to rescission, Plaintiff's purchase money mortgage is not. Plaintiff's TILA rescission claim is therefore dismissed with prejudice as to all defendants.

In her RESPA claim, Plaintiff alleges Defendants violated section 8(a), 12 U.S.C. § 2607(a), by giving and accepting improper fees or kickbacks, by "driving up settlement costs, by failing to disclose business relationships between service providers, by failing to properly follow notice of transfer provisions, [and] by failing to properly inform Plaintiff about all closing costs." (Compl. at ¶ 84.) Although Countrywide and MERS protest the sufficiency of the allegations (Mot. at 13-14), Plaintiff's claim fails for a more basic reason -- she faces yet another procedural bar. Plaintiff's RESPA section 8 claim is precluded by the applicable one-year statute of limitations under 12 U.S.C. § 2614 and is hereby dismissed with prejudice as to all defendants.

D. Negligence and Negligent Infliction of Emotional Distress

"Negligent infliction of emotional distress is not an independent tort; it is the tort of negligence to which the traditional elements of duty, breach of duty, causation, and damages apply." Ess v. Eskaton Properties, Inc., 97 Cal.App.4th 120, 126 (2002)(citing Marlene F. v Affiliated Psychiatric Med. Clinic, Inc., 48 Cal.3d 583, 588 (1989)). For both causes of action, then, a plaintiff must allege a valid legal duty owed by the defendants. Here, Plaintiff argues Defendants owed her a "duty...of due care," and in particular, a "duty to exercise reasonable care and skill in performing their duties" for her benefit. (Compl. at ¶¶ 47, 52.) Generally, barring an assumption of duty or a special relationship, "financial institutions owe no duty of care to a borrower when the institution's involvement in the loan transaction does not exceed the scope of its conventional role as a mere lender of money." Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal.App.3d 1089, 1096 (1991). Although California law imposes a fiduciary duty on a mortgage broker for the benefit of the borrower, no such duty is imposed on a lender. UMET Trust v. Santa Monica Med. Inv. Co., 140 Cal.App.3d 864, 872-73 (1983); Price v. Wells Fargo Bank, 213 Cal.App.3d 465, 476 (1989)(citing Downey v. Humphreys, 102 Cal.App.2d 323, 332 (1951))("'A debt is not a trust and there is not a fiduciary relation between debtor and creditor as such.' The same principle should apply with even greater clarity to the relationship between a bank and its loan customers."). Plaintiff characterizes Countrywide as a "lender and/or loan servicer" and does not allege MERS acted as a mortgage broker. (Compl. at ¶¶ 3-4.) In fact, all defendants are collectively referred to as "Mortgage Lenders" throughout the Complaint. Plaintiff has not alleged any duty for Countrywide or MERS that has been imposed by law, assumed by the defendants, or created by a special relationship with Plaintiff. Thus, Plaintiff's claims for negligence and negligent infliction of emotional distress are dismissed without prejudice as to Countrywide and MERS only.

E. Quiet Title and Slander of Title

Plaintiff seeks to quiet title in the property as against each defendant, and argues "[t]he foreclosure of the Subject Property is wrongful and should be voided by virtue of Defendants' fraudulent conduct...and by reason of the defective Deeds of Trust." (Compl. at ¶ 91.) In order to adequately allege a cause of action to quiet title, a plaintiff's pleadings must include a description of "[t]he title of the plaintiff as to which a sought and the basis of the title..." and "[t]he adverse claims to the title of the plaintiff against which a determination is sought." Cal. Code Civ. Proc. § 761.020. A plaintiff is required to name the "specific adverse claims" that form the basis of the property dispute. See Cal. Code Civ. Proc. § 761.020, cmt. at ¶ 3. None of Plaintiff's allegations show any adverse claims; the recorded Notices do not affect Plaintiff's title, ownership, or possession in the Property. As discussed herein, Plaintiff has not adequately alleged any fraudulent conduct which might serve as a basis for the cause of action. Finally, in California, a quiet title pleading must be verified through a sworn statement; Plaintiff's Complaint is unverified. The cause of action to quiet title is therefore dismissed without prejudice as to all defendants.

In her "slander of title" claim, Plaintiff avers Defendants "wrongfully and without privilege" caused recordation of the Notice of Default, in violation of Cal. Civ. Code § 2924.*fn2 (Compl. at ¶¶ 95-98.) Slander of title is a "tortious injury to property resulting from unprivileged, false, malicious publication of disparaging statements regarding the title to property owned by plaintiff, to plaintiff's damage." Southcott v. Pioneer Title Co., 203 Cal.App.2d 673, 676. A disparaging statement is one intended to cast doubt the existence or extent of one's interest in the property. Glass v. Gulf Oil Corp., 12 Cal.App.3d 412, 423. As mentioned above, though, the recorded Notices make no claim to Plaintiffs' property nor cast any doubt to their ownership.

Whether MERS's actions are privileged is unclear. In Kachlon v. Markowitz, 168 Cal.App.4th 316, 333 (2008), the court held that "section 2924 deems the statutorily required mailing, publication, and and delivery of notices in non-judicial foreclosure, and the performance of non-judicial foreclosure procedures, to be privileged communications under the qualified, common-interest privilege of [Civ. Code] section 47, subdivision (c)(1)." Thus, if MERS were properly acting as the foreclosure trustee, or otherwise as an agent of the beneficiary, it could claim the privilege. However, Plaintiff suggests that MERS cannot because, as a suspended California corporation, "is not qualified to do business in California." (Compl. at ¶¶ 5.) MERS offers no rebuttal.

In the end, regardless of whether MERS's conduct was privileged, the recorded documents do not qualify as disparaging statements. Thus, Plaintiff's slander of title cause of action is dismissed with prejudice as to all defendants.

F. Cancellation of Deed of Trust Based on Fraud and Impossibility

Plaintiff offers that, because Defendants "fabricated and submitted falsified loan documents" and because Plaintiff "lacked ability to perform the loan," the loan contracts and Promissory Notes are null and void. (Compl. at ¶ 88.) Consequently, Plaintiff asks the court to cancel the Deeds of Trust. While fraudulent loan documents might provide grounds for loan cancellation, as stated above, Plaintiff's Complaint fails to meet the fraud pleading standards of Rule 9(b). Further, Plaintiff's inability to perform the obligations to which she agreed, without more, does not provide a basis for cancellation of the loan. Plaintiff's claim for cancellation is dismissed without prejudice as to all defendants.

G. Lis Pendens

While ignoring the pleading requirements for a quiet title request, Plaintiff did comply with Cal. Civ. Code § 761.010 by recording a lis pendens with the county. Defendants ask the court to expunge the lis pendens pursuant to Cal. Civ. Code §§ 405.31 and 405.32. A court "shall order the notice [of pendency] expunged if...the pleading on which the notice is based does not contain a real property claim." Cal. Civ. Code § 405.31. A "real property claim" is defined, inter alia, as a cause of action "which would, if meritorious, affect...title to, or the right to possession of, specific real property...." Cal. Civ. Code § 405.4. Since Plaintiff has alleged no viable claims, much less a "real property claim," the court grants Defendants' request to expunge the lis pendens.

H. Injunctive Relief

Finally, Plaintiff seeks injunctive relief to forestall any foreclosure sale but does not offer any particular supporting cause of action. A request for injunctive relief by itself does not state a cause of action and is properly brought before the court as a separate motion. Shamsian v. Atl. Richfield Co., 107 Cal.App.4th 967, 984-85 (2003). Even if the court were to construe this request as derivative of all other alleged causes of action, Plaintiff would still bear the burden of showing: (1) a combination of probable success and the possibility of irreparable harm, or (2) serious questions and the balance of hardship tips in her favor.Arcamuzi v. Continental Air Lines, Inc., 819 F.2d 935, 937 (9th Cir. 1987). Under either formulation, however, Plaintiff must demonstrate a "fair chance of success on the merits" and a "significant threat of irreparable injury." Id. As the discussion above outlines, Plaintiff has failed to demonstrate a likelihood of success on the merits and is not entitled to injunctive relief based on her pleadings.


For the reasons set forth above, the motion to dismiss (Doc. No. 5) is GRANTED. In particular, Plaintiff's fraud, RICO, cancellation, quiet title, and slander of title causes of action are hereby DISMISSED as to all defendants, without prejudice and with leave to amend. Plaintiff's causes of action for TILA and RESPA are hereby DISMISSED with prejudice as to all defendants. Plaintiff's causes of action for negligence and negligent infliction of emotional distress are hereby DISMISSED without prejudice as to Countrywide and MERS only. Further, the court ORDERS the lis pendens recorded by Plaintiff expunged from the title record of the Property identified in the Complaint as 688 Rue Avallon, Chula Vista, California, 93913.

In light of the disposition of Plaintiff's claims, Plaintiff is granted leave to amend. Plaintiff shall file and serve an amended complaint within 20 days of the filing of this Order.


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