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Pelayo v. Home Capital Funding

May 22, 2009

PETRA PELAYO, PLAINTIFF,
v.
HOME CAPITAL FUNDING; YOUR MONEY STORE; EMC MORTGAGE CORPORATION; 2721 WARDLOW AVENUE, SAN DIEGO 92154 AND ALL OTHER CLAIMANTS OF WHATSOEVER KIND AND CHARACTER AGAINST REAL PROPERTY COMMONLY KNOWN; AND DOES 1 THROUGH 100 INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER: (1) GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS THE COMPLAINT [Doc. No. 8]; (2) GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO STRIKE [Doc. No. 9.]; and (3) GRANTING PLAINTIFF LEAVE TO AMEND

Presently before the Court are Defendant EMC Mortgage Corporations' ("Defendant" or "EMC") motions to dismiss the complaint for failure to state a claim and to strike "improper prayers for damages" in the complaint. (Doc. Nos. 8 and 9.) For the reasons stated herein, the Court grants both motions in part, denies both motions in part, and grants Plaintiff leave to amend her complaint.

BACKGROUND

I. The Parties Plaintiff Petra Pelayo ("Plaintiff") was the owner of the Property located at 2721 Wardlow Avenue, in San Diego, California ("Property"). (Compl., ¶ 1.) Defendant Home Capital Funding ("Home Capital") originated the subject loan ("loan") to Plaintiff. (Id., ¶ 2.) Your Money Store was the broker for the loan, and EMC was the loan servicer for Home Capital. (Id., ¶ 3-4.)

II. Factual and Procedural Background

On October 11, 2006, Plaintiff obtained a loan of $424,000 from Home Capital secured by a deed of trust against the Property. Plaintiff alleges the negotiations and transactions in connection with the mortgage were conducted primarily in Spanish, yet all loan documents were written in English. (Compl. ¶¶ 37-37.) The deed of trust identifies First American Title Company as the trustee, Home Capital as the lender and Mortgage Electronic Registration Systems Inc. ("MERS"), as a nominee for Home Capital and beneficiary under the deed of trust. Aztec Foreclosure Corporation ("Aztec"), a non-party to this action, issued a Notice of Default and Election to Sell Under Deed of Trust that was recorded on June 26, 2008. In a Substitution of Trustee recorded on August 19, 2008, MERS substituted Aztec as the new trustee under the deed. Aztec issued and recorded a Notice of Trustee's Sale of the Property on October 14, 2008.

Plaintiff brought the instant complaint on October 31, 2008. (Doc. No. 1.) EMC filed its motion to dismiss the complaint (Doc. No. 8) and its motion to strike "improper prayers for damages" from the complaint (Doc. No. 9) on December 31, 2009. Plaintiff has filed oppositions to both motions, and EMC has filed reply briefs for both motions. The Court finds the motions suitable for disposition without oral argument pursuant to Local Civil Rule 7.1(d)(1).

DISCUSSION

I. EMC'S Motion to Dismiss the Complaint

Plaintiff's Complaint sets forth six causes of action against EMC: (1) violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605; (2) violation of the Truth in Lending Act ("TILA,") 15 U.S.C. § 1601 et seq.; (3) violation of Cal. Civ. Code § 1632 et seq.; (4) negligent misrepresentation; (5) rescission under TILA; and (6) unjust enrichment. EMC moves to dismiss the Complaint for failure to state a claim upon which relief may be granted under Fed. R. Civ. P. 12(b)(6).

A. Request for Judicial Notice

EMC has requested that the Court take judicial notice of several documents in support of its motion to dismiss. In ruling on a motion to dismiss for failure to state a claim, "a court may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). Accordingly, a court may consider matters of public record on a motion to dismiss, and in doing so "does not convert a Rule 12(b)(6) motion to one for summary judgment." Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir. Cal. 1986), abrogated on other grounds by Astoria Federal Savings and Loan Ass'n v. Solimino, 501 U.S. 104, 111 (1991).

EMC asks the Court to take judicial notice of several documents recorded in the San Diego County Recorder's Office: (1) a deed of trust in favor of MERS recorded on October 20, 2006; (2) a Notice of Default and Election to Sell Under Deed of Trust by Aztec, recorded June 26, 2008; (3) a Substitution of Trustee substituting Aztec for original trustee First American Title Company, recorded October 14, 2008; and (4) a Notice of Trustee's Sale recorded October 14, 2008. The Court finds these documents appropriate for judicial notice under Fed. R. Evid. 201(b)(2).

B. Legal Standard

A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a) (2009). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pled in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). To a void a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). However, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. at 555 (citation omitted). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Id. (citation omitted). In spite of the deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526, (1983).

C. Violation of RESPA

Plaintiff first alleges EMC violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605, by failing to respond to her Qualified Written Requests ("QWRs") regarding the loan, and by failing to provide certain disclosures*fn1 at the loan's origination. (Compl., ¶¶ 26-30.) Plaintiff fails to identify the subsection(s) of § 2605 EMC allegedly violated.

Plaintiff's allegations with respect to EMC's "fail[ure] to adequately respond to [her QWRs]" appear to invoke 12 U.S.C. § 2605(e). RESPA defines a QWR as a: a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that-- [¶] (i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and [¶] (ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

12 U.S.C. § 2605(e)(1)(B) (2009). When a loan servicer receives a QWR, it must either correct the borrower's account or, after conducting an investigation, provide the borrower with a written explanation of: (1) why the servicer believes the account is correct; or (2) why the requested information is unavailable. See 12 U.S.C. § 2605(e)(2).

Plaintiff alleges "Defendants YMS, HOME CAPITAL, EMC, and other defendants failed to adequately respond to [her QWRs] in violation of RESPA." (Compl., ¶ 28.) EMC argues Plaintiff has not alleged: (1) EMC mailed a written response acknowledging receipt of the written request; (2) she sent a QWR to EMC in particular; or (3) why the response to her QWR was "inadequate."*fn2 ...


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