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Lal v. American Home Mortgage Servicing

September 23, 2009

PARVEEN A. LAL AND JODI L. WRIGHT, PLAINTIFFS,
v.
AMERICAN HOME MORTGAGE SERVICING, INC., DEFENDANT.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Plaintiffs initiated the current action against American Home Mortgage Servicing, Inc. ("Defendant") alleging Defendant violated federal and state laws in the execution and servicing of a mortgage agreement. Currently before the Court is Defendant's Motion to Dismiss Plaintiffs' Complaint. Defendant's Motion is granted in part and denied in part.*fn1

BACKGROUND

On or around June 28, 2006, Plaintiffs entered into a mortgage for $821,750 with Paramount Equity Mortgage, Inc. Initially, principal was payable to Paramount. According to Defendant, Plaintiffs have since defaulted on the loan.

Plaintiffs believe that Defendant is a servicing agent for their existing mortgage, but also allege Defendant may be a "lender or have an interest in the subject loan." Compl., ¶ 36. Furthermore, Plaintiffs contend that Defendant, who is not in possession of the note, is actively concealing the identity of the true note holder.

On March 10, 2009, Plaintiffs, relying on the fact that they allegedly never received accurate Notices of Right to Cancel, sent a letter to Defendant asserting, inter alia, that if Defendants did not agree to various loan modifications, Plaintiffs intended to rescind their loan. Plaintiffs also requested that Defendant inform Plaintiffs of Defendant's relationship to the loan and to identify the owner of Plaintiffs' obligation. Finally, Plaintiffs directed Defendant to stop trying to collect on the loan and to cease all future collection communications. According to Plaintiffs, Defendant failed to respond to the letter or to comply with its terms.

On June 8, 2009, Plaintiffs filed the instant action alleging that Defendant: 1) violated the Truth in Lending Act ("TILA"), 15 U.S.C. 1601 et seq., by failing to provide two accurate copies of Notice of Right to Cancel and failing to timely respond to Plaintiffs' rescission letter; 2) violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq. by likewise failing to respond to the same correspondence; 3) violated the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), California Civil Code § 1788 et seq., by continuing to try to collect on the relevant loan after receiving Plaintiffs' above letter; 4) violated California's Unfair Competition Law ("UCL"), California Business & Professions Code § 17200 et seq.; 5) violated the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq.; and 6) breached the Implied Covenant of Good Faith and Fair Dealing.

STANDARD

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the...claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the "grounds" of his "entitlement 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 555-556 (internal citations and quotations omitted). Factual allegations must be enough to raise a right to relief above the speculative level. Id. at 555 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-36 (3d ed. 2004) ("The pleading must contain something more...than...a statement of facts that merely creates a suspicion [of] a legally cognizable right of action")).

A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. A court should "freely give" leave to amend when there is no "undue delay, bad faith[,] dilatory motive on the part of the movant,...undue prejudice to the opposing party by virtue of...the amendment, [or] futility of the amendment...." Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is denied only when it is clear the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

ANALYSIS

1. Plaintiffs' Truth in Lending Act Claim

Plaintiffs contend that, under TILA, they are entitled to rescind their home loan as a result of Paramount's original notice violations. However, Plaintiffs have failed to allege that they are ready and able to tender the loan proceeds as part of the rescission. Accordingly, Defendant's Motion to Dismiss Plaintiffs' TILA rescission claim is ...


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