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Collins v. Nationapoint Loan Services

September 29, 2009

JACK COLLINS, PLAINTIFF,
v.
NATIONAPOINT LOAN SERVICES AKA HOME LOAN SERVICES; FIRST FRANKLIN LOAN SERVICES; LA SALLE BANK NATIONAL ASSOCIATION, CAL-WESTERN RECONVEYANCE CORP.; DON KIM; MICHELLE SNYDER; AND GARY STOCKEY, DEFENDANTS.



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

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS; GRANTING LEAVE TO AMEND

All Defendants, Home Loan Services, Inc. ("HLS"), erroneously sued as Nationalapoint Loan Services, aka Home Loan Services; First Franklin Financial Corporation, erroneously sued as First Franklin Loan Services; LaSalle Bank National Association, as trustee; Don Kim; Michelle Snyder; and Gary Stockey (collectively "Defendants"), move to dismiss the First Amended Complaint ("FAC") for failure to state a claim pursuant to Fed.R.Civ.P. 12(b)(6). Plaintiff Jack Collins opposes the motion. Pursuant to Local Rule 7.1(d)(1), this matter is appropriate for decision without oral argument. For the reasons set forth below, the court grants in part and denies in part the motion to dismiss. The court also grants Plaintiff 15 days leave to amend the FAC from the date of entry of this order.

BACKGROUND

On June 17, 2009 Defendants timely removed this federal question action from the Superior Court of California, County of San Diego. The FAC, filed on July 17, 2009, alleges three causes of action for violation of the Truth in Lending Act ("TILA"), 15 U.S.C. §1601 et seq., violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §2605 et seq., and violation of California Business & Professions Code §17200 et seq.

Plaintiff's claims arise from the refinancing of the mortgage on his home. In November 2006 Plaintiff applied to refinance his mortgage with First Franklin Loan Services ("Franklin"). At that time Plaintiff had an adjustable rate mortgage with a 5.5% interest rate set to adjust to 8.5% in February 2007. (FAC ¶8). The principal balance at that time was about $408,000. Plaintiff then sought to refinance the loan to a fixed rate loan.

HLS, the direct lender through Franklin, verbally offered a 30-year mortgage at a fixed rate of 6% with the principal amount of $458,000. (FAC ¶14). Before execution of the loan documents, HLS advised Plaintiff that it would not be able to offer the loan on the terms quoted. Rather, HLS offered a 7.2% fixed loan with a three-year pre-payment penalty period with a loan amount of $469,000. (FAC ¶15). The home appraised at $587,000.

At the time of the "in home" execution of the loan documents, "Plaintiff was presented in rapid succession myriad documents which he was told to sign or initial at the indicated places." (FAC ¶15). "The contents of the documents were not described to Plaintiff nor was he given an opportunity to read the documents." Id. After signing the documents, he allegedly was not provided a copy of the documents and was told that they would be provided later.

Plaintiff alleges that the failure to be provided with copies of the loan documents violated TILA because HLS did not disclose (1) he was not required to complete the loan because he signed the loan application; (2) he could lose his home and that HLS possessed a mortgage on the property; (3) the APR for the loan; and (4) two copies of the Notice of right to rescind. (FAC ¶18). After execution of the loan documents, Plaintiff made a "qualified written request" for copies of the loan documents. (FAC ¶21). HLS failed to respond to these requests. (FAC ¶22).

Plaintiff was unable to continue making payments on the loan and, on January 15, 2009 a Notice of Default was record and a trustee's sale scheduled for May 6, 2009. (FAC ¶25, 26). Apparently, the sale did not go forward and Plaintiff continues to reside at the property.

DISCUSSION

Legal Standards

Federal Rule of Civil Procedure 12(b)(6) dismissal is proper only in "extraordinary" cases. United States v. Redwood City, 640 F.2d 963, 966 (9th Cir. 1981). Courts should grant 12(b)(6) relief only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). Courts should dismiss a complaint for failure to state a claim when the factual allegations are insufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp v. Twombly, __550 U.S. __, 127 S.Ct. 1955 (2007) (the complaint's allegations must "plausibly suggest[]" that the pleader is entitled to relief); Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) (under Rule 8(a), well-pleaded facts must do more than permit the court to infer the mere possibility of misconduct). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 1949. Thus, "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. The defect must appear on the face of the complaint itself. Thus, courts may not consider extraneous material in testing its legal adequacy. Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir. 1991). The courts may, however, consider material properly submitted as part of the complaint. Hal Roach Studios, Inc. v. Richard Feiner and Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989).

Finally, courts must construe the complaint in the light most favorable to the plaintiff. Concha v. London, 62 F.3d 1493, 1500 (9th Cir. 1995), cert. dismissed, 116 Ct. 1710 (1996). Accordingly, courts must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them. Holden v. Hagopian, 978 F.2d 1115, 1118 (9th Cir. 1992). However, conclusory allegations of law and unwarranted inferences ...


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