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Lenear v. American Brokers Conduit


November 5, 2009


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


Presently before the Court are Motions by Defendants EMC Mortgage Corp. and Saxon Mortgage Services, Inc. to dismiss Plaintiff's complaint for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn1 For the reasons set forth below, Defendants' motions are GRANTED.


Plaintiff Catherine Lenear ("Plaintiff" or "Lenear") borrowed $319,200 from the originating lender, Defendant American Brokers Conduit ("ABC"), to purchase real property located in Sacramento, California on May 31, 2007. The loan was secured by a First Deed of Trust against the property with Defendant Saxon Mortgage Services ("Saxon") acting as servicer. Concurrently, Lenear also executed a Home Equity Line of Credit ("HELOC") in the amount of $79,800 from ABC. The HELOC was secured by a Second Deed of Trust against the property with Defendant EMC Mortgage Corporation ("EMC") acting as servicer. By April 23, 2009, Lenear had defaulted on the First Deed of Trust resulting in a non-judicial foreclosure sale of the property on February 2, 2009.

On May 19, 2009, Plaintiff filed a complaint against ABC, Saxon, EMC, Accumax Investment Company ("Accumax"), and all related loan officers. The complaint contains numerous causes of action including breach of contract, breach of fiduciary duty; intentional infliction of emotional distress; fraud; negligence; negligence per se; engaging in unlawful business practices in violation of state and federal laws*fn3; violations of both state and federal lending laws*fn4; and engaging in an unlawful racketeering enterprise in violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964. Plaintiff's complaint also seeks a judicial declaration of the respective parties' rights.

Additionally, Plaintiff seeks to rescind the Promissory Note and First Deed of Trust based on allegations of fraud and unlawful behavior. In her complaint, Plaintiff offers to restore the property to Defendants "ABC/Saxon" in return for all money paid by Plaintiff to the Defendants, plus the reasonable value of any improvements and maintenance made to the property.

Defendants EMC and Saxon now file a Motion to Dismiss for failure to state a claim upon which relief can be granted. Saxon also moves to strike portions of the complaint pursuant to Federal Rule of Civil Procedure 12(f), and both parties seek judicial notice of various exhibits including a copy of the grant deed, the deed of trust, the notices of default, and plaintiff's Chapter 13 and Chapter 7 history.


A. Motion to Dismiss

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, 127 S.Ct. 1955, 1964 (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 1964-65 (internal citations and quotations omitted). Factual allegations must be enough to raise a right to relief above the speculative level. Id. at 1965 (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")).

"Rule 8(a)(2)...requires a 'showing,' rather than a blanket assertion of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only 'fair notice' of the nature of the claim, but also 'grounds' on which the claim rests." Twombly, 550 U.S. 556 n.3. A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs...have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Id.

Nevertheless, "[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and 'that a recovery is very remote and unlikely.'" Id. at 556.

When a claim for fraud is raised, Federal Rule of Civil Procedure 9(b) provides that "a party must state with particularity the circumstances constituting fraud." "A pleading is sufficient under Rule 9(b) if it identifies the circumstances constituting fraud so that the defendant can prepare an adequate answer from the allegations." Neubronner v. Milken, 6 F.3d 666, 671-672 (9th Cir. 1993) (internal quotations and citations omitted). "The complaint must specify such facts as the times, dates, places, benefits received, and other details of the alleged fraudulent activity." Id. at 672.

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).

B. Motion to Strike

The Court may strike "from any pleading any insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "(T)he function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial...." Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Immaterial matter is that which has no essential or important relationship to the claim for relief or the defenses being pleaded. Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) (rev'd on other grounds Fogerty v. Fantasy, Inc., 510 U.S. 517, 114 S.Ct. 1023, 127 L.Ed. 2d 455 (1994)) (internal citations and quotations omitted). Impertinent matter consists of statements that do not pertain, and are not necessary, to the issues in question. Id.


Plaintiff Lenear's complaint alleges fourteen different violations of law. However, the legal issue currently before the Court is not the substance of these various claims, but rather whether Plaintiff has plead enough facts, as a general matter, for any of her claims to stand. While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1964 (2007), it must still provide sufficient facts alleged under a cognizable legal theory, Balistieri v. Pacifica Police Dept. 901 F. 2d 696, 699 (9th Cir. 1990).

Aside from accusations of "predatory" behavior and admonishments of the mortgage lending industry as a whole, Plaintiff alleges very few concrete facts connecting EMC and Saxon to her complaint. In fact, EMC is never independently discussed outside of a general commentary on all defendants. There is no evidence of any communication between Lenear and EMC. Saxon is only independently mentioned in connection with the foreclosure notices Saxon sent and when discussing failed attempts at workout negotiations prior to foreclosure. Plaintiff accuses Defendants of predatory lending. However, nothing in the record indicates any contact between Lenear and EMC or Saxon at the time she acquired the loan.

This is hardly enough to sustain a single, much less all, of the causes of actions that the Plaintiff has submitted. In the absence of additional facts to tie EMC and Saxon to the unlawful behavior that the Plaintiff alleges, the general pleading requirement has not been met.

Therefore the only issue that remains is whether Plaintiff should be afforded leave to amend. The deficiencies in Plaintiff's complaint appear to be more factual rather than legal. As such, the court cannot rule out the possibility that such deficiencies of the complaint might be cured by amendment. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). A more detailed explanation of the Defendants' alleged wrongs could shed light on whether any of the Plaintiff's claims have merit. Because Plaintiff has not made any prior amendments, a grant of leave to amend would be proper.


Defendant EMC's Motion to Dismiss (Docket No. 8) and Defendant Saxon's Motion to Dismiss (Docket No. 10) are hereby GRANTED with leave to amend. Plaintiff is directed to file an amended complaint, should she choose to do so, not later than twenty (20) days after the date this Memorandum and Order is filed electronically. If no amended complaint is filed within said twenty (20)-day period, without further notice, Plaintiff's claims will be dismissed without leave to amend.

Saxon's Motion to Strike is DENIED as moot.

All requests for judicial notice are also DENIED. None of the documents are "generally known within the territorial jurisdiction of the trial court" or clearly "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b). Consequently, judicial notice would be improper at this time.


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