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Somsanith v. Bank of America

November 5, 2009

NANSYVONG SOMSANITH, PLAINTIFF,
v.
BANK OF AMERICA, N.A., MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTION TO DISMISS

Plaintiff Nansyvong Somsanith filed this action against Bank of America, N.A ("Bank of America") and Mortgage Electronic Registration Systems, Inc. ("MERS") alleging various state claims relating to loans s/he*fn1 obtained to refinance her home in Davis, California. Having removed this action to federal court, Bank of America now moves to dismiss plaintiff's First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Plaintiff Somsanith did not oppose the motion. Nor did plaintiff file a statement of non-opposition pursuant to Civil Local Rule 78-230(c). Therefore, the hearing date of November 9, 2009 was vacated pursuant to Civil Local Rule 78-230(c), and the court took defendant's motion to dismiss under submission without oral argument.

To survive a motion to dismiss, a plaintiff needs to plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57). "[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. at 1949.

As a whole, plaintiff's complaint lacks even basic facts regarding plaintiff's loans, such as when she took out her mortgages or who her mortgage broker was. While plaintiff alleges a conspiracy existed between Bank of America and MERS to direct her mortgage broker to make misrepresentations to her, she fails to allege facts that would support finding any connection between her unnamed mortgage broker and either of the defendants here. Because the alleged misrepresentations of plaintiff's unnamed, non-party mortgage broker form the core of plaintiff's claims in this action, plaintiff's failure to allege any connection between the broker and Bank of America proves fatal to her complaint. Nevertheless, the court will address each of plaintiff's causes of action in turn.

A. California Financial Code Section 4973 et seq.

Plaintiff alleges that Bank of America engaged in predatory lending in violation of California Financial Code section 4973. (FAC 17.) Section 4973 prohibits specific acts in connection with "covered loans." A "Covered loan" is:

A consumer loan in which the original principal balance of the loan does not exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association in the case of a mortgage or deed of trust, and where one of the following conditions are met:

(1) For a mortgage or deed of trust, the annual percentage rate at consummation of the transaction will exceed by more than eight percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor.

(2) The total points and fees payable by the consumer at or before closing for a mortgage or deed of trust will exceed 6 percent of the total loan amount.

Cal. Fin. Code § 4970(b) (West 2008). The most current conforming loan limit for a single family mortgage loan established by the Federal National Mortgage Association is $417,000.00.*fn2 The current conforming loan limit for a high-balance single family mortgage loan in Yolo County is $474,950.00.*fn3 Plaintiff alleges that the principal of her loan is $448,000.00, (FAC ¶ 39), but does not allege either that the annual percentage rate at consummation of the transaction exceeded the Treasury securities rate by more than eight percentage points or that the total points and fees paid by the consumer at or before closing exceeded six percent of the total loan amount. Plaintiff merely reincorporates the allegations in her complaint without specifying which defendant allegedly engaged in predatory lending or providing any facts to support such a claim.

B. Fraud

In California, the essential elements of a claim for fraud are "(a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or 'scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." In re Estate of Young, 160 Cal. App. 4th 62, 79 (2008). Under the heightened pleading requirements for claims of fraud under Federal Rule of Civil Procedure 9(b), "a party must state with particularity the circumstances constituting the fraud." Fed. R. Civ. P. 9(b). The plaintiffs must include the "who, what, when, where, and how" of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1006 (9th Cir. 2003) (citation omitted). "The plaintiff must set forth what is false or misleading about a statement, and why it is false." Decker v. Glenfed, Inc., 42 F.3d 1541, 1548 (9th Cir. 1994). Additionally, "[w]here multiple defendants are asked to respond to allegations of fraud, the complaint must inform each defendant of his alleged participation in the fraud." Ricon v. Reconstrust Co., No. 09cv937, 2009 WL 2407396, at *3 (S.D. Cal. Aug. 4, 2009) (quoting DiVittorio v. Equidyne Extractive Indus., 822 F.2d 1242, 1247 (2d Cir. 1987)).

Plaintiff alleges that Bank of America directed her mortgage broker to make false and misleading statements to her to obtain a deed of trust. (FAC ¶ 50.) This oft-repeated, yet bare assertion is a mere "label and conclusion" which "stops short of the line between possibility and plausibility" required of Federal Rule of Civil Procedure 8, as plaintiff has not alleged any facts whatsoever to support it. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57). It also clearly falls short of the heightened pleading standard of Rule 9(b), as these allegations fail to identify plaintiff's mortgage broker and when and where the statements were allegedly made.

Furthermore, plaintiff alleges that Bank of America and MERS were engaged in a conspiracy to withhold information about plaintiff's loan terms from her. However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Id. at 1949. Plaintiff fails to allege any facts that would support a finding that MERS and Bank of America were engaged in a conspiracy to defraud plaintiff. Neither has plaintiff alleged any facts that support her allegations that defendants kept key loan information from her; indeed, plaintiff provides almost no information at all about the terms and conditions of her loan or other loan documents. Absent any supporting facts, plaintiff's allegations are nothing more than bare assertions which clearly fail to meet the requirements of Rule 8 and the heightened pleading requirements of Rule 9(b).

C. Breach of Implied Covenant of Good Faith and Fair Dealing

Bank of America seeks dismissal of plaintiff's fourth cause of action for breach of implied covenant of good faith and fair dealing on the grounds that this claim avers only a contractual violation and is therefore duplicative of plaintiff's ninth cause of action for breach of loan contracts. (Mot. to Dismiss 8.) "The prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties." Smith v. City & County of San Francisco, 225 Cal. App. 3d 38, 49 (1990). "To establish a breach of an implied covenant of good faith and fair dealing, a plaintiff must establish the existence of a contractual obligation, along with conduct that frustrates the other party's rights to benefit from the contract." Fortaleza v. PNC Fin. Servs. Group, Inc., 2009 U.S. Dist. LEXIS 64624, at **15-16 (N.D. Cal. July 27, 2009). However, "[i]f the allegations do not go beyond the statement of a mere ...


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