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Santos v. Countrywide Home Loans


November 5, 2009



Plaintiff Kristine Rose Santos filed this action against defendants Countrywide Home Loans ("CHL"), Resurgent Corp Service ("Resurgent"), and ReconTrust Company, N.A. ("ReconTrust") alleging various state and federal claims relating to loans she obtained to refinance her home in Stockton, California. CHL and ReconTrust move to dismiss plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

Plaintiff 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 defendants' motion to dismiss under submission without oral argument.

The court has examined each of the claims in plaintiff's complaint, and for the following reasons finds not one of them sufficient to withstand defendants' motions to dismiss.

A. Rescission and/or Reformation of Contract

Plaintiff's complaint alleges a cause of action for recision or reformation of her loan with defendants because she was fraudulently induced into her loan agreement. (See Compl. ¶¶ 18-23.) Rescission and reformation are remedies, not a cause of action. Hafiz v. Greenpoint Mortgage Funding, Inc., --- F. Supp. 2d ----, No. C 09-01729 WHA, 2009 WL 2137393, at *7 (N.D. Cal. July 16, 2009). Plaintiff's prayer to the court to rescind or reform her loan is based on her fraud claim, where she claims she was fraudulently induced into the loan. As plaintiff's fraud claim fails, rescission and reformation are not available to plaintiff.

Additionally, under California Civil Code section 1691, a request for rescission requires the rescinding party to "[r]estore to the other party everything of value which he has received from him under the contract or offer to restore the same upon condition that the other party do likewise." Cal. Civ. Code § 1691. Plaintiff offers to "restore to [d]efendants the subject property in return for defendants [sic] return to plaintiff all monies paid to defendants in connection with the placement of the loan, service of the loan, loan payments made, improvements made to the property, and other costs and expenses plaintiff has incurred in the maintenance and upkeep of the subject property." (Compl. ¶ 27.) However, this offer does not restore defendants to their former position by returning the consideration received under the contract.

Rescission is also unavailable to plaintiff because the accusations in her complaint address the actions of her lender, Argent Mortgage Company, not defendants. Rescission is unavailable as a remedy if "the rights of other have intervened and circumstances have so far changed that rescission may not be decreed without injury to [third] parties and their rights . . . ." Gill v. Rich, 128 Cal. App. 4th 1254, 1265 (2005) (internal quotation marks omitted). In this case CHL and ReconTrust's rights have intervene, as Argent Mortgage Company assigned them right to service the loan. The alleged wrongs in the complaint are against plaintiff's lender, not the instant defendants. Plaintiff has not alleged that defendants knew of the alleged fraud of her lender, outside of conclusory allegations of conspiracy. Defendants would be prejudiced if plaintiff were permitted to rescind the loan, and accordingly rescission is unavailable to plaintiff as a remedy.

Finally, plaintiff's prayer for reformation cannot succeed. "A complaint for the reformation of a contract should allege what the real agreement was, what the agreement as reduced to writing was, and where the writing fails to embody the real agreement. It is also necessary to aver facts showing how the mistake was made, whose mistake it was and what brought it about, so that mutuality may appear." Lane v. Davis, 172 Cal. App. 2d 302, 309 (1959). Plaintiff fails to allege any of these facts, and accordingly has not stated an adequate prayer for reformation. Plaintiff's first cause of action for rescission or reformation will therefore be dismissed.

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); 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. 09-937, 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's fraud allegations do not even come close to surviving a motion to dismiss. Plaintiff simply alleges that she was not provided proper disclosures by "defendants" and was "deliberately misled into believing she was entering into a predatory loan with a much lower interest rate than was actually imposed." (Compl. ¶¶ 32-33.) Plaintiff's conclusory statements do not identify with any specificity what, if any, representations were made, when they were made, who made them, or why they were false. These sort of conclusory statements come nowhere close to meeting the pleading standard generally required under Rule 8, let alone the heightened pleading standard of Rule 9(b). See Iqbal, 129 S.Ct. at 1949; Vess, 317 F.3d at 1006. Accordingly, the court will grant defendants' motion to dismiss plaintiff's second cause of action for fraud against CHL and ReconTrust.

C. Specific Performance to Modify Plaintiff's Loan

Plaintiff claims that she is entitled to specific performance to force defendants to offer her a "reasonable and feasible" loan modification. (Compl. ¶ 39.) Plaintiff bases this demand for relief on California Civil Code section 2923.6, which plaintiff asserts "requires California lenders to accept loan modification upon owner-occupied residences upon home loans made from January 1, 2003 through December 31, 2007," as well as the Emergency Economic Stabilization Act of 2008 ("EESA"), 12 U.S.C. §§ 5201-61, and the Hope for Homeowners Act, Pub. L. 110-289. (Id. at ¶ 37.) However, section 2923.6 indicates nothing more than the California legislature's intent that a mortgagee "offer the borrower a loan modification or workout plan if such modification or plan is consistent with its contractual or other authority." Cal. Civ. Code § 2923.6(b). Accordingly, "nothing in Cal. Civ. Code § 2923.6 imposes a duty on servicers of loans to modify the terms of loans or creates a private right of action for borrowers." Farner v. Countrywide Home Loans, No. 08cv2193, 2009 WL 189025, at *2 (S.D. Cal. Jan. 26, 2009).

Plaintiff also has no private right of action against defendants under the EESA or the Hope for Homeowners Act. The EESA does not provide for a private right of action. Ramirez v. Litton Loan Servicing, LP, No, CV-09-319-PHX-GMS, 2009 WL 1750617, at *1 (D. Ariz. June 22, 2009); Barrey v. Ocwen Loan Servicing, LLC, No. CV-09-573-PHX-GMS, 2009 WL 1940717, at *1 (D. Ariz. July 2, 2009). The Hope for Homeowners Act was intended to help borrowers refinance their mortgages and obtain loans insured by the Federal Housing Administration. It is unintelligible why this act would entitle plaintiff to specific performance to modify her loan. Accordingly, the court will grant CHL and ReconTrust's motion to dismiss plaintiff's third cause of action for specific performance.

D. Wrongful Threatened Foreclosure

Plaintiff's complaint purports to state a claim for "wrongful threatened foreclosure" against defendants. Plaintiff has failed to cite to any common law rule or authority providing for a claim for "wrongful threatened foreclosure." Wrongful foreclosure is an action in equity, where a plaintiff seeks to set aside a foreclosure sale. See Abdallah v. United Sav. Bank, 43 Cal. App. 4th 1101, 1009 (1996); Karlsen v. American Sav. & Loan Assn., 15 Cal. App. 3d 112, 117 (1971). However, there is no cause of action for "wrongful threatened foreclosure." In fact, in the overwhelming majority of states like California who provide for non-judicial foreclosure, do not recognize such a cause of action. See Reese v. First Mo. Bank and Trust Co. of Creve Couer, 736 S.W.2d 371, 373 n.4 (Mo. 1987) (finding that of the twenty-nine states that conduct non-judicial foreclosure sales only Georgia, Massachusetts, and North Carolina have a cause of action for attempted wrongful foreclosure).

Even if such a cause of action were to exist, plaintiff has not alleged any facts indicating why defendants' foreclosure was wrongful, outside of the conclusory allegations that "[d]efendants each of them or their agents did not have the right to foreclose" and that "the sale was conducted without complying with CA [sic] Civil Code Section 2924 et. seq." (Compl. ¶ 43.) Such conclusory statements, without any facts to support them, fall well short of the pleading requirements of Rule 8. See Iqbal, 129 S.Ct. at 1949. Accordingly, plaintiff's fourth cause of action for wrongful threatened foreclosure must be dismissed.

E. Threatened Wrongful Eviction

An action "for a threatened wrongful eviction is in reality an action for malicious prosecution, an essential element of which is want of probable cause." Asell v. Rodrigues, 32 Cal. App. 3d 817, 824 n.3 (1973)(citing Gause v. McClelland, 102 Cal. App. 2d 762, 764 (1951)); see Bisno v. Douglas Emmett Realty Fund 1988, 174 Cal. App. 4th 1534, 1544 (2009). A "complaint for malicious prosecution must allege malice, lack of probable cause and a favorable termination of the prior proceedings." Scannell v. County of Riverside, 152 Cal. App. 3d 596, 611 (1984). Plaintiff alleges no facts indicating that an eviction has been threatened outside of the foreclosure sale, that defendants have initiated a wrongful detainer action against her, or malice on the part of defendants. Accordingly, plaintiff's fifth cause of action for threatened wrongful eviction must be dismissed.

F. Quiet Title

The purpose of a quiet title action is to establish one's title against adverse claims to real property. A basic requirement of an action to quiet title is an allegation that plaintiffs "are the rightful owners of the property, i.e., that they have satisfied their obligations under the Deed of Trust." Kelley v. Mortgage Elec. Reg. Sys., Inc., No. C 09-01538 SI, ---F. Supp. 2d ----, 2009 WL 2475703, at *7 (N.D. Cal. Aug. 12, 2009). "[A] mortgagor cannot quiet his title against the mortgagee without paying the debt secured." Watson v. MTC Financial, Inc., No. 2:09-CV-01012 JAM-KJM, 2009 WL 2151782 (E.D. Cal. Jul. 17, 2009)(quoting Shimpones v. Stickney, 219 Cal. 637, 649 (1934)). As plaintiff concedes that she has not paid the debt secured by the mortgage, she cannot sustain a quiet title action. Accordingly, the court must dismiss plaintiff's sixth cause of action to quiet title.

G. Civil Conspiracy

"Civil conspiracy is not a cause of action, but a legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its preparation." Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503, 510-11 (1994). Under California law, a party may be vicariously liable for another's tort in a civil conspiracy where the plaintiff shows "(1) formation and operation of the conspiracy and (2) damage resulting to plaintiff (3) from a wrongful act done in furtherance of the common design." Rusheen v. Cohen, 37 Cal. 4th 1048, 1062 (2006) (citing Doctors' Co. v. Superior Court, 49 Cal. 3d 39, 44 (1989)).

Plaintiff has improperly alleged a cause of action for conspiracy. Taking plaintiff's civil conspiracy claim as an attempt to impose liability on defendants for the other torts alleged in her complaint, plaintiff's claim still fails. First, a claim for civil conspiracy is a derivative action that can only succeed when based on an independent tortious act. Entm't Research Group, Inc. v. Genesis Creative Group, Inc.,122 F.2d 1211, 1228 (9th Cir. 1997)(citing Applied Equipment Corp., 7 Cal. 4th at 457). Since all of plaintiff's other causes of action will be dismissed, she cannot allege a civil conspiracy. Second, plaintiff's allegations of a civil conspiracy are conclusory and inadequate. Plaintiff simply alleges that defendants acted "in concert in defrauding plaintiff" without pleading any facts to support this claim. (Compl. ¶ 54.) Asserting the bare legal conclusion that defendants acted in a conspiratorial fashion, without pleading further facts "stops short of the line between possibility and plausibility." Iqbal, 129 S.Ct. at 1949. There is nothing in the complaint to indicate that defendants were doing anything other than simply asserting their legal rights under the Note and Deed of Trust. Accordingly, plaintiff's seventh cause of action for civil conspiracy will be dismissed.

H. Special and Punitive Damages

Plaintiff alleges a claim entitled "Special and Punitive Damages," which are remedies, not a cause of action. Plaintiff's claim simply states that plaintiff "belongs to the protected class under the protective legislation to wit, the Fair Debt Collections Practices Act, [EESA] in conjunction with the Governmental Economic Stimulus Act of 2008 and the Hope for Homeowners act [sic] of 2008." (Compl. ¶ 57.) It is absolutely unclear why any of these statutes support a claim for punitive or special damages against defendants and plaintiff has not alleged how defendants violated any of these acts. Additionally, plaintiff cannot sustain a claim for punitive or special damages against defendants because plaintiff's prayer for special and punitive damages rely on success on her other causes of action, which will be dismissed. Accordingly, plaintiff's eighth "cause of action" for special and punitive damages will be dismissed.

I. Declaratory and Injunctive Relief

Plaintiff's final claim is for declaratory and injunctive relief. Declaratory and injunctive relief are not independent claims, rather they are forms of relief. See McDowell v. Watson, 59 Cal. App. 4th 1155, 1159 (1997) ("Injunctive relief is a remedy and not, in itself a cause of action . . . ." (internal quotation marks omitted)). Even viewing plaintiff's cause of action as a request for declaratory and injunctive relief as remedies, all of plaintiff's claims will be dismissed, and accordingly plaintiff is not entitled to any such relief. Therefore, plaintiff's ninth cause of action for declaratory and injunctive relief will be dismissed.

J. Sanctions

If plaintiff's attorney could not draft a complaint that contained a single claim upon which relief could be granted, he could have at least complied with Local Rule 78-230(c) and told the court he had no opposition to the granting of defendants' motion. Instead, as he has done before, he ignored the local rule and did nothing in response to the motion to dismiss his complaint. Counsel's failure to comply with Local Rule 78-230(c) and timely file any response to CHL and ReconTrust's motion to dismiss is inexcusable, and has inconvenienced the court by forcing it to nevertheless examine the motion on the merits.

Local Rule 11-110 authorizes the court to impose sanctions for "[f]ailure of counsel or of a party to comply with these Rules." Therefore, the court will sanction plaintiff's counsel, Richard A. Taguinod, $200.00 payable to the Clerk of the Court within ten days from the date of this Order, unless he shows good cause for his failure to comply with the Local Rules.*fn1

IT IS THEREFORE ORDERED that CHL and ReconTrust's motion to dismiss plaintiffs' complaint against CHL and ReconTrust be, and the same hereby is, GRANTED.

IT IS FURTHER ORDERED that within ten days of the date of this Order, Richard A. Taguinod shall either (1) pay sanctions in the amount of $200.00 to the Clerk of the Court or (2) show good cause for his failure to comply with Local Rule 78-230(c).

Plaintiff has twenty days from the date of this Order to file an amended complaint, if they can do so consistent with this Order.

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