UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
December 3, 2009
JESSICA BLANCO, PLAINTIFF,
AMERICAN HOME MORTGAGE SERVICING, INC., OPTION ONE MORTGAGE CORPORATION, THE FUNDING & LENDING NETWORK, MANDALE JOHNSON, MYRON W. BUTLER, AHMSI DEFAULT SERVICES, T.D. SERVICE COMPANY, AND DOES 1 THROUGH 20, INCLUSIVE, DEFENDANTS.
MEMORANDUM AND ORDER RE: MOTION TO DISMISS
Plaintiff Jessica Blanco filed this action against defendants American Home Mortgage Serving, Inc. ("AHMSI"), Option One Mortgage Corporation ("Option One")*fn1 , The Funding & Lending Network ("FLN"), Mandale Johnson, Myron W. Butler, AHMSI Default Services ("Default Services"), and T.D. Service Company ("TD"), alleging various state and federal claims relating to a loan they obtained to refinance their home in Woodland, California. AHMSI, Default Services and Option One move 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.*fn2
I. Factual and Procedural Background
On June 22, 2006, plaintiff obtained a loan from Option One to refinance her home, located at 406 Monte Vista Way in Woodland, California. (FAC ¶¶ 7, 29) This loan was secured by a Deed of Trust on the property. (FAC ¶ 29.) Plaintiff claims that she was channeled into this allegedly unaffordable loan through the conduct of Johnson, who allegedly exaggerated plaintiff's earnings to secure the loan. (Id. ¶¶ 20-25.) The Deed of Trust listed Premier Trust Services, Inc. as trustee and Option as lender. (Id. ¶ 29.)
Plaintiff eventually defaulted on her loan, and a Notice of Default and Election to Sell Under Deed of Trust was filed in Yolo County by T.D. Service Company on November 4, 2008, which stated that Wells Fargo Bank, N.A. as trustee for Option One had become the beneficiary of the loan. (Id. ¶ 40.) On December 3, 2008, an Assignment of Deed was allegedly recorded in Yolo County which allegedly stated that AHMSI would transfer an interest in plaintiff's mortgage to LaSalle Bank National Association, as Trustee for Merrill Lynch.*fn3 (Id. ¶ 41.) Plaintiff allegedly was sent notice of a trustee sale by T.D. on February 5, 2009. (Id. ¶ 42.) On February 25, 2009, plaintiff allegedly sent a Qualified Written Request ("QWR") under the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, to AHMSI that included a demand to rescind their loan under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f.
(Id. ¶ 30.)
In her FAC, plaintiff asserts ten causes of action against seven defendants. AHMSI, Default Services, and Option One's motion to dismiss challenges only the causes of action that apply to MERS and Saxon.
On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). 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, 550 U.S. 544, 570 (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).
In general a court may not consider items outside the pleadings upon deciding a motion to dismiss, but may consider items of which it can take judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts "not subject to reasonable dispute" because they are either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201.
AHMSI, Default Services, and Option One submitted a RJN in support of their motion to dismiss which contains three exhibits: (1) a copy of the Deed of Trust and accompanying riders executed by plaintiff, recorded in Yolo County on June 30, 2006; (2) a copy of the Notice of Default and Election to Sell Under Deed of Trust, recorded in Yolo County on November 4, 2008; and (3) a copy of the Notice of Trustee's Sale, recorded in Yolo County on February 5, 2009.
The court will take judicial notice of defendants' exhibits, as they are matters of public record whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).
Plaintiff alleges that Option One failed to comply with TILA by "(a) failing to provide the required disclosures prior to consummation of the transaction; (b) failing to make required disclosures clearly and conspicuously in writing; (c) failing to timely deliver to [p]laintiff notice required by TILA; (d) placing terms prohibited by TILA into the transaction; and (e) failing o disclose all finance charge details and the annual percentage rate based upon properly calculated and disclosed finance charges and amounts financed." (FAC ¶ 58.) Plaintiff prays for both damages and rescission of her loan based on these alleged TILA violations. (Id. ¶¶ 61-65.)
The statute of limitations for a TILA damages claim is one year from the date of the alleged TILA violation. 15 U.S.C. § 1640(e). Moving defendants argue that plaintiff's claim for damages under TILA is foreclosed by the statute of limitations because it was filed more than one year after the alleged TILA violations. Here, plaintiff's TILA claim arises solely out of failure to make required disclosures at the time the loan was entered, which was on June 22, 2006. The limitations period began to run at that time, King v. California, 784 F.2d 910, 914 (9th Cir. 1986), and would normally have expired on June 22, 2007. Plaintiff's initial complaint was not filed until February 27, 2009, more than a year and a half past the statute of limitations. Plaintiff's TILA claim is therefore time barred, unless the doctrine of equitable estoppel applies.
The Ninth Circuit has held that equitable tolling of claims for damages under TILA may be appropriate "in certain circumstances," and can operate to "suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or non-disclosures that form the basis of the TILA action." Id. at 914-15. Because the applicability of the equitable tolling doctrine often depends on matters outside the pleadings, it "is not generally amenable to resolution on a Rule 12(b)(6) motion." Supermail Cargo, Inc. v. U.S., 68 F.3d 1204, 1206 (9th Cir. 1995). However, when a plaintiff does not allege any facts demonstrating that he or she could have not discovered the alleged violations by exercising due diligence, dismissal may be appropriate. See Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 902-03 (9th Cir. 2003) (dismissing equitable tolling of TILA claim because plaintiff was in full possession of all loan documents and did not allege any actions that would have prevented discovery of the alleged TILA violations); Hubbard v. Fidelity Federal Bank, 91 F.3d 75, 79 (9th Cir. 1996) (finding that plaintiff was not entitled to equitable tolling because "nothing prevented [plaintiff] from comparing the loan contract, [the lender's] initial disclosures, and TILA's statutory and regulatory requirements").
Plaintiff alleges that equitable tolling is appropriate because she was not given a copy of any of the loan documents prior to closing, was not allowed to review the documents, and finally because "the facts surrounding loan transaction [sic] subject to this litigation were purposefully hidden and continue to be hidden from him [sic] to this day." (Pl.'s Opp'n Mot. Dismiss 10:21-25.) However, plaintiff does not offer any facts that demonstrate how Option One concealed the facts surrounding plaintiff's mortgage. Plaintiff also does not explain what prevented her from later reviewing the loan documents, which she admittedly was given at closing, and TILA's statutory requirements. "Such factual underpinnings are all the more important . . . since the vast majority of [p]laintiff's] alleged violations under TILA are violations that are self-apparent at the consummation of the transaction." Cervantes v. Countrywide Home Loans, Inc., 2009 U.S. Dist. LEXIS 87997, at ** 13-14 (D. Ariz. 2009) (holding that equitable tolling was not appropriate when plaintiffs simply alleged that defendants "fraudulently misrepresented and concealed the true facts related to the items subject to disclosure"). Given that plaintiff has failed to explain why she was prevented from discovering Option One's alleged violations of TILA, her damages is claim is time-barred.
Option One contends that plaintiff's rescission claim fails because she has not demonstrated an ability to tender payment of the net proceeds she received from Option One. "TILA provides two private remedies: damages and rescission." Shelley v. Quality Loan Serv. Corp., 2009 U.S. Dist. LEXIS 58156, at *5 (C.D. Cal. June 17, 2009). A borrower has the right to rescind the loan transaction "until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms ... together with a statement containing the material disclosures." 15 U.S.C. § 1635(a). However, where the required forms and disclosures have not been delivered to the obligor, 15 U.S.C. § 1635(f) provides that "[a]n obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first."
The Ninth Circuit has held that rescission under TILA "should be conditioned on repayment of the amounts advanced by the lender." Yamamoto v. Bank of N.Y., 329 F. 3d 1167, 1170 (9th Cir. 2003) (emphasis in original). District courts in this circuit have dismissed rescission claims under TILA at the pleading stage based upon the plaintiff's failure to allege an ability to tender loan proceeds. See, e.g., Garza v. Am. Home Mortgage, 2009 U.S. Dist. LEXIS 7448, at *15 (E.D. Cal. Jan. 27, 2009) (stating that "rescission is an empty remedy without [the borrower's] ability to pay back what she has received"); Ibarra v. Plaza Home Mortgage, 2009 U.S. Dist. LEXIS 80581, at *22 (S.D. Cal. Sept. 4, 1009); Carnero v. Weaver, 2009 U.S. Dist. LEXIS 62665, at *8 (N.D. Cal. July 20, 2009); Pesayco v. World Sav., Inc., 2009 U.S. Dist. LEXIS 73299, at *4 (C.D. Cal. July 29, 2009); Ing Bank v. Korn, 2009 U.S. Dist. LEXIS 73329, at *7 (W.D. Wash. May 22, 2009). Plaintiff has not alleged any facts indicating that she is able to tender sufficient funds to repay the loan principal. Without such facts, plaintiff cannot receive the equitable remedy of rescission. Accordingly, the court will grant Option One's motion to dismiss plaintiff's TILA cause of action.
B. California Rosenthal Fair Debt Collection Practices Act
Plaintiff's second cause of action alleges that AHMSI, Option One, and Default Services violated the RFDCPA. The RFDCPA prohibits a host of unfair and oppressive methods of collecting debt, but to be liable under the RFDCPA a defendant must fall under its definition of "debt collector." Izenberg v. ETS Svcs., LLC, 589 F. Supp. 2d 1193, 1199 (C.D. Cal. 2008). A "debt collector" under the RFDCPA is "any person who, in the ordinary course of business, regularly, on behalf of himself or herself or others, engages in debt collection." Cal. Civ. Code § 1788.2(c) (2008).
Plaintiff does not identify in her FAC the sections of the RFDCPA that AHMSI, Default Services, and Option One allegedly violated, and fail to allege facts that would support the inference that any of these defendants are a "debt collector" under the RFDCPA. Instead, the FAC contains only a conclusory restatement of the definition of "debt collector" under the RFDCPA, (FAC ¶ 67.), and fails to allege other essential elements of the statute necessary to establish liability as a "debt collector," namely that the deed of trust memorializes a "consumer credit transaction" and that the amount owed under the deed of trust is a "consumer debt" according to the RFDCPA. See Cal. Civ. Code § 1788.2(b)-(f). Such broad allegations, without even identifying what part of the RFDCPA AHMSI, Default Services, or Option One violated, are insufficient to survive a motion to dismiss. See Rosal v. First Fed. Bank of Cal., No. 09-1276, 2009 WL 2136777, at * 18 (N.D. Cal. July 15, 2009).
Additionally, foreclosure pursuant to a deed of trust does not constitute debt collection under the RFDCPA. See Izenberg, 589 F. Supp. 2d at 1199; see also Rosal, 2009 WL 2136777, at *18 (dismissing RFDCPA claim as to all defendants in foreclosure case); Ricon v. Recontrust Co., No. 09-937, 2009 WL 2407396, at *4 (S.D. Cal. Aug. 4, 2009) (dismissing with prejudice plaintiff's unfair debt collection claims in foreclosure case); Pittman v. Barclays Capital Real Estate, Inc., No. 09-0241, 2009 WL 1108889, at *3 (S.D. Cal. Apr. 24, 2009) (dismissing with prejudice plaintiff's Rosenthal Act claim in foreclosure case because a "residential mortgage loan does not qualify as a 'debt' under the statute"); Gallegos v. Recontrust Co., No. 08-2245, 2009 WL 215406, at *3 (S.D. Cal. Jan. 28, 2009) (dismissing RFDCPA claim in foreclosure case). Since residential mortgage loans to not fall within the RFDCPA, the court must grant defendants' motion to dismiss plaintiff's cause of action under the RFDCPA against AHMSI, Default Services, and Option One.
To prove a cause of action for negligence, plaintiff must show "(1) a legal duty to use reasonable care; (2) breach of that duty, and (3) proximate [or legal] cause between the breach and (4) the plaintiff injury." Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333, 1339 (1998) (citation omitted). "The existence of a legal duty to use reasonable care in a particular factual situation is a question of law for the court to decide." Vasquez v. Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (2004). Plaintiff argues that AHMSI, Default Services, and Option One owed a duty to "perform acts in such a manner as to not cause [p]laintiffs harm." (FAC ¶ 75.) Plaintiff argues that this duty was breached when "[d]efendants . . . failed to maintain the original Mortgage Note, failed to properly create original documents, and failed to make the required disclosures to the [p]laintiffs." (Id.) Plaintiff further contends that AHMSI, Default Services, and Option One also breached their duties of care when they took payments to which they were not entitled, charged fees they were not entitled to charge, and made or authorized negative reports of plaintiff's creditworthiness to credit bureaus. (Id. ¶ 76.)
Plaintiff cites no authority for the proposition that AHMSI, Default Services, or Option One owed a duty to not cause plaintiff harm in their capacities as lender and loan servicer. Generally, "[a]bsent 'special circumstances' a loan transaction 'is at arms-length'" and no duties arise from the loan transaction outside of those in the agreement. Rangel v. DHI Mortgage Co., Ltd., No. CV F 09-1035 LJO GSA, 2009 WL 2190210, at *3 (E.D. Cal. July 21, 2009) (quoting Oaks Management Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006)). Absent contrary authority, a pleading of an assumption of duty by AHMSI, Default Services, or Option One, or a special relationship, plaintiff cannot establish AHMSI, Default Services, or Option One owed a duty of care. See Hardy v. Indymac Federal Bank, ---F.R.D. ---, No. CV F 09-935 LJO SMS, 2009 WL 2985446, at *7 (E.D. Cal. Sept. 15, 2009); Bentham v. Aurora Loan Servs., No. C-09-2059 SC, 2009 WL 2880232, at *2-3 (N.D. Cal. Sept. 1, 2009).
Additionally, the FAC does not indicate which breaches of this alleged duty apply to AHMSI, Default Services, or Option One. (FAC ¶¶ 75-76.) Defendants should not be forced to guess how their conduct was allegedly negligent. See Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983); Gauvin v. Trombatore, 682 F. Supp. 1067, 1071 (N.D. Cal. 1988). The FAC groups together accusations against all defendants, and is completely unclear as to how AHMSI, Default Services, or Option One somehow breached a duty to create loan documents and provide disclosures to plaintiff. The FAC fails to state that AHMSI, Default Services, or Option One have breached a cognizable legal duty, and accordingly the court will grant defendants' motion to dismiss plaintiff's cause of action for negligence against AHMSI, Default Services, or Option One.
D. Real Estate Settlement Procedures Act
RESPA provides that borrowers must be provided certain disclosures relating to the mortgage loan settlement process. See 12 U.S.C. § 2601. § 2605 of RESPA relates to the disclosures and communications required regarding the servicing of mortgage loans, and provides that loan servicers have a duty to respond to QWRs from borrowers asking for information relating to the servicing of their loan. See 12 U.S.C. § 2605(e). Under RESPA lenders of federally related mortgage loans must disclose whether servicing of a loan may be assigned, sold or transferred to loan applicants. 12 U.S.C. § 2605(a). Plaintiffs allege that Option One failed to comply with these disclosure requirements. (FAC ¶ 82.) Additionally, borrowers may send QWRs under RESPA to loan servicers for information relating to the servicing of their loan. 12 U.S.C. § 26055(e)(1). Loan servicers have 60 days after the receipt of a QWR to respond to the borrower inquiry.
12 U.S.C. § 2605(e)(2). Plaintiff alleges that she mailed a QWR to AHMSI on February 25, 2009, which included a demand to rescind the loan under TILA, and that AHMSI has not responded to the request as required by the statute. (FAC ¶ 30.)
Plaintiff, however, fails to allege that AHMSI is a servicer at all, or that it ever serviced plaintiff's loan. In fact, plaintiff alleges that she "is not certain at this time exactly which of [d]efendants was actually the servicer of the loan at any given time." (Id. ¶ 81.) Without alleging that AHMSI is a "loan servicer" under RESPA plaintiffs cannot show that AHMSI owed any duty to respond to their QWR, and accordingly plaintiffs' RESPA claim against AHMSI must be dismissed. See Izenberg v. ETS Services, LLC, 589 F. Supp. 2d 1193, 1199-2000 (C.D. Cal. 2008) (dismissing plaintiffs' RESPA because it failed to allege defendant was a loan servicer); Lopez v. GMAC Mortg. Corp., No. C 07-3911 CW, 2007 WL 3232448, at *3 (N.D. Cal. Nov. 1, 2007) (dismissing RESPA claim because plaintiff alleged defendant was a trustee, not loan servicer).
Plaintiff's allegation that Option One "violated RESPA at the time of closing on the sale of the Property by failing to correctly and accurately comply with the disclosure requirements provided therein" is also insufficient. (FAC ¶ 82.) This allegation is utterly devoid of any facts that explain how Option One failed to comply with the requirements of RESPA at the time of closing. Plaintiff's allegation is nothing more than a bare legal conclusion against Option One, and therefore "stops short of the line between possibility and plausibility" required by Rule 12(b). Iqbal, 129 S.Ct. at 1949. Accordingly, the court must grant AHMSI and Option One's motion to dismiss plaintiff's RESPA claim.*fn4
E. Breach of Fiduciary Duty
The elements of a breach of fiduciary duty claim are (1) existence of a fiduciary relationship; (2) breach of the fiduciary duty; and (3) damage proximately caused by that breach. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003). "The absence of any one of these elements is fatal to the cause of action." Pierce v. Lyman, 1 Cal. App. 4th 1093, 1101 (1991). Plaintiff alleges that Option One owed her a fiduciary duty because it interfered with the fiduciary obligations of Butler and Johnson by offering them incentives to breach their fiduciary duties "by means of creating and participating in a scheme that created an illusion to consumers that they are being informed of all of the material facts, when in fact they are not." (FAC ¶ 94.)
As previously mentioned, "[a]bsent special circumstances, a loan transaction is at arms-length and there is no fiduciary relationship between the borrower and lender." Rangel v. DHI Mortgage Co., Ltd., 2009 U.S. Dist. LEXIS 65674, at *8 (E.D. Cal. July 20, 2009); see also e.g. Tasaranta v. Homecomings Fin., 2009 U.S. Dist. LEXIS 87372, at *15 (S.D. Cal. Sept. 21, 2009); Brittain v. IndyMac Bank, FSB, 2009 U.S. Dist. LEXIS 84863, at * 14 (N.D. Cal. Sept. 16, 2009); Dinsmore-Thomas v. Ameriprise Fin., Inc., 2009 U.S. Dist. LEXIS 68882, at *29 (C.D. Cal. Aug. 3, 2009). Plaintiff claims that although Option One does not independently owe her a duty, it can be held secondarily liable for the actions of her mortgage brokers because an agency relationship existed between her brokers and Option One. See Plata v. Long Beach Mortg. Co., No. C 05-02746 JF, 2005 U.S. Dist. LEXIS 38807, at *23 (N.D. Cal. Dec. 13, 2005). Even assuming that plaintiff can establish Option One is secondarily liable for a breach of fiduciary claim as a matter of law, plaintiff has not alleged sufficient facts to suggest an agency relationship between Option One and plaintiff's mortgage brokers outside of the conclusory allegation that "Option One directly ordered, authorized, or participated in Defendants [sic] . . . tortious conduct." (FAC ¶ 88.) Without facts that would suggest a plausible agency relationship between Option One and her mortgage brokers plaintiff cannot override the presumption that a lender owes no fiduciary duty to its borrowers. Accordingly, the court must dismiss plaintiff's breach of fiduciary duty claim. See Iqbal, 129 S.Ct. at 1949.
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, 1106 (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 "[d]efendants, and each of them, have made several representations to [p]laintiff with regard to material facts" and that these were false. (FAC ¶¶ 98-100.) Plaintiffs go on to simply state the elements of a cause of action for fraud without even once pointing to one specific representation made by any defendant at any time. (See Id. ¶¶ 101-103.) 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 fraud cause of action against AHMSI, Default Services, and Option One.
G. Breach of Contract
To state a claim for breach of contract under California law, plaintiffs must allege (1) the existence of a contract; (2) plaintiffs' performance or excuse for nonperformance of the contract; (3) defendants' breach of the contract; and (4) resulting damages. Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal. App. 4th 1375, 1390 (2004). Plaintiff alleges that she entered into an agreement with "Option One, Johnson, and Butler whereby [d]efendants promised to provide [p]laintiff with an affordable loan." (FAC ¶ 111.) This supposed promise to provide an "affordable loan" is vague, and do not allege where such a promise is memorialized or what consideration was given for such a promise. Such a vague promise is not sufficient to show the existence of a contract. See Beverage Distributors, Inc. v. Olympia Brewing Co., 440 F.2d 21, 30 (9th Cir. 1971).
Plaintiff goes on to state that defendants breached their agreement when they failed to provide an affordable loan and committed "wrongful acts, including but not limited to, intentionally or negligently failing to obtain payment and interest rates as promised, failing to submit an accurate loan application, failing to supervise, failing to provide loan documents for [p]laintiff review [sic] prior to closing, and failing to explain the loan documents to [p]laintiff." (FAC ¶ 113.) Plaintiff states no facts that indicate the existence of a contract that obligated Option One to perform the aforementioned actions they supposedly failed to do. Iqbal, 129 S.Ct. at 1949. Without alleging facts that make the existence of a contract to provide an affordable loan plausible, plaintiff cannot state a claim for breach of contract. See Hardy, 2009 WL 2985446, at *5. Accordingly, the court will grant Option One's motion to dismiss plaintiff's claim for breach of contract.
H. Implied Covenant of Good Faith and Fair Dealing
"Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999) (quoting Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 371 (1992)). "A typical formulation of the burden imposed by the implied covenant of good faith and fair dealing is 'that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.'" Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (2005) (quoting Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 573 (1973)). "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).
Plaintiff's cause of action for breach of contract against Option One will be dismissed for failure to allege the existence of a contract. Plaintiff has also not alleged any conduct by defendants that is inconsistent with the terms of the Note or Deed of Trust between AHMSI or Default Services and plaintiff that would plausibly suggest a breach of the covenant of good faith and fair dealing. As mentioned above, Option One, AHMSI, and Default Services did not owe a fiduciary duty toward plaintiff, and non-judicial foreclosure of the note was proper. Plaintiff's breach of the covenant of good faith and fair dealing claim is based on her other claims in the FAC, all of which have been found to be inadequate. Therefore, the court will grant AHMSI, Default Services, and Option One's motion to dismiss plaintiff's claim for breach of the covenant of good faith and fair dealing. Id.
I. Wrongful Foreclosure
Plaintiff's FAC purports to state a claim for "wrongful foreclosure" against AHMSI and Default Services. Plaintiff has failed to produce any common law rule or authority providing for a claim for "wrongful foreclosure" at law. See Fortaleza v. PNC Fin. Servs. Group, Inc., --- F.Supp.2d ---, No. C 09-2004 PJH, 2009 WL 2246212, at *11 (N.D. Cal. July 27, 2009). 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).
Plaintiff attempts to base this claim first on California Commercial Code section 3301, alleging that AHMSI and Default Services were not in possession of the Note, and are not beneficiaries, assignees or employees of the entity in possession of the note, and are therefore not "person[s] entitled to enforce" the security interest on the property in accordance with section 3301. (FAC ¶ 126.) However, section 3301 reflects California's adoption of the Uniform Commercial Code, and does not govern non-judicial foreclosures, which is governed by California Civil Code section 2924. See Gaitan v. Mortgage Elec. Registration Sys., No. EDCV 09-1009 VAP (MANx), 2009 WL 3244729, at *10 (C.D. Cal. Oct. 5, 2009). "The comprehensive statutory framework established to govern nonjudicial foreclosure sales is intended to be exhaustive." Moeller v. Lien, 25 Cal. App. 4th 822, 834 (1994). Under California law, there is no requirement for the production of the original note to initiate a non-judicial foreclosure. Oliver v. Countrywide Home Loans, Inc., No. CIV S-0-1381 FCD GGH, 2009 WL 3122573, at *3 (E.D. Cal. Sept. 29, 2009) (citing Alvara v. Aurora Loan Servs., No. C-0-1512 SC, 2009 WL 1689640, at *6 (N.D. Cal. Jun. 16, 2009)); Kamp v. Aurora Loan Servs., No. SACV 09-00844-CJC(RNBx), 2009 WL 3177636, at *4, (C.D. Cal. Oct. 1, 2009); Putkkuri v. Recontrust Co.,No. 08cv1919 WQH (AJB), 2009 WL 32567, at *2 (S.D. Cal. Jan. 5, 2009). Therefore, plaintiff cannot assert a claim based on AHMSI or Default Service's failure to comply with an inapplicable commercial code when defendants are not required to "produce the note" according to California law.
Plaintiff also bases her wrongful foreclosure action on the basis of California Civil Code section 2923.5, arguing that "[d]efendants failed to properly record and give proper notice of the Notice of Default" on their property. (FAC ¶ 128.) The FAC does not indicate whether AHMSI or Default Services failed to properly give notice, and simply makes a general allegation as to all defendants. This general allegation gives AHMSI or Default Services insufficient notice of whether they have committed any conduct that violates section 2923.5, and AHMSI and Default Services should not be forced to guess whether they are individually liable for this conduct. See Gauvin, 682 F. Supp. at 1071.*fn5
Plaintiff finally claims that defendants wrongfully foreclosed on plaintiff's property because they received money from the Troubled Asset Relief Program ("TARP") under the Emergency Economic Stabilization Act ("EESA"), Pub. L. No. 110-343, 122 Stat. 3765 (Oct. 3, 2008), and are therefore subject to the Department of Treasury's guidelines for the Making Homes Affordable Program, H.R. 142 Title I § 109-110, which requires TARP recipients to suspend foreclosures and consider alternative foreclosure prevention options. (FAC ¶¶ 131-134.) However, plaintiff has not alleged that AHMSI or Default Services received TARP funds, simply pleading that "some or all of the [d]efendants" received such funds. (Id. ¶ 132.) This is insufficient and forces AHMSI and Default Services to guess as to their liability. See Gauvin, 682 F. Supp. at 1071. Accordingly, plaintiff cannot state a claim upon which relief can be granted and the court will grant AHMSI and Default Services' motion to dismiss plaintiff's wrongful foreclosure cause of action.
J. California's UCL
California's UCL, prohibits "any unlawful, unfair, or fraudulent business act or practice." Cal-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). This cause of action is generally derivative of some other illegal conduct or fraud committed by a defendant, and "[a] plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation." Khoury v. Maly's of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993).
Plaintiff's claim under the UCL is vague and conclusory, simply alleging that "[d]efendants' acts as alleged herein constitute unlawful, unfair, and/or fraudulent business practices. . . ." (FAC ¶ 106.) Plaintiff does not identify a single specific practices of AHMSI, Default Services, or Option One that she finds to be "unfair" or "deceptive" in their cause of action. The court has already indicated it will dismiss plaintiff's other causes of action for failure to state a claim. Since plaintiff has failed to state a claim on any of these grounds, and because these grounds appear to be the sole basis for plaintiff's UCL claim, they by necessity have failed to state a claim against AHMSI, Default Services, or Option One under the UCL. Accordingly, the court will grant AHMSI, Default Services, and Option One's motion to dismiss plaintiff's UCL cause of action.
IT IS THEREFORE ORDERED that AHMSI, Default Services and Option One's motion to dismiss plaintiff's claims against AHMSI, Default Services, and Option One be, and the same hereby is, GRANTED.
Plaintiff has twenty days from the date of this Order to file an amended complaint, if she can do so consistent with this Order.