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Walker v. Equity 1 Lenders

January 12, 2010


The opinion of the court was delivered by: Hayes, Judge


The matters before the Court are Defendant Pacific Mortgage Consultants' Motion to Dismiss First Amended Complaint (Doc. # 25), Defendant Aurora Loan Services' Motion to Dismiss First Amended Complaint (Doc. # 26), and Aurora Loan Services' Motion to Strike (Doc. # 27).


This action relates to Plaintiff's mortgage and the subsequent foreclosure sale of his home. Plaintiff initiated this action by filing his complaint in the Superior Court of the County of San Diego on January 15, 2009. (Doc. # 1, Ex. 1). On February 19, 2009, Defendant Aurora Loan Services ("Aurora") filed a Notice of Removal removing the action to this Court. (Doc. # 1). On May 14, 2009, the Court granted Aurora's Motion to Dismiss. (Doc. # 10). On August 13, 2009, Plaintiff filed his First Amended Complaint ("FAC"). (Doc. # 21). On September 3, 2009, Defendant Pacific Mortgage Company ("Pacific") filed its Motion to Dismiss. (Doc. # 25). On September 15, 2009, Aurora filed its Motion to Dismiss and its Motion to Strike. (Docs. # 26, 27). Plaintiff filed an opposition to Pacific's Motion to Dismiss (Doc. # 31), but did not file an opposition to either of Aurora's motions.

The FAC alleges nine causes of action: (1) Violation of the Real Estate Settlement Procedures Act ("RESPA"); (2) Violation of the Truth in Lending Act ("TILA"); (3) Violation of the Fair Debt Collection Practice Act ("FDCPA"); (4) Violation of the Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act"); (5) Negligent Misrepresentation; (6) Fraud; (7) Rescission; (8) Quasi Contract; (9) Determination of Validity of Lien. (Doc. # 21 at 1).

The FAC alleges Plaintiff is the owner of property located at 568 Glenheather Drive, San Marcos, CA 91069. Id. at 2. The FAC alleges Plaintiff obtained a loan on the property from Defendant Equity 1 Lenders Group ("Equity"). Id. The FAC alleges "Plaintiff intends this action and this document to represent a formal complaint and also act as a 'qualified written request'" that Defendants provide Plaintiff with an opportunity to inspect all documents related to the loan. Id.

The FAC alleges Pacific and Equity "represented to Plaintiff that very favorable loans, loan terms, and interest rates were available to him" and encouraged him to refinance his mortgage. Id. at 9. The FAC alleges that Pacific and Equity "knew or intended that Plaintiff receive a worse loan" which "produced a higher commission for them because it was at a higher interest rate and subject to higher fees." Id. at 9-10. The FAC alleges the loan was less favorable to Plaintiff than Defendants had stated it would be. Id. The FAC alleges Defendants violated state and federal law by failing to disclose and misrepresenting terms of the loanand by failing to inform defendant of his right to cancel the transaction. Id. The FAC alleges Aurora purchased the loan from Equity. Id. The FAC alleges that these actions "breached [Defendants'] fiduciary obligations owed to Plaintiff, . . . breached their contract with Plaintiff, were professionally negligent, and caused Plaintiff damages." Id. at 11. The FAC alleges these damages include "monetary loss, medical expenses, emotional distress, [and] loss of employment."

The FAC alleges Aurora "enticed [Plaintiff] to make payments on the loan in a purported . . . loan modification based on promises that if he made payments, he would be able to obtain a more favorable loan." Id. at 12. The FAC alleges Plaintiff made additional payments based on this promise, but Aurora refused to modify the loan. Id. The FAC alleges Defendants' conduct was "despicable" and "subjected Plaintiff to a cruel and unjust hardship in conscious disregard of Plaintiff's rights," justifying exemplary and punitive damages. Id. at 13.


Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Federal Rule of Civil Procedure 8(a) provides: "A pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

To sufficiently state a claim to relief and survive a Rule 12(b)(6) motion, a complaint "does not need detailed factual allegations" but the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to dismiss, a court must accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1950 (2009). However, a court is not "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see, e.g., Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 683 (9th Cir. 2009) ("Plaintiffs' general statement that Wal-Mart exercised control over their day-to-day employment is a conclusion, not a factual allegation stated with any specificity. We need not accept Plaintiffs' unwarranted conclusion in reviewing a motion to dismiss."). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations omitted).


I. Pacific's Motion to Dismiss FAC

A. RESPA Violations

In support of the first cause of action for RESPA violations, Plaintiff alleges Pacific failed to "adequately respond to Plaintiff's request for information" which was sent to Aurora "via certified mail and by facsimile" on December 23, 2008. (Doc. # 21 at 13-14).

Pacific contends Plaintiff's RESPA claim fails to state a claim because Plaintiff does not allege that he ever sent a qualified written request to Pacific and because RESPA's qualified written request procedure does not apply to Pacific because Pacific is a mortgage broker, not a "loan servicer" of Plaintiff's mortgage as required by statute. (Doc. # 25-1 at 4-5). Further, Pacific contends Plaintiff has not alleged that the alleged failure to respond to the qualified written request resulted in any damages. Id. at 6. Pacific contends the allegation that Plaintiff suffered medical expenses, emotional distress, loss of employment, and mental and physical pain bear no relationship to the alleged violation of RESPA and could not be the basis of recovery. Id.

Plaintiff contends that the FAC itself qualifies as a qualified written request because it "is a written correspondence which is not a notice on a payment coupon, and does identify the name of the Plaintiff, the property address, the LOAN number, and requests information with sufficient detail for the information sought." (Doc. # 31 at 7).

12 U.S.C. section 2605(e) provides:

If any servicer of a federally related mortgage loan receives a qualified written request from the borrower . . . for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 20 days . . . unless the action requested is taken within such period.

12 U.S.C. § 2605(e)(1)(A). A qualified written request must enable the servicer to identify the name and account of the borrower, and include a statement of the reasons for the belief of the borrower that the account is in error. 12 U.S.C. § 2605(e)(1)(B).

The FAC does not allege that Plaintiff sent Pacific a qualified written request prior to the filing of the FAC. Even if the FAC does constitute a qualified written request within the meaning of RESPA, Plaintiff cannot plausibly allege that Pacific failed to timely respond to Plaintiff's qualified written request in the same document that contains Plaintiff's qualified written request. The Court concludes that ...

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