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Pok v. American Home Mortgage Servicing

February 2, 2010



Plaintiffs Pichanda Pok and Vann Phou filed this action against defendants American Home Mortgage Servicing, Inc. ("AHMSI"), American Brokers Conduit, Power Default Services, Inc. ("Power Default"), Mortgage Electronic Registration Systems, Inc. ("MERS"), Innovia Estates, Desiree Ford, and Joseph Hai Dinh alleging various state and federal claims relating to a loan they obtained to refinance their home in Stockton, California. AHMSI, Power Default, and MERS move to dismiss plaintiffs' 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.

I. Factual and Procedural Background

On September 12, 2006, plaintiffs obtained a loan from American Brokers Conduit to refinance their home, located at 10022 Ornella Drive, Stockton, California. (FAC ¶¶ 6, 37.) This loan was memorialized in a Promissory Note ("the Note") secured by a Deed of Trust on the property. (Id. ¶ 37.) Plaintiffs claim that they were channeled into this allegedly unaffordable loan through the conduct of their mortgage broker Ford, who allegedly told plaintiffs they could only qualify for a "sub-prime" loan when in fact they qualified for a "prime" loan with better terms. (Id. ¶¶ 29-31.) The Deed of Trust listed First Alliance Title as trustee, American Brokers Conduit as lender, and MERS as nominee and beneficiary for the lender and lender's successors and assigns. (Id. ¶¶ 37-38.) MERS facilitates the transfer of mortgage interests by providing an electronic tracking system for the mortgage interests registered in its system.*fn1 To do this, MERS is the beneficiary of record in a "nominee" capacity for the mortgage lender on all security instruments in its system. (Id. ¶ 11.)

Plaintiffs eventually defaulted on their loan, and a Notice of Default and Election to Sell Under Deed of Trust was filed in San Joaquin County by Power Default on February 26, 2009. (Id. ¶ 40.) On May 27, 2009, plaintiffs 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. ¶ 43.) On July 29, 2009, MERS, as nominee for Alliance Title, allegedly substituted Power Default as trustee under the Deed of Trust. (Id. ¶ 41.) On August 24, 2009, Power Default allegedly noticed the trustee sale of the property. (Id. ¶ 42.) This notice identified Power Default as the trustee under the Deed of Trust. (Id.)

In their FAC, plaintiffs assert ten causes of action against seven defendants. AHMSI, Power Default, and MERS move to dismiss only those causes of action alleged against them. Plaintiffs did not oppose the motion until January 14, 2010, almost two weeks past the deadline for the submission of an opposition pursuant to Local Rule 230(c). Although the court will consider plaintiffs' Opposition, the hearing date of January 19, 2010 is VACATED pursuant to Local Rule 230(c), and the court will take defendants' motion to dismiss under submission without oral argument due to plaintiffs' late filing.

II. Discussion

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.

In support of their motion to dismiss, AHMSI, Power Default, and MERS submitted a Request for Judicial Notice of two exhibits, a copy of the Deed of Trust, recorded in San Joaquin County and a Notice of Trustee's Sale, recorded in San Joaquin County. (Docket No. 22.) Plaintiffs also submitted a Request for Judicial Notice of one unpublished article entitled "Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System." The court will take judicial notice of defendants' exhibits, since 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). However, the court denies plaintiffs' request, as the document in question is an unpublished article expressing an individual opinion that can be questioned.

A. California Rosenthal Fair Debt Collection Practices Act

Plaintiffs' second cause of action alleges that defendant AHMSI violated the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), Cal. Civ. Code § 1788.2. 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).

Plaintiffs fail to allege facts that would support the inference that AHMSI is a "debt collector" under the RFDCPA. Instead, the FAC contains only a conclusory restatement of the definition of "debt collector" under the RFDCPA, (FAC ¶ 77.), 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 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 ...

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