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Farmer v. Ocwen Loan Servicing

February 4, 2010


The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge



Jody B. Farmer and Patricia Farmer (collectively "Plaintiffs") claims arise from the refinance of a loan secured by real property located at 4039 West Princeton Avenue, Fresno, California ("Property"). On or about October 24, 2006, Plaintiffs allege that Defendant Terry Ellen Coleman ("Coleman") approached Plaintiffs and solicited them to refinance their residence. Defendant Coleman informed Plaintiffs that he was a broker for Defendant Affluent Lending Inc. ("Affluent Lending"). Coleman advised Plaintiffs that he could get them the "best interest rates" available on the market. Plaintiffs allege that they told Coleman that they wanted to refinance their loan to a fixed rate loan. Coleman guaranteed Plaintiffs an affordable fixed rate loan. Coleman sold Plaintiffs an adjustable rate loan with an initial rate of 7.24% and capping at 13.24% and a prepayment rider.

Coleman told Plaintiffs that "if the loan ever became unaffordable, he would simply refinance it into an affordable loan." Plaintiffs allege that Coleman falsified Plaintiffs' income on the loan application and hid this fact from Plaintiffs.*fn2 Plaintiffs allege that they were not given a copy of the loan documents prior to closing and were not given a proper notice of cancellation. At closing, Plaintiffs were only given a few minutes to sign the loan documents and the notary did not explain the documents, nor were Plaintiffs allowed to review them.

On October 24, 2006, Plaintiffs completed the loan transaction. The Deed of Trust identified Defendant Equifirst Corporation ("Equifirst") as the lender and Defendant Mortgage Electronic Registration Systems, Inc. ("MERS"), erroneously named as Mortgage Electronic Registration System, Inc., as the beneficiary and nominee for the lender. Defendant Ocwen Loan Servicing, LLC ("Ocwen") is the current servicer for Plaintiffs' loan. Defendant Deutsche Bank National Trust Company ("Deutsche Bank"), as trustee for the registered holders of Soundview Home Loan Trust 2006 EQ2 Asset-Backed Certificates, Series 2006-EQ2, erroneously named as Deutsche Bank National Trust Company, is the current beneficiary under the terms of the Deed of Trust.

In May 2009, foreclosure proceedings were initiated following Plaintiffs' default on their loan. A Notice of Default and Election to Sell were recorded on May 5, 2009. Subsequently, a Substitution of Trustee, naming Aztec Foreclosure Corporation ("Aztec") as the foreclosure trustee, was recorded on August 10, 2009. A Notice of Trustee's Sale was recorded on August 10, 2009.

On August 26, 2009, Plaintiffs filed a complaint in this court. On October 22, 2009, Plaintiffs filed an amended complaint. Plaintiffs essentially allege that Defendants Affluent Lending, Coleman, Larry Carl Nystrom ("Nystrom"), in concert with Equifirst, placed Plaintiffs into a toxic loan. Plaintiffs also allege that Defendants failed to follow the requirements for a transfer of a negotiable instrument and an interest in real property, and that no interest was ever legally transferred to any Defendant.

Plaintiffs' First-Amended Complaint ("FAC") alleges causes of action for: (1) Violation of Truth-in-Lending Act ("TILA")-Rescission and Statutory Damages against Defendant Equifirst; (2) Violation of California Rosenthal Act ("RFDCPA") Cal. Civil Code §1788 against Defendant Ocwen; (3) Negligence against all Defendants; (4) Violation of Real Estate Settlement Procedures Act ("RESPA") against Defendants Equifirst and Ocwen; (5) Breach of Fiduciary Duty against Defendants Coleman, Affluent Lending, Equifirst, and Nystrom; (6) Fraud against all Defendants; (7) Violations of California Business & Professions Code § 17200 ("UCL") against all Defendants; (8) Breach of Contract or in the alternative Rescission of Contract against Defendants Coleman, Nystrom, and Equifirst ; (9) Breach of Implied Covenant of Good Faith and Fair Dealing against Defendants Coleman, Nystrom, and Equifirst; and (10) Wrongful Foreclosure against Defendants Ocwen, Aztec, and Deutsche Bank.

Defendants Ocwen, Equifirst, Deutsche Bank and MERS now move to have the case dismissed for failure to state a claim. Plaintiffs filed an opposition on December 22, 2009.

On December 23, 2009, the court took the matter under submission without oral argument.


Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). The Court must also assume that general allegations embrace the necessary, specific facts to support the claim. Smith v. Pacific Prop. and Dev. Corp., 358 F.3d 1097, 1106 (9th Cir. 2004); Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994). But, the Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Although they may provide the framework of a complaint, legal conclusions are not accepted as true and "[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003). Furthermore, Courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court has recently explained:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, to "avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949; see Twombly, 550 U.S. at 570; see also Weber v. Department of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

The plausibility standard is not akin to a 'probability requirement,' but it asks more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of 'entitlement to relief.' . . .

Determining whether a complaint states a plausible claim for relief will . . . be a context specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not shown -- that the pleader is entitled to relief.

Iqbal, 129 S.Ct. at 1949-50. "In sum, for a complaint to survive a motion to dismiss, the nonconclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).

In deciding whether to dismiss a claim under Rule 12(b)(6), the Court is generally limited to reviewing only the complaint, but may review materials which are properly submitted as part of the complaint and may take judicial notice of public records outside the pleadings. See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996);MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986). Further, under the "incorporation by reference" doctrine, courts may review documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005); Lapidus v. Hecht, 232 F.3d 679, 682 (9th Cir. 2000). The "incorporation by reference" doctrine also applies "to situations in which the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, ...

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