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Garavito v. GE Money Bank

March 2, 2010


The opinion of the court was delivered by: Marilyn L. Huff, District Judge United States District Court


On January 19, 2010, Defendant GE Money Bank, FSB ("GEMB") filed a motion to dismiss or, alternatively, to strike, Plaintiff's Second Amended Complaint. (Doc. No. 49.) Plaintiff filed her response in opposition to the motion on February 18, 2010.*fn1 (Doc. No. 51.) On February 24, 2010, the Court extended the deadline for Defendant GEMB to file its reply, determined this matter to be appropriate for resolution without oral argument, and submitted it on the parties' papers. (Doc. No. 52.) On February 24, 2010, Defendant GEMB filed its reply in support of its motion to dismiss. (Doc. No. 53.) For the following reasons, the Court GRANTS GEMB's motion.


On or about January 24, 2007, Plaintiff Martha Garavito purchased a residence located at 1610 Greenfield Court, Chula Vista, California (the "Property"). The purchase of the Property was financed by GEMB with two loans, the first in the amount of $504,000.00 secured by a first trust deed, and the second for $126,000.00 secured by a second trust deed. (Doc. No. 32, SAC ¶¶ 1,2,3,4,5,16; Doc. No. 5-2, Ex. A-D.) As of April 23, 2008, Plaintiff was in arrears by at least $13,767.68 on the $504,000.00 loan secured by the first trust deed and a Notice of Default was recorded by Defendant Saxon Mortgage Services, Inc. ("Saxon"). ( Doc. No. 5-2, Ex. E.) Plaintiff commenced this action on December 1, 2008, alleging causes of action for violations of the Real Estate Settlement Procedures Act ("RESPA"), the Truth in Lending Act ("TILA"), California Civil Code § 1632, negligent misrepresentation, rescission, unjust enrichment and quiet title. (Doc. No. 1.) On February 26, 2009, the Court dismissed Plaintiff's causes of action for violations of RESPA, TILA, California Civil Code § 1632, negligent misrepresentation and rescission. (Doc. No. 13.) On March 27, 2009, Plaintiff filed her First Amended Complaint ("FAC"). (Doc. No. 15.) On June 4, 2009, the Court dismissed Plaintiff's FAC without prejudice, and instructed Plaintiff that if she wished to request rescission, Plaintiff would have to submit proof of her ability to tender or provide authority for her argument that she has fulfilled this requirement by sending a notice of rescission and quit claim deed to Defendant Saxon on November 19, 2008. (Doc. No. 29.)

On July 6, 2009, Plaintiff filed her Second Amended Complaint ("SAC"). (Doc. No. 32.) The SAC alleges nine causes of action: (1) violation of RESPA against Defendants Saxon and Resurgent Capital Services ("Resurgent"); (2) violation of TILA against all Defendants; (3) violation of California Civil Code § 1632 against Defendants Integrity Premier Real Estate ("IPRE") and GEMB; (4) violation of Business and Professions Code § 17200 against all Defendants; (5) negligent misrepresentation against Defendants GEMB, IPRE and Resurgent; (6) fraud against all Defendants; (7) rescission against all Defendants; (8) quasi-contract against all Defendants; and (9) determination of validity of lien against all Defendants. (SAC.) The SAC alleges that, prior to the funding of the loan, Defendant GEMB and/or Defendant IPRE represented to Plaintiff that she was eligible for very favorable loan terms. (SAC ¶ 17.) These representations allegedly convinced Plaintiff to take on the Loan. (Id.) The Complaint alleges that these Defendants "intended that Plaintiff receive a worse loan" yielding a higher commission for Defendants. (Id.) Specifically, Plaintiff alleges that Defendants GEMB, IPRE, "and other persons" made misrepresentations concerning: the interest rate of the Loan, the payment amount, the amount of equity in the Property, the amount of money available to Plaintiff, and whether Plaintiff could afford the Loan. (SAC ¶ 18.) Plaintiff further alleges that Defendants failed to provide her with certain disclosures required under federal and state law, including a proper notice of her right to cancel at the time of the transaction or subsequently and accurate disclosures of the financing cost, annual percentage rate, payment obligations, and type of loan. (SAC ¶ 19.) Additionally, the SAC states that Plaintiff is a native Spanish speaker and that the loan negotiations were conducted primarily in Spanish, though no documents or disclosures were provided to Plaintiff in Spanish prior to the transaction. (SAC ¶¶ 21, 52.) On January 19, 2010, GEMB moved to dismiss or, alternatively, to strike, the SAC for failure to state a claim. (Doc. No. 49.)


I. Motion to Dismiss - Legal Standard

A motion to dismiss a complaint under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims asserted in the complaint. Navarro v. Black, 250 F.3d 729, 732 (9th Cir. 2001). A complaint generally must satisfy only the minimal notice pleading requirements of Federal Rule of Civil Procedure 8(a)(2) to evade dismissal under a Rule 12(b)(6) motion. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). Rule 8(a)(2) requires that a pleading stating a claim for relief contain "a short and plain statement of the claim showing that the pleader is entitled to relief." The function of this pleading requirement is to "'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). "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." Id. A complaint does not "suffice if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting id. at 557). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235--36 (3d ed. 2004)). "All allegations of material fact are taken as true and construed in the light most favorable to plaintiff. However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996); see also Twombly, 550 U.S. at 555.

"Generally, a district court may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir.1990). The court may, however, consider the contents of documents specifically referred to and incorporated into the complaint. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir.1994). The court may also consider evidence on which the complaint "necessarily relies" as long as: (1) the complaint refers to the document; (2) the document is central to the plaintiff's claim; and (3) no party questions the authenticity of the copy attached to the 12(b)(6) motion. Marder v. Lopez, 450 F.3d 445, 448 (9th Cir. 2006).

II. TILA Violation

Plaintiff alleges that "Defendants violated 15 U.S.C. §1635(a) and Regulation Z §226.23(b) with regards to the purported Notice of Right to Cancel." (SAC ¶ 47.) Plaintiff also claims that GEMB violated TILA by failing to disclose the interest rate on the note or deliver an accurate TILA statement. (SAC ¶48.) Based upon these purported violations, Plaintiff alleges that she is entitled to recover damages. (SAC ¶ 49.)

The Court had previously dismissed Plaintiff's claim with prejudice after concluding that Plaintiff's purchase money loan was exempt from the disclosure mandate. (Doc. No. 13.) Plaintiff now appears to allege that her loans were used to refinance the property. (SAC ¶ 17.) This allegation is contradicted by exhibits submitted by Defendant: the relevant grant deed, rate note and deed of trust demonstrate that Plaintiff's loan was a purchase money loan. (Doc. No. 5-2, Ex. A, B, C.) Additionally, even if Plaintiff could properly allege a TILA violation claim, her claim for damages is barred by the one-year statute of limitations. See 15 U.S.C. § 1640(e). Accordingly, the Court GRANTS GEMB's motion to dismiss Plaintiff's claim for violation of TILA.

III. Violation of California Civil Code § 1632 et seq.

Plaintiff alleges that Spanish is her native language, that the loan negotiations were carried out primarily in Spanish, and that GEMB failed to provide her with Spanish language documents in violation of California Civil Code § 1632. (SAC ¶ 52.) California Civil Code § 1632 requires a translation of a contract or agreement in the language in which the contract was negotiated be provided for a "loan or extension of credit for use primarily for personal, family or household purposes where the loan or extension of credit is subject to the provisions of Article 7 (commencing with Section 10240)." Cal. Civ. Code § 1632(b)(4). Section 10204, in turn, applies to certain real estate loans secured by real property that are negotiated exclusively by a real estate broker. Cal. Bus. & Prof. Code § 10204. The Court has previously concluded that Plaintiff failed to state a claim for violation of section 1632 against Defendant GEMB, because Plaintiff did not allege that GEMB actually negotiated Plaintiff's loan or that GEMB acted as Plaintiff's broker. (Doc. No. 29.) The SAC alleges that Defendant IPRE was the broker, and GEMB was the originating lender. (SAC ¶¶ 2, 3.) In her opposition to Defendant's motion to dismiss, Plaintiff argues ...

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