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Woods v. Greenpoint Mortgage Funding


April 27, 2010



Plaintiff Scott W. Woods filed this action against Greenpoint Mortgage Funding, Inc. ("Greenpoint"), GMAC Mortgage ("GMAC"), Aurora Lending Services, LLC ("Aurora"), Lehman Brothers,*fn1 and U.S. Bank National Association as trustee for Greenpoint Mortgage Mortgage Funding Trust Mortgage Pass-Through Certificates, Series 2006-AR7 ("US Bank"), alleging various state and federal claims relating to a loan he obtained to refinance his home in Folsom, California. Greenpoint moves 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. GMAC, Aurora, and US Bank also move to dismiss plaintiff's FAC pursuant to Rule 12(b)(6). Plaintiff did not timely oppose the motions, and instead filed a Notice of Opposition on April 9, 2010--eleven days late and four days after the court took defendants' motions under submission without oral argument pursuant to Local Rule 230(c). (Docket No. 37.)

I. Factual and Procedural Background

In 2006, plaintiff obtained a loan to refinance his home in Folsom, California. (FAC ¶ 5.) The loan is an adjustable-rate loan in the amount of $1,100,000. (Id.) Greenpoint is listed as the Lender on the promissory note. (Id. ¶ 9.) On August 18, 2008, plaintiff entered into a loan modification with GMAC, who allegedly represented to be the "Lender" under the loan. (Id. ¶ 35.) The loan modification allegedly provided for a reduction in the interest rate for five years. (Id.)

In the course of attempting to determine who the owner of the Note is, plaintiff alleges that in May 2009 GMAC informed him that Aurora is the owner. (Id. ¶ 36.) Aurora allegedly has no record of the loan, or of plaintiff, his address, or social security number. (Id.) Plaintiff allegedly sent Greenpoint and GMAC a Qualified Written Request ("QWR") pursuant to the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. §§ 2601-2617, on May 27, 2009. (Id. ¶ 37.) GMAC responded again that Aurora is the owner, and that GMAC is the loan servicer. (Id. ¶ 41.) Greenpoint represented to plaintiff that it sold the loan to Lehman Brothers in August 2006 and transferred the loan servicing to GMAC in October 2006. (Id. ¶ 45.) Plaintiff also alleges that he validly rescinded the loan under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, on May 28, 2009, by giving notice to Greenpoint, GMAC, and Aurora. (Id. ¶¶ 23-29.) Aurora responded to plaintiff's Notice of Cancellation on June 4, 2009, by allegedly stating it was unable to locate plaintiff's property in their records. (Id. ¶ 46.)

Plaintiff's counsel allegedly sent a letter to Greenpoint, GMAC, and Aurora on June 15, 2009, to definitively determine the owner of the Note. (Id. ¶ 48.) GMAC responded on June 23, 2009, and allegedly stated that GMAC is the sub-servicer and Aurora is the master servicer of the loan. (Id. ¶ 49.) GMAC allegedly informed plaintiff that his loan is held in a pool of loans for which U.S. Bank acts as trustee. (Id.) On June 27, 2009, Woods allegedly sent U.S. Bank notice of his rescission of the loan. (Id. ¶ 24.) Greenpoint responded on September 16, 2009, allegedly stating and providing documentation that the loan's beneficial interest was transferred from Greenpoint to Aurora on August 16, 2009 and the servicing was transferred to GMAC on October 9, 2006. (Id. ¶ 50.)

Plaintiff alleges that GMAC and Aurora are the servicers of his loan, and that they have failed to disclose the owner of his loan. (Id. ¶¶ 32, 51.) Plaintiff also alleges that defendants understated the interest rate on his loan, failed to make required disclosures, and improperly retained and misapplied funds collected from plaintiff.

On the basis of the allegations above, plaintiff asserts five causes of action against five defendants. Greenpoint's Motion to Dismiss only challenges plaintiff's first cause of action, as it is the only cause of action that complains against Greenpoint. GMAC, Aurora, and US Bank's Motion to Dismiss addresses each of plaintiff's claims.

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, 127 S.Ct. 1955, 1974 (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.

Defendants have each submitted a Request for Judicial Notice ("RJN"). Greenpoint's RJN contains four documents: (1) a copy of the Deed of Trust, recorded in the Official Records of Sacramento County on June 30, 2006; (2) a copy of the Note, which is identical to the copy provided by plaintiff in Exhibit G to the FAC; (3) a copy of the Notice of Right to Cancel, which is identical to plaintiff's exhibit C; (4) a copy of the letter dated June 23, 2009, from counsel for GMAC to plaintiff's counsel, which is identical to plaintiff's Exhibit K. The court will take judicial notice of exhibits 1, 2, and 4 in defendant's RJN, as they are matters of public record or whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). Because plaintiff alleges that he never received this copy of the Notice of Right to Cancel nor signed it (FAC ¶¶ 17-18), the court will decline to take judicial notice of Greenpoint's third exhibit. See Olivera v. Am. Home Mortg. Servicing, Inc., No. 09-3616, 2010 WL 334848, at *4 (N.D. Cal. Jan. 22, 2010) (declining to take judicial notice of alleged Notice of Right to Cancel proffered by defendants where plaintiff challenged its authenticity); see also Morris v. Bank of Am., No. 09-2849, 2010 WL 761318, at *4 (N.D. Cal. Mar. 3, 2010) (same). Defendants GMAC, Aurora, and US Bank's RJN contains two documents: (1) a copy of the Deed of Trust; and (2) a copy of the Notice of Right to Cancel, which is identical to plaintiff's exhibit C. The court will grant judicial notice of (1) and deny judicial notice of (2) for the same reasons explained above.

A. Truth in Lending Act Claim

Plaintiff's first cause of action complains against Greenpoint, GMAC, Aurora, and US Bank. Plaintiff alleges that Greenpoint violated TILA by failing at the origination of the loan to make the "material disclosures," to disclose the finance charge, and to deliver two copies of the notice of the right to rescind as required by TILA. (FAC ¶¶ 13-17.) Rather, plaintiff alleges that he received only one defective copy of the notice of right to cancel from Greenpoint. (Id. ¶ 17.) Plaintiff also alleges that Greenpoint, GMAC, US Bank, and Aurora violated TILA when they did not implement plaintiff's rescission of the loan within twenty days as required by TILA, and when they failed to return any money received by them from plaintiff as part of the loan transaction. (Id. ¶¶ 28-29.) Plaintiff requests both a declaration that the Deed of Trust is now void as a result of plaintiff's prior rescission and damages as the result of these alleged violations.

1. Greenpoint's Motion to Dismiss

Greenpoint presents three reasons why plaintiff's first cause of action should be dismissed against it. First, Greenpoint argues that plaintiff's rescission claim is time-barred under TILA. (Greenpoint Mem. in Supp. of Mot. to Dismiss (Docket No. 25), at 4.) Yet plaintiff does not seek rescission of the loan; indeed, plaintiff alleges that he rescinded the loan by letter on May 28, 2009, (FAC Ex. D (Notice of Cancellation)) and seeks declaratory relief that the security interest is void and damages for defendants' failure to comply with the Notice of Cancellation. As Greenpoint acknowledges, plaintiff has three years from the date of consummation of the transaction to rescind, which plaintiff has allegedly done. See 15 U.S.C. § 1635(f). Greenpoint's first argument, therefore, must fail.

Second, Greenpoint argues that plaintiff's first cause of action must be dismissed because a TILA damages claim is subject to a one-year statue of limitations. 15 U.S.C. § 1640(e). Plaintiff seeks both damages and declaratory relief for the alleged TILA violation. In his Opposition, plaintiff argues that the damages claims in his first cause of action should survive as a defense by recoupment or set-off. (Mem. in Opp'n to Def.'s Mot. to Dismiss (Docket No. 37), at 5.) In support of this argument, plaintiff cites 15 U.S.C. § 1640(e), which provides that the one-year statute of limitations does not apply where a borrower "assert[s] a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action . . . ." Plaintiff has not alleged, however, that defendants have initiated any court proceedings against plaintiff to collect on plaintiff's debt. Rather, plaintiff has filed suit against defendants. When a debtor files suit against her creditor, "the claim by the debtor is affirmative rather than defensive." Ortiz v. Accredited Home Lenders, Inc., 639 F. Supp. 2d 1159, 1164-65 (S.D. Cal. 2009) (citation omitted) (also noting that a non- judicial foreclosure is not an "action" as contemplated by TILA). Plaintiff's claim for damages under TILA, therefore, is not subject to a waiver of the one year statute of limitations. As plaintiff filed his complaint more than one year after the origination of his loan and has provided no facts that would support equitable tolling of the statute of limitations, his claim for damages related to TILA violations at the origination of his loan must be dismissed.

While plaintiff filed his claim for damages more than a year after the closing of his loan, the failure to honor plaintiff's rescission request or request for information is a separate actionable violation of TILA. See Buick v. World Sav. Bank, 637 F. Supp. 2d 765, 771-72 (E.D. Cal. 2008) (England, J.) (citing In re Wright, 133 B.R. 704 (E.D. Pa. 1991) ("The failure of a lender to properly act on a rescission is a new violation separate and distinct from the disclosure violation that gave rise to the right to rescind.")). As alleged, plaintiff provided Greenpoint with a valid notice of rescission within the requisite time period under 15 U.S.C. § 1635(f) and Greenpoint refused to comply. If a creditor receives a timely Notice of Cancellation and then refuses to cancel the loan, the borrower has one year from the refusal to file suit for damages pursuant to 15 U.S.C. § 1640. Miguel v. Country Funding Corp., 309 F.3d 1161, 1165 (9th Cir. 2002) (citing 15 U.S.C. § 1640(e)). Because plaintiff brought this action for damages pursuant to 15 U.S.C. § 1640 within one year of having his Notice of Cancellation refused, it is timely. See Buick, 637 F. Supp. 2d at 771-72 (citing Belini v. Wash. Mut. Bank, FA, 412 F.3d 17, 25 (1st Cir. 2005)).

Third, Greenpoint argues that plaintiff has never offered to tender the funds necessary to validly rescind the loan. Under TILA, the security interest in the Note becomes void upon rescission and the creditor must return any money or property given by the borrower under the transaction within twenty days. 15 U.S.C. § 1635(b); see 12 C.F.R. § 226.23(d). "Upon the performance of the creditor's obligations," the borrower must tender the property or its reasonable value to creditor. 15 U.S.C. § 1635(b). A notice of rescission, however, does not always automatically rescind the Note. If a defendant acquiesces to the notice then the transaction automatically rescinds, thereby triggering the sequence of events outlined in § 1635(b). If a defendant contests the notice, however, then "it cannot be that the security interest vanishes immediately upon the giving of notice." Yamamoto v. Bank of N.Y., 329 F. 3d 1167, 1172 (9th Cir. 2003) ("In a contested case, [rescission] happens when the right to rescind is determined in the borrower's favor.").

Section 1635 gives courts the power to modify the rescission procedure. 15 U.S.C. § 1635(b). The Ninth Circuit has held that in certain circumstances rescission under TILA "should be conditioned on repayment of the amounts advanced by the lender," Yamamoto, 329 F. 3d at 1170 (citing LaGrone v. Johnson, 534 F.2d 1360 (9th Cir. 1976) (requiring tender where TILA violations were not egregious and equities favor creditor that would be left in unsecured position in borrower's intervening bankruptcy)), and that judges may alter the sequence of rescission events under 15 U.S.C. § 1635(b). See Yamamoto, 329 F.3d at 1171 ("[W]hether a decree of rescission should be conditional depends upon 'the equities present in a particular case, as well as consideration of the legislative policy of full disclosure that underlies [TILA] and the remedial-penal nature of the private enforcement provisions of the Act.'") (quoting Palmer v. Wilson, 502 F.2d 860, 862 (9th Cir. 1974)); see also In re Hubbel, No. 09-3424, 2010 WL 1222777, at *4 (N.D. Cal. Mar. 24, 2010) (discussing Yamamoto).

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, No. 1:08-1477, 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, No. 09-1707, 2009 U.S. Dist. LEXIS 80581, at *22 (S.D. Cal. Sept. 4, 1009); Carnero v. Weaver, No. 09-1995, 2009 U.S. Dist. LEXIS 62665, at *8 (N.D. Cal. July 20, 2009); Pesayco v. World Sav., Inc., No. 09-3926, 2009 U.S. Dist. LEXIS 73299, at *4 (C.D. Cal. July 29, 2009); Ing Bank v. Korn, No. 09-124Z, 2009 U.S. Dist. LEXIS 73329, at *7 (W.D. Wash. May 22, 2009). Plaintiff's Notice of Cancellation stated that plaintiff would "tender to you any and all monies or properties you have given to borrower, or their reasonable value" upon completion of the creditor's obligations under 15 U.S.C. § 1635(b). (FAC Ex. D.) Plaintiff has not, however, pled his ability to tender the loan proceeds, and his bald assertion that he will tender over one million dollars does not cross "the line between possibility and plausibility." Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 556-57).

Like many other courts in the Ninth Circuit, this court will not entertain plaintiff's claims for relief under TILA as a result of defendants' failure to honor his rescission unless plaintiff alleges the ability to complete his part of the rescission process and tender either the property itself or its reasonable value as required by section 1635. Taking all facts plead in the most favorable light to plaintiff, he has pled that he mailed a timely Notice of Cancellation to defendants and has offered to tender, but has not alleged any facts indicating that he has or is able to tender sufficient funds to repay the loan principal. To the contrary, the facts that the court does have indicate that plaintiff has thus far been unable to tender the amount of the loan or unwilling to return the property to the creditor. (FAC Ex. K.) Without facts indicating plaintiff's ability to tender, he cannot seek relief from the court for defendant's alleged failure to honor his rescission. Greenpoint's motion to dismiss will therefore be granted with leave to amend.

2. GMAC, Aurora, and US Bank's Motion to Dismiss

Plaintiff alleges that GMAC, Aurora, and US Bank failed to implement his notice of rescission under TILA, and alleges that each of them are assignees of his loan. Section 1641 of TILA specifically makes assignees of creditors civilly liable under TILA. 15 U.S.C. § 1641. As alleged assignees, GMAC, Aurora, and US Bank have the same defenses available to them as Greenpoint. For the reasons stated above, GMAC, Aurora, and US Bank's motion to dismiss plaintiff's first cause of action will also be granted.

B. Real Estate Settlement Procedures Act and TILA Claim

The Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. §§ 2601-2617, provides that borrowers must be provided certain disclosures relating to the mortgage loan settlement process. See 12 U.S.C. § 2601 (2006). Section 2605 relates to the disclosures and communications required regarding the servicing of mortgage loans, and provides that loan servicers have a duty to respond to qualified written requests ("QWRs") from borrowers asking for information relating to the servicing of their loan. See 12 U.S.C. § 2605(e). Loan servicers have sixty days after the receipt of a QWR to respond to the borrower inquiry. 12 U.S.C. § 2605(e)(2).

Plaintiff's second cause of action complains against GMAC and Aurora as loan servicers for failing to provide required disclosures, misapplying funds belonging to plaintiff, failing to provide a full accounting, and failing to disclose ownership of the Note and loan. Plaintiff alleges that, inter alia, he mailed GMAC and Greenpoint a QWR on May 27, 2009, which included a demand to disclose the ownership of the Note as required by TILA. (FAC ¶ 38.) GMAC allegedly told plaintiff that Aurora owns the loan and that GMAC is the servicer, Greenpoint told plaintiff that the loan was sold to Lehman Brothers and that GMAC is the servicer, and Aurora has stated in phone conversations with plaintiff that it has no record of the loan. (Id. ¶¶ 41, 45-47; Id. Ex. F-I.) Counsel for GMAC later allegedly informed plaintiff that GMAC is the loan's sub-servicer, Aurora is the master servicer, and that the loan is held in a pool of loans for which US Bank acts as trustee. (Id. ¶ 49; Id. Ex. K.) Because GMAC has allegedly provided plaintiff with conflicting information regarding the ownership of his Note, plaintiff charges that it has not properly responded to his QWR or provided him with the identification of the present owner of the Note. (Id. ¶¶ 39-51.)

GMAC and Aurora argue that plaintiff's TILA cause of action must fail because it is time-barred by the one-year statute of limitations for damages claims under TILA. Plaintiff's second cause of action alleges that GMAC and Aurora violated TILA, 15 U.S.C. § 1641(f)(2), which provides that a loan servicer "shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation." (See FAC ¶ 52.) As previously stated, the failure to honor plaintiff's request for information is a distinct, actionable violation under TILA. See Buick, 637 F. Supp. 2d at 771-72.

However, "[c]ivil liability under TILA applies to creditors." Pelayo v. Home Capital Funding, No. 08-CV-2030, 2009 U.S. Dist. LEXIS 44453, at *12 (S.D. Cal. May 22, 2009). "15 U.S.C. § 1641 provides that any TILA action (including a rescission claim) which may be brought against a creditor may also be brought against the assignee of a creditor. However, under § 1641, loan servicers 'shall not be treated as an assignee of [a consumer] obligation for purposes of this section unless the servicer is or was the owner of the obligation.'" Id.

(emphasis in original); see also Marks v. Ocwen Loan Servicing, 2008 U.S. Dist. LEXIS 12175, at *4-5 (N.D. Cal. Feb. 6, 2008) (noting that "although TILA provides that assignees of a loan may be liable for TILA violations, loan servicers are not liable under TILA as assignees unless the loan servicer owned the loan obligation at some point"). Plaintiff alleges that GMAC and Aurora are servicers, yet also alleges that he does not know who owns the Note or how the beneficial interest in the loan has transferred over time. While it is unclear whether defendants were in fact an assignee of plaintiff's loan, construing the facts and all reasonable inferences in favor of plaintiff, it plausible that defendants were an assignee of the creditor of the loan outside of servicing obligations.*fn2 See Pelayo, 2009 U.S. Dist. LEXIS 44453 at *13; see also Cabalo v. EMC Mortg. Corp., No. 08-5667, 2009 U.S. Dist. LEXIS 8283, at *6 (N.D. Cal. Feb. 5, 2009)(finding the plaintiff sufficiently pled that defendant mortgage servicer was liable under TILA under circumstances where "it [was] not clear who the loan's holder [was]" and "documents submitted by defendants [did] not show [an assignment of the loan] was never made").

GMAC also argues that plaintiff's RESPA cause of action must fail because he fails to allege how it failed to respond to his QWR request and he has not identified any code section of RESPA that GMAC allegedly violated.*fn3 RESPA obliges servicers to respond to QWRs for information "relating to the servicing of" the loan within sixty days. 12 U.S.C. § 2605(e)(1)(A), (e)(2)(C). Plaintiff specifically alleges that he requested TILA disclosures pursuant to 15 U.S.C. § 1641(f)(2). Information regarding oh whose behalf the servicer is accepting loan payments seems to clearly be related to the servicing of plaintiff's loan and a proper subject of a QWR under RESPA.*fn4 Plaintiff admits that GMAC responded to his written requests, but alleges that the varied responses and documentary evidence show that the defendants are providing him with false and misleading information. (FAC ¶¶ 39-40, 43, 51, 57.) Viewing the FAC in the light most favorable to the plaintiff, plaintiff has stated a valid RESPA cause of action against GMAC.

Plaintiffs must also allege actual harm to survive a motion to dismiss. Section 2605(f) imposes liability on servicers that violate RESPA and fail to make the required disclosures. 12 U.S.C. § 2605(f). Although this section does not explicitly make a showing of damages part of the pleading standard, "a number of courts have read the statute as requiring a showing of pecuniary damages in order to state a claim." Allen v. United Financial Mortg. Corp., 2009 WL 2984170, at *5 (N.D. Cal. Sept. 15, 2009). For example, in Hutchinson v. Del. Sav. Bank FSB, the court stated that "alleging a breach of RESPA duties alone does not state a claim under RESPA. Plaintiff must, at a minimum, also allege that the breach resulted in actual damages." 410 F. Supp. 2d 374, 383 (D.N.J. 2006). Courts, however, "have interpreted this requirement liberally." Yulaeva v. Greenpoint Mortg. Funding, Inc., No. 09-1504, 2009 WL 2990393, at *15, (E.D. Cal. Sept. 9, 2009)(Karlton, J.).

Plaintiff alleges that he has made over $100,000 in mortgage payments to GMAC and that he relied on GMAC's assertion that it owned the loan by entering into a loan modification arrangement with GMAC. (FAC ¶¶ 35, 72.) Plaintiff has been unable to determine who owns his loan, where his mortgage payments to GMAC have gone, and how they have been applied or misapplied to paying off his loan balance. By failing to give plaintiff a straight answer to these simple questions, GMAC has harmed plaintiff by preventing him from rescinding the loan and having his mortgage payments returned to him. Plaintiff has therefore stated a valid RESPA cause of action.

C. Fraud

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, 1006 (9th Cir. 2003) (citation omitted). "The plaintiff must set forth what is false or misleading about a statement, and why it is false." 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. 09cv937, 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)).

Plaintiffs' fraud allegation reincorporates his earlier allegations, which include references to the exhibits of letters sent by plaintiff and from defendants regarding the holder of the Note and owner of the loan. (See FAC Ex. D-L). These exhibits clearly provide the date, address, and identifying information about the defendants and the alleged statements made by them with enough specificity to put GMAC and Aurora sufficiently on notice as to the statements that plaintiff alleges are false and misleading. Plaintiff alleges that GMAC and Aurora's letters and statements to him regarding the owner of the loan are false and misleading in part because they are clearly in conflict, (FAC ¶ 64) which is sufficient to survive a motion to dismiss at this time.

Likewise, plaintiff has established the remaining elements of fraud sufficiently. Plaintiff alleges that he had relied on GMAC's prior assertions that it owned the loan when he entered into a loan modification agreement with GMAC, and that he has been harmed by this fraud as he has been unable to rescind the loan and have his principal payments returned to him. This properly alleges both intent to induce reliance and the "cause and effect relationship between the fraud and damages sought" necessary to survive a motion to dismiss. Small v. Fritz Companies, 30 Cal. 4th 167, 202 (2003) (citations omitted). Plaintiff's allegations that each defendant has denied ownership of the loan and passed him off to another party is sufficient to plead scienter. It is clear that at least some, if not all, of the information allegedly told to plaintiff by the defendants is false. As a result, plaintiff has been prevented from determining who owns his loan, how his mortgage payments have been credited to his loan balances, or rescinding the loan. GMAC and Aurora's motion to dismiss plaintiff's third cause of action will therefore be denied.

D. Negligent and Reckless Misrepresentation

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[s'] injure[ies]." Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333, 1339 (Ct. App. 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's fourth cause of action for negligent and reckless misrepresentation states only that GMAC and Aurora did not have reason to believe that their statements to plaintiff were true, and that plaintiff relied on these representations to his detriment. (FAC ¶¶ 68-70.) Even incorporating the prior allegations by reference, this sparse pleading clearly fails to allege the necessary elements for negligence. Specifically, plaintiff fails to allege how Aurora and GMAC owed him a duty of care and that they breached that duty, how plaintiff was injured, and that his injuries are causally related to defendants' representations. This is compounded by the fact that, to the extent that plaintiff alleges that GMAC and Aurora are loan servicers, they do not owe a duty to the borrowers of the loans they service. See Watts v. Decision One Mortg. Co., No. 09-43 2009 U.S. Dist. LEXIS 59694 (S.D. Cal. July 13, 2009); Marks v. Ocwen Loan Servicing, No. 07-2133, 2009 WL 975792, at *7 (N.D. Cal. Apr. 10, 2009) ("[A] loan servicer does not owe a fiduciary duty to a borrower beyond the duties set forth in the loan contract.")

The court will therefore dismiss this cause of action with leave to amend.

E. Conversion

Defendants also seek dismissal of plaintiff's conversion claim. "Conversion is any act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein," which includes assuming "control or ownership over the property," or applying the property to one's own use. Messerall v. Fulwider, 199 Cal. App. 3d 1324, 1329 (1988) (citing Igauye v. Howard, 114 Cal. App. 2d (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages. Fremont Indemnity Co. v. Fremont Gen. Corp., 148 Cal. App. 4th 97, 119 (2007) (citing Burlesci v. Petersen, 68 Cal. App. 4th 1062, 1066 (1998)). Legal title to property is not necessary for an action for damages in conversion; a plaintiff must only show that she was "entitled to immediate possession at the time of conversion." Messerall v. Fulwider, 199 Cal. App. 3d 1324, 1329 (1988) (citing Bastanchury v. Times-Mirror Co., 68 Cal. App. 2d 217, 236 (1945)).

Defendants argue that plaintiff has failed to allege facts that plausibly show that either GMAC or Aurora "exercised dominion over plaintiff's personal property in a manner inconsistent with the plaintiff's rights at the time." Somsanith v. Bank of America, N.A., No. 09-1791, 2009 WL 3756693, at *4 (E.D. Cal. Nov. 6, 2009) (Shubb, J.) Unlike in Somsanith, plaintiff here alleges that GMAC and Aurora collected payments from plaintiff and failed to apply them to his loan. While GMAC may have had the right as plaintiff's servicer to receive payments from plaintiff, and while Aurora may have had the right as plaintiff's senior servicer or owner of the loan to receive payments from GMAC, neither had the right to allegedly convert plaintiff's funds for their own gain. Plaintiff alleges that GMAC and Aurora provided conflicting information with respect to Aurora's involvement in the loan and with respect to alleged payments made by GMAC to Aurora. (FAC ¶¶ 73-74.) This is sufficient to plead that one or both of defendants improperly converted plaintiff's mortgage payments, and plaintiff has therefore adequately pled a cause of action for conversion.

F. Sanctions

James A. Nations ignored Local Rule 230(c) and failed to timely file his opposition to defendants' motions to dismiss. Instead of informing the court of his inability to meet the opposition deadline, he did nothing. Counsel's failure to comply with Local Rule 230(c) and timely file any response to Greenpoint's or Aurora, US Bank, and GMAC's motions to dismiss is inexcusable and has seriously inconvenienced both opposing counsel and the court. Specifically, it has disrupted the orderly process of litigation by forcing the court to spend hours attempting to figure out what arguments plaintiff would have made had plaintiff bothered to file an opposition. The court then received plaintiff's untimely opposition after it had already completed drafting a final order on the defendants' motions. This untimely submission forced the court to not only start all over in evaluating defendants' motions, but to further delay the issuance of the order so that defendants could submit a reply and respond to plaintiff's arguments.

Local Rule 110 authorizes the court to impose sanctions for "[f]ailure of counsel or of a party to comply with these Rules." The court will therefore sanction plaintiff's counsel, James A. Nations, $250.00 payable to the Clerk of the Court within ten days from the date of this Order, unless he shows good cause for his failure to comply with the Local Rules.

IT IS THEREFORE ORDERED that Greenpoint's Motion to Dismiss be, and the same hereby is, GRANTED.

IT IS FURTHER ORDERED that GMAC, Aurora, and US Bank's Motion to Dismiss is DENIED with respect to plaintiff's second, third, and fifth causes of action.

IT IS FURTHER ORDERED that GMAC, Aurora, and US Bank's Motion to Dismiss is GRANTED in all other respects.

IT IS FURTHER ORDERED that within ten days of the date of this Order James A. Nations shall either (1) pay sanctions of $250.00 to the Clerk of the Court, or (2) submit a statement of good cause explaining his failure to comply with Local Rule 230(c).

Plaintiff has thirty days from the date of this Order to file an amended complaint, to the extent he can do so consistent with this Order.

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