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Carter v. GMAC Mortgage


May 11, 2010



Plaintiff Michael C. Carter brought this action against defendants GMAC Mortgage, LLC ("GMAC") and First California Mortgage ("First California") alleging various federal and state claims arising out of plaintiff's mortgage transaction. Presently before the court are defendants' motions to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).

I. Factual and Procedural Background

On December 7, 2005, plaintiff obtained a loan from First California to purchase his home, located at 1664 Baroness Way in Roseville, California. (Compl. ¶¶ 6, 14; GMAC Req. Judicial Notice Ex. 1.) Plaintiff claims that he was channeled into this allegedly unaffordable loan through the conduct of First California, who allegedly exaggerated plaintiff's earnings and the value of the property to secure the loan. (Id. ¶ 14.) Plaintiff further alleges that he did not receive disclosures required to be provided to him by the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, at the time of loan origination. (Compl. ¶ 42.) The FAC alleges that GMAC "either assumed or was assigned said loan" and is therefore liable for these violations under "successor's liability law." (Id. ¶ ¶ 9, 13.)

Plaintiff filed the Complaint in California Superior Court in Placer County on February 18, 2010. (Docket No.1.) First California then removed the case to this court on March 18, 2010 with the consent of GMAC. (Id.) In his Complaint, plaintiff asserts ten causes of action against GMAC and First California. GMAC and First California now move to dismiss the Complaint for failure to state a claim upon which relief can be granted.

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.

GMAC and First California each submitted a request for judicial notice. GMAC requests the court take notice of plaintiff's First Deed of Trust, publically recorded in the Placer County Recorder's Office. (Docket No. 7.) The court will take judicial notice of this document, since it is a matter of public record whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). First California requests the court take notice of several documents related to plaintiff's mortgage transaction found in its records and files. (Docket No. 9.) The court declines to take notice of these documents, since First California's files are not a source whose accuracy cannot be reasonably questioned under Federal Rule of Evidence 201(b).

A. TILA Claim

Plaintiff's first cause of action prays for damages and rescission of his loan under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f.

1. Rescission

In a consumer credit transaction where the creditor acquires a security interest in the borrower's principal dwelling, TILA provides the borrower with "a three-day cooling-off period within which [he or she] may, for any reason or for no reason, rescind" the transaction. McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 421 (1st Cir. 2007) (citing 15 U.S.C. § 1635). A creditor must "clearly and conspicuously disclose" this right to the borrower along with "appropriate forms for the [borrower] to exercise his right to rescind." 15 U.S.C. § 1635(a).

If a creditor fails to provide the borrower with the required notice of the right to rescind, the borrower has three years from the date of consummation to rescind the transaction. Id. § 1635(f); see 12 C.F.R. § 226.23(a)(3) ("If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation."). "[Section] 1635(f) completely extinguishes the right of rescission at the end of the 3-year period." Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412, (1998); see also Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir. 2002) ("[S]section 1635(f) represents an 'absolute limitation on rescission actions' which bars any claims filed more than three years after the consummation of the transaction. (quoting King v. California, 784 F.2d 910, 913 (9th Cir. 1986))); Cazares v. Household Fin. Corp., 2005 U.S. Dist. LEXIS 39222, at *24-25 (C.D. Cal. 2005) (concluding that, "[i]f certain Plaintiffs did exercise their rights to rescind[ ] prior to the expiration of the three-year limitation period," such facts "would only entitle Plaintiffs to damages, not rescission" (citing Belini v. Wash. Mut. Bank, FA, 412 F.3d 17 (1st Cir. 2005))). The Complaint alleges that "[a] Qualified Written Request... will be mailed to [d]efendants... [which] includes a demand to rescind the loan...." (Compl. ¶ 23.) However, plaintiff's loan closed on December 7, 2005, putting his future notice of rescission, even if sent on the date of filing of the Complaint, well outside of the three-year limitations period. (GMAC Req. Judicial Notice Ex. 1.)

Moreover, plaintiff's rescission claim fails because he has not demonstrated an ability to tender payment of the net proceeds he received from the loan. The Ninth Circuit has held that rescission under TILA "should be conditioned on repayment of the amounts advanced by the lender." Yamamoto v. Bank of N.Y., 329 F. 3d 1167, 1170 (9th Cir. 2003) (emphasis in original). 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, 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, 2009 U.S. Dist. LEXIS 80581, at *22 (S.D. Cal. Sept. 4, 1009); Carnero v. Weaver, 2009 U.S. Dist. LEXIS 62665, at *8 (N.D. Cal. July 20, 2009); Pesayco v. World Sav., Inc., 2009 U.S. Dist. LEXIS 73299, at *4 (C.D. Cal. July 29, 2009); Ing Bank v. Korn, 2009 U.S. Dist. LEXIS 73329, at *7 (W.D. Wash. May 22, 2009). Plaintiff has not alleged any facts indicating that he is able to tender sufficient funds to repay the loan principal. Without such facts, plaintiff cannot receive the equitable remedy of rescission.

2. Damages

The statute of limitations for a TILA damages claim is one year from the date of the alleged TILA violation. 15 U.S.C. § 1640(e). Plaintiff argues that the statute of limitations should be tolled because the circumstances of the loan were hidden from him at the outset. Even if plaintiff is legally entitled to equitable tolling of his claim, plaintiff has not alleged any facts in the Complaint that would warrant tolling the statute of limitations. Plaintiff simply asserts that he was unable to discover defendants' TILA violations until within the last year because "[t]he facts surrounding this loan transaction were purposefully hidden...." (Compl. ¶¶ 21, 26.) This conclusory allegation is insufficient to establish the necessity for equitable tolling under even the pleading standards of Federal Rule of Civil Procedure 8(a). See Iqbal, 129 S.Ct. at 1949; Cervantes v. Countrywide Home Loans, Inc., 2009 U.S. Dist. LEXIS 87997, at * 13-14 (D. Ariz. 2009) (holding that equitable tolling was not appropriate when plaintiffs simply alleged that defendants "fraudulently misrepresented and concealed the true facts related to the items subject to disclosure").

Even if plaintiff's TILA claim were timely, it is currently insufficiently plead. The claim does not so much as indicate what sections of TILA defendants violated, simply stating that "[d]efendants committed one ore more of the following violations" and listing sections of the statute. (Compl. ¶ 42.) Such vague and conclusory pleadings to not come close to surviving a motion to dismiss. See Iqbal, 129 S.Ct. at 1949. Accordingly, the court will grant defendants' motions to dismiss plaintiff's TILA claim.

B. California Rosenthal Fair Debt Collection Practices Act Claim

Plaintiff's second cause of action alleges that defendant violated the California 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).

The Complaint does not identify the sections of the RFDCPA that defendant allegedly violated, and fails to allege facts that would support the inference that defendant is a "debt collector" under the RFDCPA. Instead, the FAC contains only a conclusory restatement of the definition of "debt collectors" under the RFDCPA without further explanation as to how defendants' actions meet these definitions. (Compl. ¶¶ 48-52.) Plaintiff fails to so much as plead what practices defendants engaged in that violated the RFDCPA, outside of the conclusory allegation that defendants "repeatedly threatened to take actions not permitted by law...." (Id. ¶ 50.) Such broad allegations, without even identifying what part of the RFDCPA each defendant 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 RFDCPA claim in foreclosure case). Since residential mortgage loans do not fall within the RFDCPA, the court must grant defendants' motions to dismiss plaintiff's cause of action for violations of the RFDCPA.

C. Negligence

To prove a cause of action for negligence, a 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 injury." Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333, 1339 (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 alleges that defendants owed him a duty to "perform acts... in such a manner as to not cause [p]laintiff harm." (Compl. ¶ 54.) Plaintiff further contends that defendants breached this duty when "they used their knowledge and skill to direct [him] into a lone for which [he] was not qualified...." (Id. ¶ 55.)

Plaintiff cites no authority for the proposition that defendants owed a duty to not cause plaintiff harm. Absent contrary authority, a pleading of an assumption of duty by defendants, or a special relationship, plaintiff cannot establish defendants owed him a duty of care. See Hardy v. Indymac Fed. Bank, --- F.R.D. ---, No. CV F 09-935 LJO SMS, 2009 WL 2985446, at *7 (E.D. Cal. Sept. 15, 2009); Bentham v. Aurora Loan Servs., No. C-09-2059 SC, 2009 WL 2880232, at *2-3 (N.D. Cal. Sept. 1, 2009).

Additionally, the Complaint lumps defendants together and does not distinguish between their alleged actions. Defendants should not be forced to guess how their conduct was allegedly negligent. See Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983); Gauvin v. Trombatore, 682 F. Supp. 1067, 1071 (N.D. Cal. 1988). The Complaint fails to state that GMAC and First California have breached a cognizable legal duty, and accordingly the court will grant defendants' motions to dismiss plaintiff's cause of action for negligence.

D. Real Estate Settlement Procedures Act Claim

Plaintiff's fourth claim alleges violations of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617. Plaintiff alleges that defendants violated RESPA by "failing to correctly and accurately comply with one or more of the disclosure requirements provided therein." (Compl. ¶ 63.) The Complaint's RESPA claim is nothing more than a conclusory allegation and recitation of the elements of a RESPA cause of action with absolutely no factual enhancement. Plaintiff's allegations cannot possibly put defendants on notice of the claim against them without so much as describing what sections of RESPA they violated. This falls well short of the demands of Rule 8, and accordingly plaintiff's RESPA claim must be dismissed. Iqbal, 129 S.Ct. at 1949.

E. Breach of Fiduciary Duty Claim

The elements of a breach of fiduciary duty claim are (1) existence of a fiduciary relationship; (2) breach of the fiduciary duty; and (3) damage proximately caused by that breach. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003). "The absence of any one of these elements is fatal to the cause of action." Pierce v. Lyman, 1 Cal. App. 4th 1093, 1101 (1991). Plaintiff alleges that defendants breached their fiduciary duties when they steered plaintiff into a loan he could not afford. (Compl. ¶ 73.)

"Absent special circumstances, a loan transaction is at arms-length and there is no fiduciary relationship between the borrower and lender." Rangel v. DHI Mortgage Co., Ltd., No. CV F 09-1035 LJO GSA, 2009 WL 2190210, at *3 (E.D. Cal. July 21, 2009) (quoting Oaks Management Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006)). Plaintiff has not plead any special circumstances that indicate the closing of his mortgage was anything but an arms-length loan transaction. California First was plaintiff's lender and accordingly owed no fiduciary duty to plaintiff during their loan transaction. GMAC cannot be held secondarily liable for California First's alleged breach because California First owes plaintiff no fiduciary duty. Accordingly, the court must dismiss plaintiff's breach of fiduciary duty claim.

F. Fraud Claim

Plaintiff's sixth claim alleges that defendants committed 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). A plaintiff must include the "who, what, when, where, and how" of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citation omitted); 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. 09-937, 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)).

Plaintiff's fraud claim does not even come close to surviving a motion to dismiss. First, the claim does not differentiate between defendants. Defendants should not be forced to guess as to how their conduct was allegedly fraudulent. See Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983); Gauvin, 682 F. Supp. at 1071. Second, plaintiff's fraud allegations also fail to specify so much as when the fraudulent statements alleged were made, who specifically made them, and why they were false. Plaintiff simply states that "[t]he above-state false representations and one or more violations of state and federal laws made by [d]efendants to [p]laintiff were designed to fraudulently induce [p]laintiff to enter into said transaction." (Compl. ¶ 78.) The claim then goes on to state the remaning elements of a cause of action for fraud. (See id. ¶¶ 80-86.) Plaintiff's conclusory statements come nowhere close to meeting the pleading standard generally required under Rule 8, let alone the heightened pleading standard of Rule 9(b). See Iqbal, 129 S.Ct. at 1949; Vess, 317 F.3d at 1006.

G. Breach of Contract Claim

To state a claim for breach of contract under California law, plaintiff must allege (1) the existence of a contract; (2) plaintiff's performance or excuse for nonperformance of the contract; (3) defendants' breach of the contract; and (4) resulting damages. Armstrong Petroleum Corp. v. Tri-Valley Oil & Gas Co., 116 Cal. App. 4th 1375, 1390 (2004). Plaintiff alleges that he entered into an agreement with defendants for a loan and that they breached their agreement "by failing to exercise reasonable efforts and due diligence as promised... [and] committing the acts stated herein." (Compl. ¶ 95.)

Plaintiff fails to state any facts that indicate the existence of a contract obligating defendants to "exercise reasonable efforts" or engage in "due diligence." Such a vague promises are not sufficient to show the existence of a contract. See Beverage Distributors, Inc. v. Olympia Brewing Co., 440 F.2d 21, 30 (9th Cir. 1971). Plaintiff states no facts that indicate the existence of terms in the loan contract that obligated defendants to perform the actions mentioned in the Compliant. Iqbal, 129 S.Ct. at 1949. Without alleging facts that make the existence of a contract to provide an affordable loan plausible, plaintiff cannot state a claim for breach of contract. See Hardy, 2009 WL 2985446, at *5. Accordingly, the court will grant defendants' motions to dismiss plaintiff's claim for breach of contract.

H. Breach of the Implied Covenant of Good Faith and Fair Dealing Claim

"Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999) (quoting Carma Developers, Inc. v. Marathon Dev. Cal., Inc., 2 Cal. 4th 342, 371 (1992)). "A typical formulation of the burden imposed by the implied covenant of good faith and fair dealing is 'that neither party will do anything which will injure the right of the other to receive the benefits of the agreement.'" Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (2005) (quoting Gruenberg v. Aetna Ins. Co., 9 Cal. 3d 566, 573 (1973)). Plaintiff alleges that defendants violated the implied covenant of good faith and fair dealing by failing to comply with "applicable laws" and failing to pay as much in regard to [p]laintiffs [sic] financial interests as to [d]efendants' financial interests." (Compl. ¶¶ 99-100.)

"Generally, no cause of action for the tortious breach of the implied covenant of good faith and fair dealing can arise unless the parties are in a 'special relationship' with 'fiduciary characteristics.'" Pension Trust Fund for Operating Eng'rs v. Fed. Ins. Co., 307 F.3d 944, 955 (9th Cir. 2002) (citing Mitsui Mfrs. Bank v. Superior Court, 212 Cal. App. 3d 726, 730 (1989)). "Thus, the implied covenant tort is not available to parties of an ordinary commercial transaction where the parties deal at arms' length." Id. (internal citations omitted). Whether a lender is subject to this tort depends on whether there is "a fiduciary relationship in which the financial dependence or personal security by the damaged party has been entrusted to the other." Mitsui, 212 Cal. App. 3d at 731; Pension Trust Fund, 306 F.3d at 955. As previously noted, plaintiff has not alleged any facts that distinguish this case from an ordinary arms length loan transaction and accordingly has not pled a breach of the covenant of good faith and fair dealing. The claim is also inadequate because it lumps all defendants together and fails to explain what actions each individual defendant took to violate the covenant of good faith and fair dealing. See Gauvin, 682 F. Supp. at 1071. Accordingly, the court must grant defendants' motions to dismiss this claim.

I. California's Unfair Competition Law Claim

California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210, prohibits "any unlawful, unfair, or fraudulent business act or practice." Cal-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). This cause of action is generally derivative of some other illegal conduct or fraud committed by a defendant, and "[a] plaintiff must state with reasonable particularity the facts supporting the statutory elements of the violation." Khoury v. Maly's of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993).

Plaintiff's claim under the UCL is vague and conclusory, simply alleging that "[d]efendants' acts, as alleged herein, constitute unlawful, unfair, and/or fraudulent busines practices...." (Compl. ¶ 88.) Plaintiff's claim lumps all defendants together and fails to identify any specific act taken by either of the named defendants. (See id. ¶¶ 88-91.) Such vague and conclusory allegations are insufficient to inform defendants as to their liability. See Associated Gen. Contractors of Cal., 459 U.S. at 526; Gauvin, 682 F. Supp. at 1071; see also Lingad v. Indymac Fed. Bank, No Civ. 2:09-02347 GEB JFM, --- F. Supp. 2d ----, 2010 WL 347994, at *11 (E.D. Cal. Jan. 29, 2010). The court has already indicated it will dismiss plaintiff's other causes of action against defendants for failure to state a claim. Since plaintiff has failed to state a claim on any of these grounds, and because these grounds appear to be the sole basis for plaintiff's UCL claim, plaintiff has necessarily failed to state a claim against defendants under the UCL. Accordingly, the court will grant defendants' motions to dismiss plaintiff's UCL cause of action.

J. Injunctive Relief

Plaintiff's final claim purports to state a cause of action for injunctive relief. Injunctive relief is not an independent claim, rather it is only a form of relief. See McDowell v. Watson, 59 Cal. App. 4th 1155, 1159 (1997) ("Injunctive relief is a remedy and not, in itself a cause of action...." (internal quotation marks omitted)). Because plaintiff's other claims have been dismissed and injunctive relief is not a cause of action in and of itself, the court must grant defendants' motions to dismiss plaintiff's final cause of action as well.

IT IS THEREFORE ORDERED that GMAC and First California's motions to dismiss be, and the same hereby are, GRANTED.

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


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