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Arango v. ReconTrust Co.

June 14, 2010

SANDRA ARANGO, AN INDIVIDUAL, PLAINTIFF,
v.
RECONTRUST COMPANY, N.A.; COUNTRYWIDE HOME LOANS, INC.; BANK OF AMERICA HOME LOANS; AMERICAN WHOLESALE LENDER; THE LOAN CONSULTANTS; BAC HOME LOANS SERVICING LP; AND DOES 1 THROUGH 20, DEFENDANTS.



The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge

ORDER: GRANTING DEFENDANTS' MOTION TO DISMISS SECOND AMENDED COMPLAINT [Doc. No. 15] DENYING DEFENDANTS' MOTION TO STRIKE AS MOOT [Doc. No. 14] DENYING DEFENDANTS' REQUEST FOR JUDICIAL NOTICE AS MOOT [Doc. No. 15-3]

Before the Court is Defendants ReconTrust Company, N.A. ("ReconTrust"), Countrywide Home Loans, Inc. ("Countrywide"), Bank of America, N.A.,*fn1 America's Wholesale Lender,*fn2 and BAC Home Loans Servicing, LP's ("BAC") (collectively, "Defendants") motion to dismiss Plaintiff Sandra Arango's second amended complaint ("SAC"). [Doc. No. 15.] Defendants also filed a motion to strike certain allegations in the SAC regarding Plaintiff's demand for punitive damages and attorney's fees. [Doc. No. 14.] Plaintiff submitted a combined opposition to both Defendants' motions [Doc. No. 17], and Defendants submitted a reply brief in support of each motion [Doc. Nos. 18, 19]. Additionally, Defendants submitted a Request for Judicial Notice, requesting the Court consider the loan documents identified in Plaintiff's SAC. [Doc. No. 15-3.]*fn3

For the reasons set forth below, the Court GRANTS Defendants' motion to dismiss the SAC, DENIES Defendants' motion to strike as moot, and DENIES Defendants' request for judicial notice as moot.

BACKGROUND

This action arises out of foreclosure-related events with respect to Plaintiff's home.*fn4 On or about October 13, 2006, Plaintiff purchased a condominium located at 1075 N. Escondido Blvd. #104, Escondido, California 92026 (the "Property"). [SAC, Doc. No. 11, ¶2.] Plaintiff obtained financing to purchase the Property from America's Wholesale Lender, an agent of Countrywide. [Id. at ¶¶9-10.] The Loan Consultants acted as a broker to facilitate the loan transaction. [Id. at ¶¶6, 10.] America's Wholesale Lender provided Plaintiff a first loan in the amount of $225,600, and a second loan in the amount of $56,400. [Id. at ¶9.] Bank of America and its subsidiary BAC serviced both loans. [Id. at ¶11.] According to Plaintiff, Defendants should never have approved her loan application. [Id. at ¶¶14-15.]

In her initial loan application, Plaintiff accurately stated her yearly income. [Id. at ¶12.] Although the SAC does not indicate the income Plaintiff stated, she submitted her 2005 and 2006 tax returns for an audit,*fn5 which identified her average monthly income as $1,425.17. [Id. at ¶15.] Defendants did not request proof of her income, and never showed Plaintiff they erroneously stated her income as $7,333 per month on the loan application. [Id. at ¶¶12, 15.] Because Defendants exaggerated Plaintiff's income, she obtained loans that she would not have otherwise qualified for to purchase the Property. [Id. at ¶¶14-15.] Additionally, Defendants Countrywide and America's Wholesale Lender inflated the Property's value by $8,000 on the loan documents by using money the seller had given Plaintiff towards closing costs. [Id. at ¶16.] The inflated property value allowed Defendants to charge more money in origination costs, and to collect more interest from Plaintiff because of the additional money she borrowed. [Id.]

In addition, Plaintiff alleges she did not receive certain disclosures required by the federal Truth In Lending Act ("TILA" 15 U.S.C. §§ 1601-1666j) and Real Estate Settlement and Procedures Act ("RESPA" 12 U.S.C. § 2601 et seq.). [Id. at ¶19.] For example, Defendants violated TILA when they did not disclose, in writing within three days prior to closing: Plaintiff's right of rescission; "written disclosures of the amount being financed;" an "historical example of maximum interest rates and payments for adjustable-rate mortgages;" the Consumer Handbook on Adjustable-Rate mortgages; and a "property/hazard insurance disclosure." [Id. at ¶65.] Similarly, Defendants violated RESPA by requiring Plaintiff use a particular title company; participating in kickbacks; and failing to provide accurate initial and final Good Faith Estimates, Notice of Assignment, Sale or Transfer of Servicing Rights, and Escrow Account Disclosure documents. [Id. at ¶¶76-77, 110.]*fn6 Plaintiff, a native Spanish speaker, never received Spanish translations of the loan documents. [Id. at ¶13.] Although defendant The Loan Consultants negotiated the entirety of the loan application in Spanish, without translations at signing, Plaintiff did not understand the English documents she was required to sign. [Id.]

As a result of Defendants' wrongful conduct, Plaintiff experienced difficulty paying the mortgages on her Property. [Id. at ¶20.] On May 28, 2009, Plaintiff's counsel sent two Qualified Written Requests ("QWR") to Defendant BAC (the loan servicer), requesting information related to her loans on the Property. [Id. at ¶54.] BAC did not respond to the letters, nor did BAC ever attempt to work with Plaintiff to modify her loans. [Id. at ¶¶21, 54-55.] On May 28, Plaintiff's counsel also sent a rescission letter to Defendant Countrywide. [Id. at ¶21.] Because of Defendants' conduct, the Property is currently involved in foreclosure proceedings and was scheduled to be sold at a trustee's sale on February 9, 2010. [Id. at ¶¶21, 24.]

Plaintiff filed this action against six named defendants, alleging seventeen causes of action, on August 12, 2009 [Doc. No. 1]. Plaintiff filed a first amended complaint with eighteen causes of action on September 11, 2009 [Doc. No. 4], and then (per a stipulation by the parties) filed a second amended complaint on January 19, 2010, alleging the following nine claims: (1) Intentional Misrepresentation; (2) Breach of Fiduciary Duty; (3) Quiet Title; (4) Accounting and Violation of RESPA; (5) Violation of TILA; (6) Violation of RESPA; (7) Violation of California Business and Professions Code § 17200; (8) Violation of California Civil Code § 2923.5; and (9) Violation of California Civil Code § 1632 [Doc. No. 11].

LEGAL STANDARD

A complaint survives a motion to dismiss if it contains "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). The court reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). Notwithstanding this deference, the reviewing court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, -- U.S. -- , 129 S.Ct. 1937, 1949 (2009). Moreover, it is improper for a court to assume "the [plaintiff] can prove facts that [she] has not alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). Accordingly, a reviewing court may begin "by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Ashcroft, supra, 129 S.Ct. at 1950.

"When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 1949. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "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.'" Id. (citing Twombly, 550 U.S. at 557).

DISCUSSION

I. CLAIMS FIVE, SIX, EIGHT ...


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