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Arango v. ReconTrust Co.


June 14, 2010


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


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.


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].


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).



As a preliminary matter, the Court acknowledges Plaintiff concedes dismissal is proper with respect to her fifth cause of action for violations of TILA (15 U.S.C. §§ 1601-1666j); sixth cause of action for violation of RESPA (12 U.S.C. § 2601 et seq.); eighth cause of action for violation of California Civil Code § 2923.5; and ninth cause of action for violation of California Civil Code § 1632.*fn7 Although Plaintiff requests the Court dismiss these four claims without prejudice, the Court finds dismissal without further leave to amend appropriate. Currently before the Court is Plaintiff's third attempt to set forth viable claims for relief. Further, Plaintiff's opposition provides the Court no indication she could successfully amend these claims if given yet an another opportunity to do so. Indeed, Plaintiff's opposition is devoid of a single case law citation in support of her arguments, fails to address several of Defendants' arguments in favor of dismissal, and provides no indication as to what additional facts Plaintiff might later plead to survive dismissal. Accordingly, because the Court concludes that any further effort to amend these causes of action would be futile, the Court hereby DISMISSES Plaintiff's fifth, sixth, eighth, and ninth causes of action with prejudice.


In her fourth cause of action-brought only against defendant BAC-Plaintiff alleges BAC violated RESPA (12 U.S.C. § 2601 et seq.) by failing to respond to her Qualified Written Requests sent May 28, 2009, and she is therefore entitled to damages and "an accounting of all monies received and expenditures made involving the loan account." [SAC ¶56.] Defendant BAC asserts Plaintiff's RESPA claim is time-barred under 12 U.S.C. § 2614 because Plaintiff did not bring her claim within one year after she executed her loan documents on October 13, 2006. [Defs.' Mot. to Dismiss, Doc. No. 15, p.8.] BAC also argues the SAC fails to allege sufficient facts establishing a RESPA violation. [Id. at 9.] Moreover, a demand for accounting is a remedy, not a cause of action, and must be based on a viable claim for relief. [Id. at 8.]

(A) Statute of Limitation

BAC asserts Plaintiff's RESPA violation is time-barred by the one-year statute of limitation under 12 U.S.C. § 2614. Plaintiff does not address BAC's statute of limitation argument in her opposition. Nevertheless, the Court finds Plaintiff's RESPA claim is not subject to the one-year limitation period under section 2614-the applicable statute of limitation is three years. Accordingly, Plaintiff's claim is timely.

Section 2614 provides two different statutes of limitation for various violations of RESPA. Specifically, actions for violations of 12 U.S.C. § 2605 must be brought within three years of the alleged violation, whereas actions for violations of 12 U.S.C. §§ 2607 or 2608 must be brought within one year. See 12 U.S.C. § 2614. Here, the three-year statute of limitation applies because Plaintiff's RESPA claim is premised on BAC's purported failure to respond to her QWRs, in violation of section 2605(e). Kelley v. Mortgage Electronic Registration Systems, Inc., 642 F.Supp.2d 1048, 1058 (N.D. Cal. 2009) (citing 12 U.S.C. § 2614).*fn8 Additionally, the Court disagrees with Defendants' assumption that the statute of limitation was triggered when Plaintiff consummated her loan on October 13, 2006.

Under federal law, a cause of action accrues "when the plaintiff knows or has reason to know of the injury which is the basis of the action." Maldonado v. Harris, 370 F.3d 945, 955 (9th Cir. 2004). Here, Plaintiff's RESPA claim against BAC is premised solely on BAC's alleged failure to respond to her QWRs sent in May 2009. Under section 2605(e)(2), BAC had sixty days to act or otherwise respond to Plaintiff's QWRs. Thus, the statute of limitation began to run when BAC's time to respond expired in or around July or August 2009. The consummation of Plaintiff's loan could not trigger the applicable statute of limitation because the offending conduct did not occur until several years after her loan closed in 2006. Accordingly, Plaintiff's fourth cause of action for violation of 12 U.S.C. § 2605 is timely.

(B) RESPA Violation 12 U.S.C. § 2605(e)

BAC also argues Plaintiff's RESPA claim should be dismissed because the facts alleged are insufficient to state a section 2605 violation. [Doc. No. 15, p.9.] Plaintiff contends BAC had a duty to provide her the information requested in her QWRs, and BAC's failure to respond violated RESPA.

Section 2605(e)(1)(B) defines "Qualified written request" as:

[A] written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that--

(i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and

(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.

In relevant part, Plaintiff alleges her counsel sent BAC two QWRs on or about May 28, 2009, which requested:

[I]nformation on whether or not the loan was in lawful compliance with all federal and state laws regarding disclosure, the identity of all holders of the note secured by the deeds of trust, the calculation of the principal and interest, information on the appointment of the trustee and all substitute trustees, documentation of all assignments, transfers or sale of the note, copies of all checks or other evidence of payments made by the Plaintiff, all debits and credits to the Plaintiff's accounts, documentation of all mortgage assignments, accounting of all attorney fees, costs and foreclosure fees, and all late charges assessed to the balance of the loan, an accounting of all monies applied to suspend or forbearance accounts, an accounting of all impounds including taxes and insurance and the fees, charges and commissions paid to all servicers of the account. [SAC ¶54.] Plaintiff's allegations do not demonstrate she sent a proper QWR, and therefore fail to state a claim under RESPA. First, there is no indication Plaintiff's QWRs included any information required by section 2605. See Espinoza v. Bank of America, 2010 U.S. Dist. LEXIS 49048 *11-12 (S.D. Cal.). Plaintiff fails to allege she provided identifying information to enable BAC to locate Plaintiff's loan documents, nor does she assert her QWRs included information regarding why she believed her account was in error. Indeed, it appears the vast majority of Plaintiff's broad requests for information related to her loan are not covered by section 2605.

Second, section 2605 only requires servicers to respond to a proper QWR by correcting the account discrepancy, explaining why the account is correct, or if the information is unavailable, by providing contact information for someone who can assist the borrower with her inquiry. See 12 U.S.C. §§ 2605(e)(2)(A)--(C). BAC did not have an obligation to provide Plaintiff the extraordinary amount of information requested.

Third, Plaintiff's SAC fails to adequately allege she suffered damages as a result of BAC's conduct. Under section 2605(f)(1), Plaintiff must, at a minimum, allege the "actual damages" she suffered as a result of BAC's failure to respond to her QWRs. See Sanchez v. Bear Stearns Residential Mortgage Corp., 2010 U.S. Dist. LEXIS 46043 *11-12 (S.D. Cal.) (citing Garcia v. Wachovia Mortgage Corp., 676 F.Supp.2d 895, 909 (C.D. Cal. 2009)); Garibay v. American Home Mortgage Corp., 2010 U.S. Dist. LEXIS 29071 *6-9 (S.D. Cal.). Similarly, Plaintiff's conclusory allegation that "Plaintiff is informed and believes that [BAC] has engaged in a pattern and practice of not responding to borrow inquiries" [SAC ¶58] is insufficient to establish that she is entitled to additional compensation beyond any actual damages. See Sanchez, 2010 U.S. Dist. LEXIS at *12; 12 U.S.C. § 2605(f)(1). Accordingly, Plaintiff has failed to state a claim on which relief may be granted.

(C) Demand for Accounting

Plaintiff also seeks an accounting from BAC to "determine if there is in fact any monies due under the note" or "if monies are owed to Plaintiff." [SAC ¶¶56, 57.] As BAC correctly notes, and Plaintiff concedes, accounting is a remedy, not a cause of action. [Doc. No. 15, p.8 (citing Batt v. City & County of San Francisco, 155 Cal. App. 4th 65, 82 (2007); Doc. No. 17, p.5; First Pac. Bancorp, Inc. v. Helfer, 224 F.3d 1117, 1125-26 (9th Cir. 2000) (accounting is an equitable remedy).] Plaintiff's right to an accounting is derivative in nature, such that it must be based on a viable claim. Hepler v. Washington Mut. Bank, F.A., 2008 U.S. Dist. LEXIS 88775 *10-11 (C.D. Cal. 2008) (citing County of Santa Clara v. Astra U.S., Inc., 428 F.Supp.2d 1029, 1037 (N.D. Cal. 2006)). Because Plaintiff's RESPA claim does not survive Defendants' motion to dismiss, Plaintiff's demand for accounting must also fail.

In addition, even if Plaintiff were to amend her claim to state a viable cause of action under section 2605, accounting is not a remedy available under RESPA. Espinoza, 2010 U.S. Dist. LEXIS at *12 (citing Gaitan v. Mortgage Elec. Registration Sys., 2009 U.S. Dist. LEXIS 97117 *36 (C.D. Cal.) (12 U.S.C. § 2605(f) provides the remedies available for violations of section 2605, which do not include an accounting)). Accordingly, Plaintiff's fourth cause of action is DISMISSED without prejudice.


Because Plaintiff concedes her federal claims against Defendants ReconTrust, Countrywide, Bank of America, American Wholesale Lender, and The Loan Consultants for violations of TILA and RESPA are subject to dismissal, and the Court has granted Defendants' motion to dismiss with respect to all of Plaintiff's federal claims against these five defendants, the Court declines to retain jurisdiction over the remaining state law claims. When the Court's jurisdiction is initially premised on a federal question, it may decline to exercise supplemental jurisdiction over state law claims if no independent basis for subject matter jurisdiction exists after the dismissal of the federal claims. 28 U.S.C. § 1367(c)(3); Osborn v. Haley, 549 U.S. 225, 245 (2007) (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350-51 (1988)). The decision whether to retain or dismiss state claims after dismissal of all federal claims is fully discretionary. Schneider v. TRW, Inc., 938 F.2d 986, 993-94 (9th Cir. 1991). In the usual case where federal claims are dismissed before trial, the balance of factors will point toward declining to exercise jurisdiction over the remaining state law claims. Schultz v. Sundberg, 759 F.2d 714, 718 (9th Cir. 1995); Gini v. Las Vegas Metro. Police Dep't., 40 F.3d 1041, 1046 (9th Cir. 1994). Accordingly, the Court declines to exercise its discretion to retain the remaining state law claims and DISMISSES Plaintiff's first, second, third and seventh causes of action without prejudice.*fn9


For the reasons stated herein, the Court: (1) GRANTS Defendants' motion to dismiss. Claims five (TILA), six (RESPA), eight (Civil Code § 2923.5), and nine (Civil Code § 1632) are DISMISSED WITH PREJUDICE. Claims one (intentional misrepresentation), two (breach of fiduciary duty), three (quiet title), four (RESPA and accounting) and seven (Business and Professions Code § 17200) are DISMISSED WITHOUT PREJUDICE; (2) DENIES Defendants' request for judicial notice as moot; and (3) DENIES Defendants' motion to strike as moot.


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