The opinion of the court was delivered by: Irma E. Gonzalez, Chief JudgeUnited States District Court
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS [Doc. No. 19]
Currently before the Court is the Motion to Dismiss filed by Defendants JPMorgan Chase Bank, N.A., an Acquirer of Certain Assets and Liabilities of Washington Mutual Bank From the Federal Deposit Insurance Corporation Acting as Receiver ("JPMorgan"), California Reconveyance Company ("CRC"), and Bank of America, N.A. as Successor by Merger to LaSalle Bank N.A. ("BOA") (collectively, "Moving Defendants"). Plaintiffs filed a Statement of Non-Opposition to the motion. Having considered the Moving Defendants' arguments, and for the reasons set forth below, the Court GRANTS IN PART and DISMISSES IN PART the motion.
Plaintiffs own a home located at 2489 Wintergreen Lane, Fallbrook, CA 92028. On April 10, 2007, Plaintiffs obtained a loan from Washington Mutual Bank ("WaMu") in the amount of $1,416,000. The Deed of Trust, which was recorded on April 16, 2007, listed WaMu as the lender and Defendant CRC as the trustee. [Def. RJN, Ex. 1].
In September 2008, the Office of Thrift Supervision closed WaMu and appointed Defendant Federal Insurance Deposit Corporation ("FDIC") as receiver. On September 25, 2008, Defendant JPMorgan entered into a purchase and assumption agreement ("P & A Agreement") with the FDIC, acting in its corporate capacity as well as receiver for WaMu. [See Def. RJN, Ex. 5]. On August 21, 2009, JPMorgan recorded an Assignment of Deed of Trust, whereby it purported to assign all beneficial interest under the Deed of Trust in this case to Defendant BOA. [Def. RJN, Ex. 2].
Some time in early 2009, Plaintiffs began experiencing financial difficulties and decided to explore the option of refinancing the loan. Subsequently, Plaintiffs defaulted on their loan. On August 21, 2009, Defendant CRC, acting as an agent for the beneficiary, recorded a Notice of Default and Election to Sell under Deed of Trust relating to Plaintiffs' property. [Def. RJN, Ex. 3]. According to the Notice of Default, the amount in default as of August 20, 2009 was $39,075.99. On November 24, 2009, Defendant CRC recorded a Notice of Trustee's Sale with respect to Plaintiffs' property, setting December 14, 2009 as the date of the sale. [Def. RJN, Ex. 4]. On December 3, 2009, Plaintiffs wrote and sent a letter via certified mail to WaMu and CRC purporting to rescind the contract under TILA and Federal Reserve Regulation Z. [FAC, Ex. 1]. According to Plaintiffs, Defendants have not yet responded to their notice of rescission.
Plaintiffs commenced this action on January 12, 2010, by filing a complaint in the Superior Court for the County of San Diego. On February 24, 2010, the Moving Defendants removed the case to this Court. The Moving Defendants then filed their first motion to dismiss on March 3, 2010. On May 12, 2010, the Court denied as moot that motion to dismiss and granted Plaintiffs leave to file First Amended Complaint ("FAC"). The FAC alleges ten causes of action. The Moving Defendants then filed the present motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(e). Plaintiffs filed a Statement of Non-Opposition. The Court subsequently took the motion to dismiss under submission without oral argument pursuant to the Civil Local Rule 7.1(d)(1).
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings. 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 may dismiss a complaint as a matter of law for: (1) "lack of cognizable legal theory," or (2) "insufficient facts under a cognizable legal claim." SmileCare Dental Group v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) (citation omitted). The court only reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (citation omitted).
Despite the deference, the court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949-50 (2009). It is also improper for the court to assume "the [plaintiff] can prove facts that [he or she] has not alleged." Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, "[w]hen 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." Iqbal, 129 S.Ct. at 1950.
The FAC alleges the following ten causes of action: (1) intentional misrepresentation; (2) breach of covenant of good faith and fair dealing; (3) declaratory relief; (4) quiet title; (5) violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1666j, the Home Ownership and Equity Protection Act of 1994 (HOEPA), and Regulation Z, 12 C.F.R. § 226; (6) violations of California Business & Professions Code § 17200 et seq.; (7) fraud; (8) accounting; (9) wrongful foreclosure in violation of California Civil Code § 2923.5; and (10) inaccurate calculation of redemption amount in violation of California Civil Code § 2924c. The Court will address each one in turn.
I. Defendant JPMorgan's Liability
As initial matter, the Court addresses the Moving Defendants' argument that Plaintiffs cannot maintain any of the claims against Defendant JPMorgan because JPMorgan did not assume liability for borrower claims related to loans or commitments to lend made by WaMu when JPMorgan entered into the P & A Agreement with the FDIC regarding WaMu.
Under the Federal Deposit Insurance Act, 12 U.S.C. §§ 1811-1832(d), the FDIC may accept appointment as a receiver for any closed insured depository institution. 12 U.S.C. § 1821(c). As a receiver, "the FDIC . . . 'steps into the shoes' of the failed [financial institution]" and operates as its successor. O'Melveny & Myers v. F.D.I.C., 512 U.S. 79, 86 (1994); see also 12 U.S.C. § 1821(d)(2)(A)(i), (B)(i) (providing that when it becomes a receiver, the FDIC succeeds to "all rights, titles, powers, and privileges of the insured depository institution" and may "take over the assets of and operate the insured depository institution"). The FDIC then has "broad powers to allocate assets and liabilities," such as through a P & A Agreement. West Park Assocs. v. Butterfield Sav. & Loan Ass'n, 60 F.3d 1452, 1458-59. Absent an express transfer of liability, no liability is transferred from a failed bank to an assuming bank. See Kennedy v. Mainland Sav. Ass'n, 41 F.3d 986, 990-91 (5th Cir. 1994); Payne v. Sec. Sav. & Loan Ass'n, F.A., 924 F.2d 109, 111 (7th Cir. 1991); Williams v. F.D.I.C., No. CIV 2:07-2418 WBS GGH, 2009 WL 5199237, at *2 (E.D. Cal. Dec. 23, 2009).
In this case, the Office of Thrift Supervision closed WaMu on September 25, 2008, and appointed the FDIC as receiver. On the same date, JPMorgan entered into a P & A Agreement with the FDIC regarding WaMu.*fn1 (See Def. RJN, Ex. 5.) Section 2.5 of the P & A Agreement expressly provides that JPMorgan does not assume "any liability associated with borrower claims for payment of or liability to any borrower for monetary relief, or that provide for any other form of relief to any borrower." Accordingly, the Court agrees that JPMorgan expressly disclaimed assumption of liability arising from borrower claims pre-dating the P & A Agreement. Thus, to the extent they deal with misconduct at the origination of the subject loan, the Court DISMISSES WITH PREJUDICE the first, second, fifth, and sixth causes of action against Defendant JPMorgan. On the other hand, the Moving Defendants have made no showing that the P & A Agreement was also meant to shield JPMorgan from any liability incurred following the Agreement. Accordingly, the Court will analyze separately the remaining claims to the extent they allege liability for acts after September 25, 2008.
II. Intentional Misrepresentation
Plaintiffs' first cause of action alleges Defendant WaMu defrauded Plaintiffs by falsely inflating Plaintiffs' stated income on the loan application to qualify Plaintiffs for the loan and by approving Plaintiffs for a loan that WaMu knew or should have known Plaintiffs could not afford. To the extent this claim is alleged against the Moving Defendants, it fails to state a claim because there are no allegations in the FAC that any of the Moving ...