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Chon v. Downey Savings and Loan Association

August 20, 2010


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


This action arises out of a mortgage loan transaction in which Plaintiffs Chae Chon and Yung Chon ("Plaintiffs") refinanced their home in August 2005. Presently before the Court is a Motion by Defendant Central Mortgage Company ("Defendant") to Dismiss Plaintiffs' Complaint for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). Also before the Court is Defendant's Motion to Expunge Lis Pendens. For the reasons set forth below, Defendant's Motion to Dismiss is granted and Motion to Expunge Lis Pendens is denied.


As indicated in the Deed of Trust, on or about August 22, 2005, Plaintiffs entered into a loan agreement for $316,000.00 secured by property at 8180 Rama Court, Sacramento, California.*fn2 Downey Savings and Loan Association served as the lender. Defendant is the successor-in-interest.

Plaintiffs later defaulted on the loan. On May 29, 2009, a Notice of Default was recorded by Trustee Corps as agent for the beneficiary. A Notice of Trustee's Sale was recorded on November 30, 2009. Plaintiffs subsequently filed suit and recorded a lis pendens against the property on February 2, 2010.

Plaintiffs allege that the proceedings surrounding the loan agreement were tainted by fraud and that Defendant failed to comply with a host of federal and state laws including the Truth in Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), California's Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), egligence, Fraud, violation of Business and Professions Code §17200, Breach of Fiduciary Duty, Breach of Contract, and Breach of the Covenant of Good Faith and Fair Dealing. Plaintiffs seeks both damages and rescission of the mortgage loan.


A. Motion to Dismiss under Rule 12(b)(6)

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief" in order to "give the defendant fair notice of what the...claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and quotations omitted). "Factual allegations must be enough to raise a right to relief above the speculative level." Id. at 555 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) ("The pleading must contain something more...than...a statement of facts that merely creates a suspicion [of] a legally cognizable right of action").

In order to "state a claim for relief that is plausible on its face," Aschroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570), plaintiff must plead "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 is asks for more than a sheer possibility that a defendant has acted unlawfully." Id. at 1949 (internal citation and quotation omitted).

If the court grants a motion to dismiss a complaint, it must then decide whether to grant leave to amend. The court should "freely give[]" leave to amend when there is no "undue delay, bad faith[,] dilatory motive on the part of the movant,...undue prejudice to the opposing party by virtue of...the amendment, [or] futility of the amendment...." Fed. R. Civ. P. 15(a); Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to amend is only denied when it is clear that the deficiencies of the complaint cannot be cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

B. Motion to Expunge Lis Pendens

"A lis pendens is recorded by someone asserting a real property claim, to give notice that a lawsuit has been filed which may, if that person prevails, affect title to possession of the real property described in the notice." Federal Deposit Ins. Corp. V. Charlton, 17 Cal. App. 4th 1066, ...

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