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Nichalson v. First Franklin Financial Corp.

September 2, 2010

LYNN A. NICHALSON, PLAINTIFF,
v.
FIRST FRANKLIN FINANCIAL CORPORATION, ET AL., DEFENDANTS.



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

MEMORANDUM AND ORDER

Through this action Plaintiff Lynn A. Nichalson ("Plaintiff") seeks monetary damages and injunctive relief from Defendant First Franklin Financial Corporation ("Defendant") for alleged violations of state and federal law arising out of her mortgage loan.

Presently before the Court is a Motion by Defendant First Franklin Financial Corporation ("Defendant") to Dismiss Plaintiff's First Amended Complaint for failure to state a claim upon which relief may be granted pursuant to Federal Rule of Civil Procedure 12(b)(6).

Defendant has concurrently filed a Motion to Strike pursuant to Federal Rule of Civil Procedure 12(f). For the reasons set forth below, Defendant's Motion to Dismiss is granted with leave to amend, and Defendant's Motion to Strike is denied as moot.*fn1

BACKGROUND*fn2

This action arises out of Plaintiff's 2006 residential mortgage loan transaction secured by property located at 9527 Clarke Farms Drive, Elk Grove, California ("Property").

Plaintiff alleges that Defendant extended credit to her without regard to her ability to pay. She contends that she accurately reported her income on her loan application, but that Defendant falsified her income, as well as the property's appraisal information, without Plaintiff's knowledge or consent in order to get the loan approved. Furthermore, Plaintiff alleges that the loan's interest rates were subject to increase, such that the monthly payments exceeded Plaintiff's ability to pay. Nonetheless, as indicated in the Deed of Trust, Plaintiff was approved for a loan in the amount of $534,800.00.

Plaintiff further alleges that Defendant awarded higher commissions to its loan officers when they sold a large volume of loans or loans with high yield spread premiums. Plaintiff states that these practices encouraged loan officers to steer borrowers, Plaintiff included, into loans that they were unable to repay.

The terms of the loan were memorialized in a Promissory Note, which was secured by a Deed of Trust on the Property.

STANDARD

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). Federal Rule of Civil Procedure 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. (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (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").

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 ...


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