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Chad Dillon Sandry v. First Franklin Financial Corp.

December 10, 2010

CHAD DILLON SANDRY,
PLAINTIFF,
v.
FIRST FRANKLIN FINANCIAL CORP., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

MEMORANDUM DECISION REGARDING DEFENDANTS' MOTION TO DISMISS (Doc. 7).

I. INTRODUCTION.

Plaintiff Chad Dillon Sandry ("Plaintiff") proceeds with an action for damages and injunctive relief. Plaintiff filed a complaint in California Superior Court on September 17, 2010, and Defendants removed the action to federal court on October 14, 2010. (Doc. 1).

Defendants First Franklin Financial Corp., Home Loan Services, Inc., and Mortgage Electronic Registration Systems, Inc. ("Defendants") filed a motion to dismiss the complaint on October 21, 2010. (Docs. 7, 8). Defendants also filed a motion to strike portions of the complaint and a request for judicial notice. (Docs. 9, 10, 11).

Plaintiff filed opposition to Defendants' motions on November 22, 2010. (Docs. 12, 13). Defendants filed replies to Plaintiff's opposition on November 29, 2010. (Docs. 14, 15).

II. FACTUAL BACKGROUND.

This action arises out of a loan Plaintiff's obtained for the purchase of their home in or about 2007("subject loan"). (Comp. at 9). Defendant First Franklin Financial Corp. ("FFFC") was identified as the lender under a promissory note and Deed of Trust for the subject loan. (Comp. at 2). FFFC was also the servicer of the subject loan. (Comp. at 2). Defendant Loan Review Incorporated ("LRI") was Plaintiff's mortgage broker for the subject loan. (Comp. at 2).

In 2007, Plaintiffs met with David Hoggett, an employee of LRI. (Comp. at 9). According to the complaint, Hogget submitted a loan application to FFFC that inflated the property value by $95,000, pursuant to an agreement between FFFC and LRI whereby FFFC would accept applications containing false information. (Comp. at 9). "Defendants" also failed to verify Plaintiffs' income. (Comp. at 10). FFFC paid LRI for leading Plaintiffs into a loan for which they did not qualify. (Comp. at 9). The complaint alleges that FFFC and LRI knew that their conduct could cause Plaintiffs to lose their home through foreclosure. (Comp. at 9).

"Defendants" told Plaintiffs that the subject loan was in Plaintiffs' "best interests," but knew that it was not. (Comp. at 10). Plaintiffs placed trust and confidence in "Defendants." (Comp. at 10). The full terms of the loan were not explained to Plaintiffs, Plaintiffs were not given time to review the loan documents, and Plaintiffs could not understand any of the documents they signed. (Comp. at 10). Plaintiffs were charged a much greater interest rate than promised, and "Defendants" concealed from Plaintiffs that the loan was designed to cause negative amortization to occur and included a stiff prepayment penalty. (Comp. at 19).

III. LEGAL STANDARD.

Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1990). To sufficiently state a claim to relief and survive a 12(b) (6) motion, the pleading "does not need detailed factual allegations" but the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Mere "labels and conclusions" or a "formulaic recitation of the elements of a cause of action will not do." Id. Rather, there must be "enough facts to state a claim to relief that is plausible on its face." Id. at 570. In other words, the "complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted).

The Ninth Circuit has summarized the governing standard, in light of Twombly and Iqbal, as follows: "In sum, for a complaint to survive a motion to dismiss, the nonconclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009) (internal quotation marks omitted). Apart from factual insufficiency, a complaint is also subject to dismissal under Rule 12(b)(6) where it lacks a cognizable legal theory, Balistreri, 901 F.2d at 699, or where the allegations on their face "show that relief is barred" for some legal reason, Jones v. Bock, 549 U.S. 199, 215, 127 S.Ct. 910, 166 L.Ed.2d 798 (2007).

In deciding whether to grant a motion to dismiss, the court must accept as true all "well-pleaded factual allegations" in the pleading under attack. Iqbal, 129 S.Ct. at 1950. A court is not, however, "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001). "When ruling on a Rule 12(b)(6) motion to dismiss, if a district court considers evidence outside the pleadings, it must normally convert the 12(b)(6) motion into a Rule 56 motion for summary judgment, and it must give the nonmoving party an opportunity to respond." United States v. Ritchie, 342 F.3d 903, 907 (9th Cir.2003). "A court may, however, consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment." Id. at 908.

IV. DISCUSSION.

A. First Cause of ...


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