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Lowell Findley, and Joni Findley v. American Home Mortgage Corporation


December 14, 2010


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


This matter is before the court on American Home Mortgage Servicing, Inc. ("AHMSI") and Mortgage Electronic Registration Systems, Inc.'s ("MERS") (collectively "defendants") motion to dismiss plaintiffs Lowell Findley and Joni Findley's*fn1 (collectively "plaintiffs") first amended complaint ("FAC") pursuant to Federal Rules of Civil Procedure 12(b)(6).*fn2

Defendant AHMSI argues that it should be dismissed from the action because it is not the same entity as named defendants American Home Mortgage Corporation or American Brokers Conduit ("ABC"), and furthermore, because it was not in existence at the time plaintiffs' loan originated. AHMSI and MERS also move to dismiss the FAC on a variety of other bases, including, that each of plaintiffs' claims are barred by the relevant statute of limitations, and the FAC does not satisfy even the minimum pleading requirements of Federal Rule of Civil Procedure 8(a).*fn3

In opposing the motion, plaintiffs ask that should the court grant defendants' motion to dismiss in any respect, it give plaintiffs the opportunity to amend their complaint.*fn4

For the reasons set forth below, defendants' motion to dismiss is GRANTED. Plaintiffs, however, are permitted leave to amend the complaint as to defendant MERS. Defendant AHMSI is hereby dismissed from the action.


In January 2006, plaintiffs decided to refinance their home. (Pls.' First Amended Complaint ["FAC"], Docket No. 1-10, filed Oct. 27, 2010, ¶ 48). On February 24, 2006, defendant Chris Carter, an employee of defendant Windsor Capital Mortgage, submitted a loan application for plaintiffs. (FAC ¶ 51). On or about March 24, 2006, plaintiff Lowell Findley executed an Adjustable Rate Note in the amount of $280,000 with lender ABC to refinance the existing mortgage on the property located at 12020 Kimberly Road, Marysville, California 95901. (FAC ¶¶ 2, 47-57); (Defs.' Request for Judicial Notice ["RJN"], Docket No. 5, filed Nov. 2, 2010, Exhibit A).*fn5 A Deed of Trust was also executed on or about March 24, 2006 relating to the property located on Kimberly Road, which named MERS nominee beneficiary for lender ABC and ABC's assignees. (RJN, Exhibit B). Plaintiffs eventually went into default on their loan. (FAC ¶ 60). On April 5, 2010, a Notice of Default and Election to Sell Under Deed of Trust ("Notice of Default") was recorded with the Yuba County Recorder. (RJN, Exhibit D).

On July 20, 2010, plaintiffs filed an action in the Superior Court of California, County of Yuba, against defendants and other parties. (Defs.' Notice of Removal ["NR"], Docket No. 1, filed Oct. 27, 2010, ¶ 1). Defendants subsequently filed a demurrer against all causes of action as well as a motion to strike portions of plaintiffs' complaint. (NR ¶¶ 2-3). On or about October 8, 2010, plaintiffs filed the FAC asserting nine causes of action. (NR ¶ 4). Plaintiffs filed the FAC for harm allegedly "resulting from the Defendants' acts or omissions . . . surrounding the residential loan transaction ("Subject Loan") on the Plaintiffs' residence." (FAC ¶ 2). Plaintiffs generally allege that this action arises out of a predatory lending scheme where they were victimized by mortgage loan related activity involving their residence on Kimberly Road. (FAC ¶ 15).

In addition to various state law claims, plaintiffs' seventh cause of action in the FAC alleges a violation of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. ("RESPA"). Specifically, plaintiffs argue that the payment of a "yeild spread premium" constituted a "kickback" or referral fee in violation of RESPA. (FAC ¶ 149). Further, plaintiffs' RESPA claim alleges that defendants "split charges between them which were connected to transactions involving federally related mortgage loans" and that defendants split charges with other defendants who did not render settlement services. (FAC ¶¶ 151-52). Because plaintiffs' FAC asserted a claim for a violation of a federal statute, defendants filed a Notice of Removal of the action from the Superior Court of California to this court on October 27, 2010.


On a motion to dismiss, the allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give the plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff need not necessarily plead a particular fact if that fact is a reasonable inference from facts properly alleged. See, id.

Nevertheless, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Calif., Inc. v. Calif. State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). Indeed, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)(citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See, Mir v. Little Co. of Mary Hospital, 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp.2d 1035, 1042 (C.D. Cal. 1998).

Ultimately, the court may not dismiss a complaint in which the plaintiff alleged enough facts to "state a claim to relief that is plausible on its face." Iqbal, 129 S. Ct. at 1949 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Only where a plaintiff has failed to "nudge [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 1952. 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. at 1950.


A. Claims against defendant AHMSI

AHMSI argues plaintiffs have improperly named the company as a defendant in this action. AHMSI asserts it is not the entity connected to the lender associated with plaintiffs' loan, and further, that the company only came into existence after the events giving rise to plaintiffs' claims took place. (Defs.' Mot. to Dismiss ["Defs.' Mot."], Docket No. 4, filed Nov. 11, 2010, at 5-7). In support of its argument, AHMSI submits evidence via the RJN establishing that it is a Delaware corporation, which was incorporated on September 6, 2007 under the name AH Mortgage Acquisition Co., Inc.*fn6 (Defs.' Mot. at 6)(citing RJN, Exhibit E [Certificate of Incorporation] and Exhibit F [Change of Corporate Name Form]). AHMSI indicates it previously raised this issue on the demurrer filed in state court. (Id. at n. 2). Yet again in their FAC, plaintiffs named AHMSI as a defendant. In response to the instant motion, plaintiffs do not allege any facts to establish AHMSI's involvement in plaintiffs' loan transaction. In fact, plaintiffs' opposition ignores the issue completely. Instead, plaintiffs reallege in their opposition, in some instances verbatim, the allegations of the FAC against the collective group of defendants, failing to establish any wrongdoing by AHMSI specifically. Because plaintiffs did not oppose defendants' motion to dismiss on this ground and because they have not alleged any facts to demonstrate that AHMSI is a proper defendant, the court hereby dismisses defendant AHMSI from the action.

B. Claims against defendant MERS*fn7

Defendants argue that plaintiffs' RESPA claim should be dismissed as time-barred because it was not brought within the one year statute of limitations that applies to violations of 12 U.S.C. 1207. (Defs.' Mot. at 18). More specifically, defendants argue that in order to be within the statute of limitations, plaintiffs should have brought the action within one year after the loan closed, which was in April 2006. (Id.). Further, even if timely filed, defendants argue that plaintiffs do not state a viable claim for a RESPA violation because plaintiffs do not allege that defendant MERS actually gave or received kickbacks in violation of RESPA.

To state a cognizable claim for violation of RESPA, plaintiffs must preliminarily allege facts demonstrating the claim was brought within the statute of limitations. A RESPA claim alleging that illegal kickbacks were made must be brought a year from the date of the occurrence of the violation. See 12 U.S.C. § 2614. Here, plaintiffs' RESPA claim is based on allegedly illegal kickbacks, fees, and payments made on unspecified dates. Because plaintiffs do not allege the dates of the alleged illegal conduct, plaintiffs have failed to establish that their claims were brought within the statute of limitations.*fn8

Furthermore, plaintiffs fail to allege any specific conduct by MERS giving rise to a RESPA violation. Plaintiffs' opposition only restates allegations in the complaint that defendants, collectively, split charges and made kickback payments. (See Opp'n at 14-15; FAC at 26-27). Plaintiffs' FAC does allege that the broker of the loan transaction "received $9,320 for originating the loan, [and] $3,850 in the form of a yield spread premium" (FAC at 10); however, there are no allegations, in the FAC or in plaintiffs' opposition, that state how defendant MERS was involved in the alleged illegal kickbacks. Instead, plaintiffs broadly assert that defendants, generally, violated 12 U.S.C. § 2607 when they "split charges between them which were connected to transactions involving federally related mortgage loans, including but not limited to the 'yield spread premium.'" (FAC at 27; Opp'n at 14). While Rule 8 only requires that a pleading set forth "a short and plain statement of the claim showing that the pleader is entitled to relief," it is not enough for the complaint to make general allegations against multiple defendants without providing more specificity as to the claims against each defendant. See Fed. R. Civ. Pro. 8(a)(2); e.g. Jones v. Community Redevelopment Agency, 733 F.2d 646, 649 (9th Cir. 1984) (noting that a pleading must give fair notice and state the elements of the claim plainly and succinctly). Here, plaintiffs' conclusory allegations against all defendants collectively are insufficient to state a viable claim against MERS specifically. Therefore, the court concludes that plaintiffs' RESPA claim against defendant MERS is properly, alternatively, dismissed on this basis.

Because plaintiffs only first alleged a RESPA violation in their FAC and considering that leave to amend shall be freely given pursuant to Federal Rule of Civil Procedure 15(a), the court dismisses plaintiffs' RESPA claim against MERS without prejudice.


For the foregoing reasons, defendants' motion to dismiss is GRANTED. Defendant AHMSI is hereby dismissed from this action. Plaintiffs, however, are permitted leave to amend the complaint with respect to defendant MERS.*fn9 Plaintiff shall file a second amended complaint in accordance with this order within 20 days of the date of this order. MERS shall have 20 days after service thereof to file a response.


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