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Vincent and Lien Tang v. Reconveyance Co.


December 22, 2010


The opinion of the court was delivered by: Lucy H. Koh United States District Judge

(re: docket #13)

United States District Court For the Northern District of California


Home Finance ("Chase"), and Washington Mutual for damages exceeding $6.5 million. Plaintiffs 19 claim that Defendants violated numerous federal laws by reporting an "alleged debt that has never 20 been validated or proven" to credit reporting agencies. Plaintiffs do not identify the nature of that 21 debt, but Defendants reveal that the "alleged debt" in question relates to Plaintiffs' failure to make 22 payments on an $825,000 residential mortgage. Defendants move to dismiss pursuant to Federal

Federal Rule of Civil Procedure 12(e). The Court held a hearing on this matter on December 21, 2010. Because Plaintiffs fail to state a claim, the Court GRANTS Defendants' motion to dismiss, in part with prejudice and in part with leave to amend.

Plaintiffs Vincent and Lien Tang, proceeding pro se, bring suit against Defendants California Reconveyance Company ("CRC"), JP Morgan Chase Bank, N.A. ("JP Morgan"), Chase 18 Rule of Civil Procedure 12(b)(6), or in the alternative, move for a more definite statement under

with little reference to facts. For example, there are repeated statements that "Beginning on or 5 about March 2008 the Defendant [who is not specified] did report to Experian, Trans Union, Equifax credit bureaus that Plaintiffs owe an alleged debt to the Defendant and has continued to do this to date." See, e.g.. Compl., Part 1, ¶ 1 [dkt. #1]. Plaintiffs do not identify the nature of the

Attached to the Complaint are various records that Plaintiffs allege demonstrate the violations of 10 federal law in detail. However, these attachments, which appear to be computer-printouts of credit are more than 120 days past due on a 40-year mortgage, on an


A.Plaintiffs' Complaint

For the most part, Plaintiffs' Complaint includes only vague and conclusory allegations, "alleged debt," and only repeat the statement that "Defendants violated Plaintiffs civil rights."

bureau reports, note that Plaintiffs 12 account that was opened in July 2005. See Compl., Exh. A [dkt. #1-1]. These same reports note that Plaintiffs have a balance of more than $900,000, and made their last monthly payment (of $3,195) in October 2009. Id. In another exhibit to the Complaint (Exhibit B), Plaintiffs attach a letter addressed to Defendant Chase, seeking "verification of the debt" and production of the

In the midst of these confusing allegations, Plaintiffs do make one clear factual allegation:

"Defendants disclosed a annual percentage rate (APR) of 4.867% when in actuality the annual 19 percentage rate was 5.0009%. See exhibit demonstrating this violation in detail." Compl., Part 6, ¶ 1. Plaintiffs do not identify the referenced "exhibit," however, it appears that Plaintiffs are citing to Exhibit D of the Complaint, a 52-page document entitled "Mortgage Forensic Analysis Report" prepared by an entity called "LogicEase Solutions, Inc." According to that so-called "Report," 4.867% is "not accurate."

"original note."

Plaintiffs were actually charged an APR of 5.009% on their loan, and thus the "disclosed rate" of

B.Defendants' Motion to Dismiss and Request for Judicial Notice

Defendants submit that the following are the relevant allegations in the Complaint and judicially noticeable facts. See Defs.' Mot. to Dismiss at 2 [dkt. #13].*fn1 Plaintiffs obtained a residential mortgage loan for $825,000 for real property located at 2739 Clover Meadow Street,

2005 with the Santa Clara County Recorder's Office. The deed of trust identifies Washington Plaintiffs as the borrowers. An assignment of the deed of trust was recorded on March 1, 2010, 7 with Bank of America, N.A., assigned all beneficial interest in the deed of trust. Plaintiffs 8 defaulted on the loan, and a Notice of Default and Election to Sell Under Deed of Trust ("NOD") 9 was recorded on or about March 1, 2010. The NOD indicated that, as of February 26, 2010, the 10 amount in arrears on Plaintiffs' loan was $14,954.54. On September 25, 2008, the Office of Thrift San Jose, California 95135. The loan was secured by a deed of trust recorded on or about July 6,

Mutual as the lender and the beneficiary, California Reconveyance Company as the trustee, and Supervision (OTS) closed Washington Mutual Bank and appointed the Federal Deposit Insurance

Corporation (FDIC) as receiver. Also on September 25, 2008, JP Morgan entered into a "Purchase 13 and Assumption Agreement" with the FDIC, and took over the assets of Washington Mutual.

Plaintiffs, in an opposition to Defendants' motion to dismiss, note that Defendant CRC filed a Notice of Trustee's Sale on June 2, 2010. See Pls.' Opp'n, Exh. B [dkt. #33]. That Notice shows an unpaid balance of $925,328.21. opportunity to clarify their claims and to identify any additional factual allegations in regard to 20 their claims pursuant to the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. 1961 et seq. Plaintiffs could point to no additional factual allegations, and repeatedly stated 22 that Defendants were colluding with each other to commit fraud. Plaintiffs stated that, without the 23 original copies of the loan documents signed in blue ink, they could not be sure that their loan had 24 not been extinguished or that Defendants had valid rights to their mortgage loan. Plaintiffs further stated that they would not identify their signatures on any loan documents unless they saw the 2 original documents with their signatures in blue ink.

C.December 21, 2010 Hearing

At the December 21, 2010 hearing on Defendants' motion, the Court provided Plaintiffs the


Dismissal under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim is "proper only where there is no cognizable legal theory or an absence of sufficient facts alleged to 6 support a cognizable legal theory." Shroyer v. New Cingular Wireless Services, Inc., 606 F.3d 658, 664 (9th Cir. 2010) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). In considering whether the complaint is sufficient to state a claim, the court must accept as true all of the factual allegations contained in the complaint. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). However, the court need not accept as true "allegations that contradict matters properly subject to judicial notice or by exhibit" or "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." St. Clare v. Gilead Scis., Inc. (In re Gilead Scis. Sec. Litig.), 536 F.3d 1049, 1055 (9th Cir. 2008). While a complaint need not allege detailed factual allegations, it "must contain sufficient factual matter, accepted as true, to "'state a claim to relief that is plausible on its face.'" Iqbal, 129 S.Ct. at 1949 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

to grant leave to amend. "[A] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (quoting Doe 22 v. United States, 58 F.3d 494, 497 (9th Cir. 1995)).

U.S.C. 1601 et seq., the Racketeer Influenced and Corrupt Organizations Act (RICO), U.S.C. 1961 et seq., and the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §2601 et 28 seq. Despite this multitude of claims, Plaintiffs fail to plead sufficient facts to state a claim against

If the Court concludes that the complaint should be dismissed, it must then decide whether


Plaintiffs bring suit under the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692, the Fair Credit Reporting Act (FCRA), 15 U.S.C. §1681, the Truth in Lending Act (TILA), any Defendant for any violation. As discussed below, Plaintiffs' claims are dismissed, in part with prejudice and in part with leave to amend.

A.Borrower-related Claims against JP Morgan are Dismissed with Prejudice

The Court agrees with Defendants' argument that Plaintiffs cannot state a claim against Defendant JP Morgan for any "borrower-related" claims (e.g., failure to disclose accurate interest 6 rate). As numerous courts have held, including courts in this district, JP Morgan did not assume borrower-related claims in its purchase and assumption of Washington Mutual (the original lender in this action) from the FDIC. See, e.g., Hilton v. Wash. Mut. Bank, 2009 U.S. Dist. LEXIS 100441, *7-9 (N.D. Cal. Oct. 28, 2009) (Illston, J.) (plaintiff's borrower-related claims on a mortgage originally with Washington Mutual were valid against the FDIC, as receiver, but not against JP Morgan because the FDIC was the responsible party for those claims).

Accordingly, to the extent any of Plaintiffs' claims are based on the origination of the Washington Mutual loan in July 2005, those claims are dismissed with prejudice as to Defendant

Defendant JP Morgan.

practices in the collection of consumer debt. The FDCPA defines "debt collector" as "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." 15 U.S.C. 1692a(6). The definition expressly excludes "any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained by such person." 15 U.S.C. § 1692a(6)(F).

any Defendant is a "debt collector" under the FDCPA, a necessary statutory requirement lacking here. Even had they done so, Defendants would likely be excluded from the definition of "debt JP Morgan. Specifically, Plaintiffs' TILA and RESPA claims are dismissed with prejudice as to

B.Federal Claims

1.Plaintiffs' Claims Pursuant to FDCPA

The FDCPA prohibits debt collectors from engaging in abusive, deceptive and unfair Plaintiffs' FDCPA claims fail for a number of reasons. First, Plaintiffs do not allege that collector" since it appears that, from the limited facts alleged in this case, Defendants obtained their interest in the property prior to default. See Zhuravlev v. BAC Home Loans Servicing, LP, 2010 U.S. Dist. LEXIS 73874, *5 (N.D. Cal. July 20, 2010) (Seeborg, J.) (a debt collector does not include the consumer's creditors, a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned).

Second, Plaintiffs' conclusory allegations that "Defendants" or "Defendant" "did violate the FDCPA" by reporting that Plaintiffs owed an alleged debt are insufficient to state a claim. See Iqbal, 129 S.Ct. at 1949. Plaintiffs do not identify the alleged debt, nor do they allege any wrongful action on the part of any of the Defendants. Reporting a mortgage delinquency and foreclosure is not itself illegal, and Plaintiffs make no other factual allegations as to how proceeding, Plaintiffs fail to state a claim. This is because "foreclosing on the property pursuant to a deed of trust is not the collection of a debt within the meaning of the FDCPA." Powell v. Residential Mortg. Capital, 2010 U.S. Dist. LEXIS 59698 (N.D. Cal. May 24, 2010) (Fogel, J.); see also Zhuravlev v. BAC Home Loans Servicing, LP, 2010 U.S. Dist. LEXIS 73874 (N.D. Cal. LEXIS 3358, at * 6 (N.D. Cal. Jan. 14, 2010) ("[T]he activity of foreclosing on [a] property 19 pursuant to a deed of trust is not the collection of a debt within the meaning of the FDCPA.").

Defendants harassed, abused, or oppressed Plaintiffs in the collection of consumer debt.

And third, to the extent their FDCPA claims are based on the initiation of a foreclosure July 20, 2010) (same); Jozinovich v. JP Morgan Chase Bank, N.A., No. 09-03326, 2010 U.S. Dist.

Accordingly, Plaintiffs' claims under the FDCPA are dismissed with leave to amend. If Plaintiffs choose to amend their Complaint, they must specify with detail the exact allegations of wrongdoing against each Defendant.

2.Plaintiffs' Claims under the FCRA

The FCRA prohibits "[a] person" from furnishing information "relating to a consumer" to a Credit Reporting Agency "if the person knows or consciously avoids knowing that the information is inaccurate." 15 U.S.C. 1681s-2(a). But the FCRA does not provide for a right of action against a furnisher of false information. See Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1059 (9th Cir. 2002). Rather, after receiving notice that information is disputed, the furnisher has certain duties:

to conduct an "investigation with respect to the disputed information;" to review all relevant information provided by the CRA; to report the results of its investigation to the CRA; and if the investigation finds the information is incomplete or inaccurate to report those results "to all [nationwide] consumer reporting agencies to which the person furnished the information."

Id. (quoting 15 U.S.C. § 1681s-2(b)). A consumer then has a private right of action in connection with the performance of these four duties. Id.

information to credit reporting agencies. See Compl., Part 2-3. These allegations are fatally short

on facts. For example, Plaintiffs do not allege how the furnished information was in any way "inaccurate." More importantly, they allege a violation of Section 1681s-2(a), which does not provide for a private right of action. Section 1681s-2(b) does provide a private right of action, but

Defendants received notice of disputed information, that the information was in any way inaccurate, or that Defendants failed to review or investigate the disputed information. See Marks FCRA claim where plaintiff failed to allege that furnished information was inaccurate).

Plaintiffs allege that "the Defendant" negligently violated the FCRA by furnishing

Plaintiffs do not allege that they disputed the information with the credit reporting agencies, that

v. Green Tree Servicing, 2010 U.S. Dist. LEXIS 119979 (N.D. Cal. Oct. 27, 2010) (dismissing

Therefore, Plaintiffs have failed to state a claim upon which relief can be granted, and their

FCRA claims are dismissed. Plaintiffs are granted leave to amend, but any amended complaint must specify with detail the exact allegations of wrongdoing against each Defendant.

25 and 22 by failing to disclose certain finance charges and calculating the annual percentage rate based upon improperly calculated and disclosed amounts. Compl., Part 6-7. Unlike their other claims, Plaintiffs make the specific factual allegation that Defendants "disclosed a annual

3.Plaintiffs' Claims under TILA

Plaintiffs allege that "the Defendants violated TILA and Regulation Z §§ 226.18(c), 18(d),

percentage rate of 4.867% when in actuality the annual percentage rate was 5.009%." Id.

Plaintiffs seek $31,000 in damages.

TILA by making an inaccurate disclosure of the APR and finance charges. And second, a TILA claim for damages is subject to a one-year statute of limitations. See 15 U.S.C. §1640(e). As a general rule, the one-year period runs from the date of the consummation of transaction at issue.

Notwithstanding this one factual allegation, the Court finds that Plaintiffs' claims under TILA still fail to state a claim. First, Plaintiffs do not identify which Defendant allegedly violated

See King v. California, 784 F.2d 910, 915 (9th Cir. 1986). In this case, the loan transaction occurred in July 2005, but Plaintiff did not file suit until July 29, 2010, more than five years after 10 the loan. However, "the doctrine of equitable tolling may, in the appropriate circumstances, suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action." See King, 784 F.2d at

Accordingly, Plaintiffs' TILA claims are dismissed. Plaintiffs are granted leave to amend these claims, but they must specify with detail the alleged wrongdoing of each Defendant and must specify with detail how and why equitable tolling is appropriate in these circumstances.

existence of a pattern of racketeering activity, a nexus between the defendant and either the pattern of racketeering activity or the RICO enterprise, and resulting injury to the plaintiff. To allege a pattern of racketeering activity, a plaintiff must allege two or more predicate acts. Sun Sav. & Loan Ass'n v. Dierdorff, 825 F.2d 187, 193 (9th Cir. 1987). Such alleged acts must be pled with 23 specificity. Blake v. Dierdorff, 856 F.2d 1365, 1370 (9th Cir. 1988). Furthermore, when the alleged racketeering activity sounds in fraud, the complaint must "state with particularity the circumstances constituting fraud or mistake." See Fed. R. Civ. P. 9(b). 915. Plaintiffs have made no allegations as to why equitable tolling is appropriate.

4.Plaintiffs' Claims under RICO

To state a claim under RICO, a plaintiff must allege the existence of a RICO enterprise, the

In their $1 million claim for civil violations of RICO, Plaintiffs allege: 1) that they notified

Defendants that the alleged debt in question "was not their debt," but Defendants continued to try to collect the debt; and 2) that Defendants "represent themselves as rightful owners to obtain money and property by means of false pretenses." Compl., Part 8-9. Plaintiffs do not adequately plead a civil RICO claim under either the Rule 8 or Rule 9(b) pleading standards. Plaintiffs do not 3allege the existence of a RICO enterprise and do not identify a pattern of racketeering activity.

Exhibits attached to Plaintiffs' Complaint. For example, Exhibit A to the Complaint is a computer-6 printout of a credit bureau report, noting that Plaintiffs: 1) are more than 120 days past due on a 40-7 year mortgage opened in July 2005; 2) have a balance due on their mortgage of more than

A. In any event, a civil RICO claim, especially one sounding in fraud, requires far more specificity 10 than the conclusory allegations in Plaintiffs' Complaint.

Accordingly, as leave to amend would be futile, Plaintiffs' claims under RICO are dismissed with prejudice.

charges for specific settlement services the borrower is likely to incur in connection with the settlement." 12 U.S.C. 2604. See also 12 U.S.C. § 2603 (contemplating a good faith estimate of charges at or before settlement). An accompanying regulation, 24 C.F.R. § 3500.7(c)(2)

"good faith estimate" of "each charge which . . . the borrower will normally pay or incur at or 22 before settlement based upon common practice in the locality of the mortgaged property."


aith settlement" and seek $1,000. Defendants argue that Plaintiffs cannot state a claim for relief, 27 as the section of RESPA on which they rely (i.e., Section 2604 covering "good faith estimates") 28 does not authorize a private right of action for damages. Numerous courts in this district have

Plaintiffs' conclusory allegation that it was not "their debt" is belied by information provided in the

$900,000; and 3) made their last monthly payment (of $3,195) in October 2009. See Compl., Exh. 9

At the December 21, 2010 hearing, Plaintiffs were repeatedly given the opportunity to identify any specific factual allegations as to their RICO claims. Plaintiffs failed to do so.

5.Plaintiffs' Claim under RESPA

Section 2604 of RESPA contemplates "a good faith estimate of the amount or range of ("Regulation X"), further details that the lender must provide mortgage applicants with such a

Moreover, a violation under the subsection operates as a violation of section 2604. 24 C.F.R.

Plaintiffs allege that Defendants violated RESPA by failing to provide them a timely "good

analyzed RESPA's statutory scheme and persuasively reasoned that Congress did not intend to 2 create a private right of action for the sections that contemplate disclosure violations. See, e.g.,

Davenport v. Litton Loan Servicing, LP, 2010 U.S. Dist. LEXIS 71561 (N.D. Cal. July 16, 2010)

(citing cases for proposition that Congress did not intend to create a private right of action for RESPA disclosure violations). Such courts have reasoned that "[t]he inclusion of remedies in 6 certain RESPA provisions and their omission in others is indeed strong evidence that Congress did 7 not intend to provide a private remedy for violations" relating to disclosures. See Bloom v. Martin, 865 F. Supp. 1377, 1384 (N.D. Cal. 1994).

Accordingly, Plaintiffs' RESPA claim for failure to provide a good faith estimate is dismissed with prejudice. If Plaintiffs intended to rely on another section of RESPA, they must make this clear in any amended complaint, and must specify, with detail, the exact allegations of wrongdoing against each Defendant.


For the reasons stated above, Defendants' motion to dismiss is GRANTED in its entirety.

Plaintiffs may file an amended complaint consistent with this Order within thirty (30) days of the date this Order is filed. In light of the Court's disposition of Defendants' motion to dismiss,

Defendants' alternative motion for a more definite statement is denied as moot.


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