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Jose Soto et al v. Fcm Corporation

January 13, 2011


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


This action to rescind two residential real estate loans was filed in this court based on federal question jurisdiction under 28 U.S.C. Section 1331 and supplemental jurisdiction under 28 U.S.C. Section 1367. Defendant Chase Home Mortgage ("Chase")*fn1 filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), which Plaintiffs opposed. Chase did not file a reply. For the reasons which follow, the motion is GRANTED WITH LEAVE TO AMEND.

Plaintiffs allege that on March 25, 2005 they purchased a residence with two loans from Defendant FCM Corporation ("FCM"), both of which were secured by the residence. (Compl. at 2-3.) Subsequently, FCM transferred the loan servicing rights to Defendant Washington Mutual ("WaMu"). (Id. at 3.) Plaintiffs thought that they were getting a fixed-rate mortgage, but the mortgage had an adjustable rate. (Id.) Furthermore, monthly payments for the first 24 months were for interest only. (Id.) Plaintiffs claim they did not fully understand the features of the loans before they agreed to them, that FCM did not fully disclose or explain the features to them, and that, as Spanish speakers, they should have received loan documents for review in Spanish, but instead received only documents in English. (Id. at 4.) On July 1, 2009, the Property was put up for a Trustee's sale on behalf of FCM. (Id. at 3.)

Plaintiff filed this action alleging violations of the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., the Real Estate Settlement Procedure Act, 12 U.S.C. § 2601 et seq., California Civil Code Section 1632 and California Business and Professions Code Sections 17200 et seq., as well as intentional misrepresentation and grounds to quiet title. They requested rescission of both loans, money damages and a judgment quieting title in the Property, among other things.

Chase filed a motion to dismiss all causes of action for failure to state a claim upon which relief can be granted. A Rule 12(b)(6) motion tests the sufficiency of the complaint. Navarro v., 250 F.3d 729, 732 (9th Cir. 2001). "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. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks, brackets and citations omitted). In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

Similarly, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998).

Specifically, Chase contends that none of the causes of action are asserted against it. The complaint expressly alleges all causes of action only against FCM, although Chase and WaMu are also named as Defendants on the caption. (See, e.g., Compl. at 4, 7, 10, 11 & 13.) Plaintiffs do not address this issue in their opposition. Instead, they mention in passing in a conclusory manner that JP Morgan took over the beneficial interest in the loan and began servicing it and that there is "flow through liability to the subsequent noteholders." (Opp'n at 2-3; see also id. at 6.) Plaintiffs did not name JP Morgan as a Defendant and do not include these allegations and theories of liability in the Complaint against either Chase or WaMu. Because the Complaint does not allege any claims against Chase, Chase's motion to dismiss is GRANTED.

In their opposition, Plaintiffs indicated their intent to amend the Complaint. Accordingly, the court must next consider whether Plaintiffs should be granted leave to amend. See Schreiber Distrib. Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 2004). Rule 15 advises the court that leave to amend shall be freely given when justice so requires. Fed. R. Civ. P. 15(a). "This policy is to be applied with extreme liberality." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal quotation marks and citation omitted).

In the absence of any apparent or declared reason -- such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. -- the leave sought should, as the rules require, be "freely given."

Foman v. Davis, 371 U.S. 178, 182 (1962). Dismissal with prejudice and without leave to amend is not appropriate unless it is clear that the complaint could not be saved by amendment.

Chase has not expressed any opposition to Plaintiff's intend to amend the Complaint. Accordingly, the Complaint is DISMISSED WITH LEAVE TO AMEND.

It is hereby ORDERED as follows: 1. The motion to dismiss is GRANTED. All claims asserted against Defendant Chase DISMISSED WITH LEAVE TO AMEND.

2. If Plaintiffs choose to file an amended complaint they must allege grounds of their entitlement to relief, beyond mere labels and conclusions, as to each named Defendant and cause of action. The amended complaint, if any, must be filed no later than January 27, 2010.

3. If Plaintiffs choose not to file an amended complaint, they must file a notice of intent not to file an ...

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