UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
January 28, 2011
ABU-ART ROBINSON AND NADINE E. NO. CIV. 2:10-3014 WBS GGH ROBINSON, PLAINTIFFS,
WACHOVIA MORTGAGE; THE SUCCESSORS AND ASSIGNS OF WORLD SAVINGS BANK; AND DOES 1 THROUGH 20, INCLUSIVE, DEFENDANTS.
MEMORANDUM AND ORDER RE:
MOTION TO DISMISS
Plaintiffs Abu-Art Robinson and Nadine E. Robinson filed this action against defendants Wachovia Mortgage and the successors and assigns of World Savings Bank arising from their residential mortgage. Wachovia Mortgage now moves to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Plaintiffs did not file an opposition or statement of non-opposition to the motion.
I. Factual and Procedural Background Plaintiffs entered into a loan agreement with World Savings Bank in August of 2005 to purchase property at 1124 Martinson Court in Sacramento, California. (Compl. ¶ 2, Ex. A (Docket No. 1).) The note was secured by a Deed of Trust. (Id. Ex. A.) While the Complaint lacks specifics, it appears that plaintiffs have defaulted on their loan agreement "by virtue of their inability to make all payments as they came due" and the foreclosure process has been initiated, but a foreclosure sale has not taken place. (Id. ¶¶ 5-6, 10-11, 14, 20.)
Plaintiffs' claims are based on the loan origination and the initiation of the foreclosure process. Plaintiffs allege that defendants "fail[ed] to provide the Plaintiff(s) with a copy of the loan application (form 1003), the actual fully filled-out and executed promissory note, [and] the 3-day Right of Rescission" and that "the Truth In Lending Disclosure statement is very inaccurate and deceptive and fails to give notice to Plaintiff(s) [regarding] the extent of the obligations." (Id. ¶
7.) Defendants allegedly gave plaintiffs "incomplete documents that plaintiffs were told they must sign [and] insufficient time to review the more than 50 pages the plaintiffs were expected to read and sign in less than an hour." (Id. ¶ 8.) While the Complaint does not allege what was misrepresented, the Complaint alleges that misrepresentations induced plaintiffs "to accept loan terms that they did not understand." (Id. ¶ 18.)
The Complaint alleges that the "plaintiffs were placed in an inappropriate loan that they could barely afford before any re-set of interest rate or payment." (Id. ¶ 8.) Plaintiffs allege that the defendants had the "knowledge and experience to evaluate the appropriateness of the loans and the standards of the lending industry sufficient to determine if plaintiffs had been dealt with fairly and if the selected loan product was applicable for the plaintiffs." (Id. ¶ 12.)
Plaintiffs allegedly "have been threatened with wrongfully [sic] and unlawfully [sic] dispossession of their real property." (Id. ¶ 10.) The Complaint alleges that defendants have "perpetrated fraud on the plaintiff(s), if the allegations are true that defendants do not hold the original promissory note secured by the deed of trust." (Id. ¶ 17.)
On September 28, 2010, plaintiffs filed this action in state court, and defendants removed it on November 9, 2010. The Complaint asserts nine claims: (1) breach of contract, (2) declaratory relief, (3) fraud, (4) intentional misrepresentation,
(5) negligent misrepresentation, (6) rescission and restitution,
(7) declaration of resulting or constructive trust, (8) quiet title, and (9) accounting. Wachovia Mortgage*fn1 now moves to dismiss the Complaint pursuant to Rule 12(b)(6).
To survive a motion to dismiss, a plaintiff must plead
"only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949 (2009), and where a complaint pleads facts that are "'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557). In deciding whether a plaintiff has stated a claim, the court must assume that the plaintiff's allegations are true and draw all reasonable inferences in the plaintiff's favor. Usher v. City of L.A., 828 F.2d 556, 561 (9th Cir. 1987). However, the court is not required to accept as true "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation mark omitted).
A. Breach of Contract Claim
While plaintiffs label their first claim as breach of contract, plaintiffs actually appear to allege a breach of the covenant of good faith and fail dealing. "Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." Marsu, B.V. v. Walt Disney Co., 185 F.3d 932, 937 (9th Cir. 1999) (applying California law) (internal quotation marks omitted). That duty, known as the covenant of good faith and fair dealing, requires "that neither party . . . do anything which will injure the right of the other to receive the benefits of the agreement." Andrews v. Mobile Aire Estates, 125 Cal. App. 4th 578, 589 (2d Dist. 2005) (internal quotation marks omitted). "[T]he implied covenant is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated in the contract." Racine & Laramie, Ltd. v. Dep't of Parks & Recreation, 11 Cal. App. 4th 1026, 1032 (4th Dist. 1992). "[T]he implied covenant is a supplement to an existing contract, and thus it does not require parties to negotiate in good faith prior to any agreement." McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 799 (2d Dist. 2008).
Here, plaintiffs rest this claim primarily on allegations about defendants' conduct during the negotiation and formation of the agreement. However, defendants did not have a duty of good faith and fair dealing during the loan origination. See Lopez v. Wachovia Mortg., 2010 WL 2836823, No. C 10-01645, at *8 (N.D. Cal. July 19, 2010) ("Thus, to the extent that the complaint's allegations stem from the formation and negotiation of the loan, plaintiff's claim for breach of the covenant must be dismissed."); Madrid v. J.P. Morgan Chase Bank, N.A., No. 09-cv-00731 JAM GGH, 2009 WL 3255880, at *4 (E.D. Cal. Oct. 8, 2009). Plaintiffs have also failed to sufficiently allege a breach of the covenant subsequent to the loan origination. Accordingly, the court will grant Wachovia Mortgage's motion to dismiss this claim.
B. Fraud, Intentional Misrepresentation, and Negligent Misrepresentation Claims "The elements of fraud are: (1) a misrepresentation
(false representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage." Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 990 (2004). A claim for intentional misrepresentation is a claim for fraud. See Anderson v. Deloitte & Touche, 56 Cal. App. 4th 1468, 1474 (1st Dist. 1997). A claim for negligent misrepresentation contains similar elements, but requires a different state of mind. BNSF Ry. Co. v. San Joaquin Valley R. Co., No. 1:08-cv-01086 AWI SMS, 2010 WL 5158879, at *7 (E.D. Cal. Dec. 14, 2010). Negligent misrepresentation does not require an intent to deceive, only an "assertion, as a fact, of that which is not true, by one who has no reasonable ground for believing it to be true," Cal. Civ. Code § 1710(2), or a "positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true." Cal. Civ. Code § 1572(2).
Under the heightened pleading requirements for claims of fraud under Federal Rule of Civil Procedure Rule 9(b), "a party must state with particularity the circumstances constituting the fraud." Fed. R. Civ. P. 9(b). A plaintiff must include the "who, what, when, where, and how" of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003). Negligent misrepresentation "sounds in fraud" and thus is also subject to these heightened pleading standards. Errico v. Pacific Capital Bank, N.A., --- F. Supp. 2d ----, ----, No. 09-CV-04072, 2010 WL 4699394, at *13 (N.D. Cal. Nov. 9, 2010).
Here, the Complaint is devoid of allegations stated with particularity. It is not even clear what representations were made to plaintiffs. To the extent these claims rest on a representation that defendants are entitled to foreclose on the property despite not being the note holder, plaintiffs' claims fail. See Arvizu v. GMAC Mortg., LLC, No. 1:10-cv-00990 OWW JLT, 2010 WL 3958666, 2010 WL 3958666, at *5 (E.D. Cal. Oct. 8, 2010); Castaneda v. Saxon Mortgage Servs., Inc., 687 F. Supp. 2d 1191, 1201 (E.D. Cal. 2009) ("Under California law, there is no requirement for the production of the original note to initiate a non-judicial foreclosure"). Accordingly, the court will grant Wachovia Mortgage's motion to dismiss these claims.
C. TILA Claim
The Complaint does not separately label a TILA claim.
However, plaintiffs allege TILA violations. (Compl. ¶ 7.) To the extent plaintiffs assert a TILA claim, a TILA claim is timed-barred because the loan was made in August of 2005 (Compl. Ex. A) and the Complaint was filed over five years later. A TILA damages claim has a one-year statute of limitations, 15 U.S.C. § 1640(e), and a TILA rescission claim has a three-year statute of limitations. Id. § 1635(f). Although equitable tolling may apply to a TILA damages claim, King v. California, 784 F.2d 910, 915 (9th Cir. 1986), plaintiffs do not allege facts suggesting that equitable tolling applies. Accordingly, to the extent that plaintiffs assert a TILA claim, the court will dismiss this claim.
D. Quiet Title Claim
California Code of Civil Procedure section 761.020
states that a claim to quiet title requires: (1) a verified complaint, (2) a description of the property, (3) the title to which a determination is sought, (4) the adverse claims to the title against which a determination is sought, (5) the date as of which the determination is sought, and (6) a prayer for the determination of the title. Cal. Code Civil Proc. § 761.020.
The tender rule applies to a quiet title action. Kozhayev v. America's Wholesale Lender, No. CIV S-09-2841 FCD DAD PS, 2010 WL 3036001, at *5 (E.D. Cal. Aug. 2, 2010); see also Shimpones v. Stickney, 219 Cal. 637, 649 (1934). A "quiet title action is doomed in the absence of Plaintiffs' tender of the full amount owed." Gjurovich v. Cal., No. 1:10-cv-01871 LJO SMS, 2010 WL 4321604, at *8 (E.D. Cal. Oct. 26, 2010). Here, among other deficiencies, plaintiffs have not alleged tender or the ability to tender. Accordingly, the court will grant Wachovia Mortgage's motion to dismiss the quiet title claim.
E. Remaining Claims
Plaintiffs' remaining claims are for declaratory relief, rescission and restitution, declaration of resulting or constructive trust, and accounting. These claims are either duplicative or derivative of the claims that the court will dismiss. Thus, because the court will dismiss the other claims, the court will grant Wachovia Mortgage's motion to dismiss these remaining claims.
IT IS THEREFORE ORDERED that Wachovia Mortgage's motion to dismiss the Complaint be, and the same hereby is, GRANTED.
Plaintiffs have twenty days from the date of this Order to file an amended complaint, if they can do so consistent with this Order.