UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
February 18, 2011
MARGOTH MENDOZA, AN INDIVIDUAL,
CITIMORTGAGE, INC. AND DOES 1 TO 50,
The opinion of the court was delivered by: Lucy H. Koh United States District Judge
United States District Court For the Northern District of California
ORDER GRANTING DEFENDANT‟S MOTION TO DISMISS AND DENYING DEFENDANT‟S MOTION TO STRIKE
Originally filed in the Superior Court of California on July 15, 2010, Defendant CitiMortgage, Inc. removed the instant action to the United States District Court for the Northern District of California on August 12, 2010. Dkt. No. 1. On August 19, 2010, CitiMortgage moved 20 to dismiss Plaintiff Margoth Mendoza‟s complaint and moved to strike portions of Mendoza‟s 21 complaint. Dkt. Nos. 5 ("Mot. to Dismiss"), 6 ("Mot. to Strike"). CitiMortgage originally noticed 22 these motions before Judge Trumbull. After the instant case was reassigned to the undersigned 23 judge on October 7, 2010, CitiMortgage renoticed its motions. Dkt. Nos. 13, 14. In violation of Civil Local Rule 7-3, Mendoza has neither opposed nor filed a statement of non-opposition to CitiMortgage‟s motions. Pursuant to Civil Local Rule 7-1(b), the Court deems CitiMortgage‟s 26 motions suitable for disposition without oral argument. After considering CitiMortgage‟s 27 submissions and the relevant legal authorities, the Court hereby GRANTS CitiMortgage‟s motion to dismiss, with leave to amend in part and with prejudice in part, and DENIES CitiMortgage‟s 2 motion to strike as moot. 3
A. Factual Allegations
Mendoza‟s complaint alleges that CitiMortgage and other unnamed Defendants (collectively "Defendants") engaged in fraudulent real estate loan practices in order to increase 7 their loan origination volume. See Dkt. No. 1, Ex. A ("Compl."). According to Mendoza, Defendants purposefully relaxed their underwriting guidelines and sold a risky loan product to Mendoza because they could resell Mendoza‟s mortgage on the secondary market. Id. ¶¶ 12-19.
Mendoza further claims that Defendants failed to clearly and conspicuously disclose certain key provisions related to Mendoza‟s mortgage and provided undisclosed financial incentives to the United States District Court For the Northern District of California
agents and loan officers selling their products. Id. ¶ 13. In addition to these allegations, Mendoza 13 also claims that Defendants‟ loans were structurally unfair, that Defendants did not meaningfully 14 consider whether Mendoza could afford the loans sold to her, and that Defendants incentivized 15 brokers to sell risky loan products. Id. ¶¶ 22-35.
Based on these allegations, Mendoza asserts six claims for relief: (1) violation of the California Unfair Competition Law ("UCL"), CAL. BUS. & PROF. CODE § 17200 et seq.; (2)
violation of the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2601; (3) 19 violation of the Truth in Lending Act ("TILA"), 12 C.F.R. § 226; (4) fraud; (5) fraud in the 20 inducement; and (6) unfair business practices. Id. ¶¶ 37-61. Mendoza seeks injunctive relief, 21 damages, rescission, and reasonable attorneys‟ fees.
B. Procedural History
After CitiMortgage renoticed its motions before this Court, the Court set the motions for a hearing to be held on January 27, 2011. Dkt. No. 15. Under Civil Local Rule 7-3, Mendoza had 25 until January 6, 2011 to file either an opposition to CitiMortgage's motions or a statement of non-26 opposition. When Mendoza failed to do either, CitiMortgage requested that this Court grant its 27 unopposed motions. Dkt. Nos. 16, 17. On January 21, 2011, the Court vacated the January 27, 28 2011 hearing and stated that it would issue a written order. Dkt. No. 18.
II. LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a complaint. See Ileto v. Glock Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). "To survive a motion to dismiss, a 4 complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is 5 plausible on its face.'" Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 127 S. Ct. 1955, 167 L. Ed. 2d 29 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows 8 the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." 9 Caviness v. Horizon Cmty. Learning Ctr., Inc., 590 F.3d 806, 812 (9th Cir. 2010) (quoting Iqbal, 129 S. Ct. at 1949) (internal quotation marks omitted). When the facts alleged do not nudge a plaintiff's claim "across the line from conceivable to plausible," the court should dismiss the United States District Court For the Northern District of California complaint. See Twombly, 550 U.S. at 570, 127 S. Ct. 1955. "Determining whether a complaint 13 states a plausible claim for relief" is "a context-specific task that requires the reviewing court to 14 draw on its judicial experience and common sense." Iqbal, 129 S. Ct. at 1950 (citation omitted).
Claims sounding in fraud are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). A plaintiff alleging fraud "must state with particularity the 17 circumstances constituting fraud." FED. R. CIV. P. 9(b). To satisfy this standard, the allegations 18 must be "specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they 20 have done anything wrong." Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985).
Accordingly, claims sounding in fraud must allege "an account of the time, place, and specific 22 content of the false representations as well as the identities of the parties to the misrepresentations."
Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007).
Even if a complaint fails to state a claim on which relief can be granted, "a district court should grant leave to amend even if no request to amend the pleading was made, unless it 26 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) (en banc) (citations and quotations omitted); see also Balistreri v. Pacifica Police Dept., 901 F.2d 696, 701 (9th Cir. 1990).
A. Request for Judicial Notice
CitiMortgage requests that this Court take judicial notice of ten documents pursuant to Rule 201 of the Federal Rules of Evidence. Dkt. No. 7 ("RJN"). These documents are: (1) the Grant Deed recorded October 22, 2002 as document number 16552303 in the official records of Santa Clara County, California (RJN, Ex. A); (2) the Deed of Trust recorded October 22, 2002 as 7 document number 16552304 in the official records of Santa Clara County, California (RJN, Ex. B);
(3) the Deed of Trust recorded January 17, 2003 as document number 16757085 in the official 9 records of Santa Clara County, California (RJN, Ex. C); (4) the Deed of Trust recorded October 23, 2003 as document number 17434103 in the official records of Santa Clara County, California (RJN, Ex. D); (5) the California Open End Deed of Trust recorded March 2, 2004 as document United States District Court For the Northern District of California number 17639477 in the official records of Santa Clara County, California (RJN, Ex. E); (6) the California Open End Deed of Trust recorded October 4, 2004 as document number 18031150 in 14 the official records of Santa Clara County, California (RJN, Ex. F); (7) the Deed of Trust recorded December 27, 2004 as document number 18162372 in the official records of Santa Clara County, California (RJN, Ex. G); (8) the Assignment of Deed of Trust recorded December 14, 2009 as 17 document number 20538393 in the official records of Santa Clara County, California (RJN, Ex. H);
(9) Notice of Default recorded September 17, 2009 as document number 20435976 in the official 19 records of Santa Clara County, California (RJN, Ex. I); and (10) the Notice of Trustee‟s Sale 20 recorded January 20, 2010 as document number 20581092 in the official records of Santa Clara County, California (RJN, Ex. J).
Although a court generally only considers the allegations contained in
complaint when ruling on a motion to dismiss, "a district court
ruling on a motion to dismiss may 24 consider a document the
authenticity of which is not contested, and upon which the plaintiff's
complaint necessarily relies." Parrino v. FHP, Inc., 146 F.3d 699,
705-06 & n. 4 (9th Cir.1998), 26 superseded by statute on other
grounds as stated in Abrego Abrego v. The Dow Chem. Co., 443 27
F.3d 676, 681 (9th Cir. 2006). This same rule applies to documents
that are crucial to the 28 plaintiff‟s claims but are not incorporated
in the complaint. See id. at 706. In addition, "[a] court
may take judicial notice of "matters of public record‟ without
converting a motion to dismiss into a 2 motion for summary judgment."
Lee v. City of Los Angeles, 250 F.3d 668, 690 (9th Cir. 2001)
(quoting MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.
Mendoza‟s entire complaint is based on an alleged real estate mortgage loan that Defendants used fraudulent means to sell her. Even though Mendoza does not provide any details 6 as to when she received this loan, she identifies the subject property as 940 Sweetbriar Drive,
Campbell, CA 95008 ("the Subject Property"). See Compl. ¶ 1. All ten of the documents relate to 8 the Subject Property. Many show that Mendoza has in fact secured loans using the Subject Property. No party has questioned the authenticity of the documents. Thus, the Court may 10 consider these documents in ruling on CitiMortgage‟s motions.
Furthermore, all ten documents are public records and are proper subjects for judicial United States District Court For the Northern District of California notice. The first seven documents are judicially noticeable as copies of various forms of certified 13 deeds. Hotel Employees and Rest. Employees Local 2 v. Vista Inn Mgmt. Co., 393 F. Supp. 2d 972, 978 (N.D. Cal. 2005) ("Unimpeached and certified copies of deeds have been widely held proper 15 subjects of judicial notice."); see also Western Federal Sav. & Loan Ass'n v. Heflin Corp., 797 F.Supp. 790, 792 (N.D.Cal. 1992) (taking judicial notice of deeds of trust contained in the public 17 records of the Santa Clara County Recorder). The last three documents are an assignment of deed 18 of trust, a notice of default, and a notice of trustee‟s sale. These are also commonly considered 19 public records subject to judicial notice. See Grant v. Aurora Loan Servs., Inc., No. CV 09-08174, 20 2010 WL 3517399, at *3 (C.D. Cal. Sept. 10, 2010) (citing numerous cases where the court took 21 judicial notice of assignments of deeds of trust, notices of default, and notices of trustee‟s sale).
Therefore, the Court takes judicial notice of all ten documents attached to CitiMortgage‟s request for judicial notice and will consider these documents in ruling on CitiMortgage‟s motions.
B. Motion to Dismiss
CitiMortgage‟s central argument is that Mendoza‟s complaint must be dismissed with prejudice because it fails to give CitiMortgage proper notice of the basis of Mendoza‟s claims.
Mot. to Dismiss 1. CitiMortgage‟s argument is based on the vague and generalized nature of Mendoza‟s allegations. Beyond identifying the Subject Property by address and naming CitiMortgage as a defendant, the complaint contains no specific allegations against CitiMortgage.
Most of the complaint is filled with general allegations against the mortgage industry as a whole.
Although Mendoza does claim that CitiMortgage and other unnamed Defendants failed to comply 4 with federal and state law in selling her a mortgage loan, she does not identify any loans that she 5 has received nor does she specify any dates on which the alleged activity occurred.
Other than the address of the Subject Property, all of the specifics available to the Court come from the documents submitted by CitiMortgage. According to these documents, Mendoza 8 has obtained a number of different loans since purchasing the Subject Property. See RJN, Exs. B, C, D, E, F. Mendoza received one of these loans, in the amount of $635,000, from MetroCiti Mortgage, LLC on or around October 17, 2003 ("MetroCiti Loan"). RJN, Ex. D. On or around September 3, 2009, MetroCiti assigned the MetroCiti Loan to CitiMortgage. RJN, Ex. H. A notice United States District Court For the Northern District of California of default on the MetroCiti Loan was recorded on September 17, 2009, RJN, Ex. I, and on January 20, 2010, a Notice of Trustee‟s Sale was recorded, RJN, Ex. J. Thus, it would appear that CitiMortgage has never sold a loan to Mendoza and that CitiMortgage is named only because it is the current owner of a loan on which Mendoza has defaulted.
Despite the formulaic character of Mendoza‟s complaint and CitiMortgage‟s limited connection to any real estate loan transactions involving the Subject Property, the Court deems it prudent to consider each of Mendoza‟s claims individually.
1. California Business and Professions Code § 17200 limitations. Mot. to Dismiss 5.*fn1 Under California law, the statute of limitations for an action for 22 unfair business practices is four years. CAL. BUS. & PROF. CODE § 17208. Ordinarily, a UCL CitiMortgage argues that Mendoza‟s UCL claim is time-barred by the relevant statute of cause of action accrues at the time when the wrongful act was done and liability arises. Salenga v. Mitsubishi Motors Credit of Am., Inc., 183 Cal. App. 4th 986, 996, 107 Cal. Rptr. 3d 836 (2010).
Here, Mendoza claims that Defendants violated the UCL by making untrue or misleading 26 statements to induce her to enter a real estate mortgage loan. Compl. ¶ 38. Mendoza entered into the MetroCiti Loan, the loan currently owned by CitiMortgage, in 2003. RJN, Ex, D. This is 2 almost seven years before Mendoza filed this action. Even if Mendoza based her UCL claim on 3 the loan she obtained in 2004, RJN, Ex. G, her UCL claim would still not be timely. Because Mendoza does not allege facts suggesting that equitable tolling or some form of delayed accrual 5 should apply, her UCL claim is time-barred.
Mendoza‟s UCL claim also fails because she does not plead sufficient facts to put CitiMortgage on notice as to the basis of her claim. According to Mendoza‟s complaint, CitiMortgage made untrue statements to Mendoza in connection with a real estate mortgage loan.
Compl. ¶ 38. Mendoza, however, does not identify any real estate loan, either by date or amount. CitiMortgage to her. *fn2
Accordingly, Mendoza‟s UCL claim is dismissed with leave to amend. However, if any Furthermore, Mendoza does not describe any specific content of any statement made by United States District Court For the Northern District of California amended complaint does not remedy the above deficiencies, this claim may be dismissed with prejudice.
Mendoza‟s second cause of action alleges violations of the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. § 2601 et seq. Mendoza does not specify any 18 particular provisions of RESPA that Defendant allegedly violated, but she states that Defendant 19 violated RESPA through certain statements related to the loan terms, payment obligations and prepayment penalties. Compl. ¶ 42. Although RESPA sets forth certain disclosure and notice 21 requirements related to the servicing of loans and escrow accounts, see 12 U.S.C. § 2605, it does not govern disclosures regarding loan terms or prepayment penalties. Thus, any statements made 23 regarding loan terms, loan payment obligations, or prepayment penalties do not establish a RESPA violation.
In addition, to the extent that Mendoza attempts to allege a violation of 12 U.S.C. § 2607, which prohibits giving or receiving fees, kickbacks, or things of value in exchange for referrals of loan-related business, Mendoza is time-barred by the one-year statute of limitations for such claims. 12 U.S.C. § 2614. Mendoza‟s allegations all relate to statements made at the time of loan origination. The only loan with which CitiMortgage has any connection, the MetroCiti Loan, was originated in October 2003. RJN, Ex. D. Mendoza did not bring her claim until almost seven 5 years later, and she pleads no facts that suggest a basis for equitable tolling. Her claim is thus 6 time-barred. Nevertheless, the Ninth Circuit disfavors dismissal when equitable tolling is at issue.
Accordingly, Mendoza‟s RESPA claim is dismissed with leave to amend. However, if any 8 amended complaint does not remedy the above deficiencies, this claim may be dismissed with prejudice.
For the Northern District of California Plaintiff's third cause of action asserts violations of the Truth in Lending Act ("TILA"), United States District Court U.S.C. § 1601 et seq., and its implementing regulation, 12 C.F.R. § 226. Like her RESPA claim, Mendoza‟s TILA claim rests on conclusory allegations and fails to identify any specific statutory 14 or regulatory provisions allegedly violated by CitiMortgage. Mendoza specifies only that CitiMortgage failed to examine her repayment ability and failed to disclose details such as "the 16 eventually reset interest rate, specific loan terms, and the total dollar amount the loan will cost over 17 time." Compl. ¶ 45. These vague allegations do not provide CitiMortgage fair notice of the claims 18 asserted against it, and do not provide a factual basis sufficient to allow the Court to draw the 19 reasonable inference that the defendant is liable for TILA violations. See Iqbal, 129 S. Ct. at 1949.
In addition, to the extent that Mendoza is basing her TILA claim on the MetroCiti Loan, CitiMortgage is not the originator of that loan.
Moreover, it appears that any claim for damages would be barred by the one-year statute of limitations, 15 U.S.C. § 1640(e), and any claim seeking rescission would be barred by the three-24 year statute of repose, 15 U.S.C. § 1635(f). Although equitable tolling may apply to TILA claims 25 for damages, King v. California, 784 F.2d 910, 915 (9th Cir. 1986), Mendoza has not alleged facts 26 suggesting that equitable tolling should apply in this case. Although equitable tolling may apply to 27 TILA damages claims, equitable tolling does not apply to TILA rescission claims. See Miguel v. Country Funding Corp., 309 F.3d 1161, 1164-65 (9th Cir. 2002) (stating that 15 U.S.C. § 1635(f) imposes an absolute limitation on rescission actions and deprives federal courts of jurisdiction to consider rescission claims brought outside the three-year limitation period). Mendoza's TILA rescission claim is time-barred because not equitable tolling applies.
Accordingly, Mendoza's TILA claim for damages is dismissed with leave to amend, and her TILA claim for rescission is dismissed with prejudice. However, if any amended complaint does 6 not remedy the above deficiencies, this claim may be dismissed with prejudice.
Mendoza‟s claim for fraud is subject to the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See Jenkins v. Commonwealth Land Title Ins. Co., 5 F.3d 791, 796 (9th Cir. 1996). Accordingly, Mendoza‟s allegations must include "an account of the time, place, and specific content of the false representations as well as the identities of the parties to the United States District Court For the Northern District of California misrepresentations." Swartz, 476 F.3d at 764. Mendoza‟s complaint, however, contains only 13 vague averments that CitiMortgage made false statements relating to the terms and conditions of an 14 unspecified real estate mortgage loan. Compl. ¶¶ 48-52. Mendoza does not name any individuals 15 who made statements. Mendoza does not provide any dates on which CitiMortgage or its agents 16 made representations to her. Finally, Mendoza does not describe the content of any misrepresentations. Therefore, Mendoza‟s fraud claim is dismissed with leave to amend.
However, if any amended complaint does not remedy the above deficiencies, this claim may be 19 dismissed with prejudice.
5. Fraud in the Inducement
Mendoza alleges that CitiMortgage made a series of fraudulent promises to induce her into a real estate mortgage loan. Compl. ¶ 54. Mendoza, however, does not specify any particular real estate mortgage loan that CitiMortgage fraudulently induced her to accept. Thus, Mendoza fails to provide CitiMortgage fair notice of the claims asserted against it. Moreover, Mendoza‟s allegations fail to satisfy the heightened pleading standard of Rule 9(b). Therefore, Mendoza‟s 26 fraud in the inducement claim is dismissed with leave to amend. However, if any amended complaint does not remedy the above deficiencies, this claim may be dismissed with prejudice.
6. Unfair Business Practices
Mendoza alleges in her sixth claim for relief that CitiMortgage engaged in unfair business practices in order to profit from Mendoza‟s loss. Compl. ¶ 59. Although Mendoza does not 4 specify any statutory basis for her claim, it would seem logically based on the same statute that 5 provides the basis for Mendoza‟s first claim for relief: California Business and Professions Code § 17200. Section 17200 "prohibits [business] practices that are either "unfair,‟ or "unlawful,‟ or "fraudulent.‟" Pastoria v. Nationwide Ins., 112 Cal. App. 4th 1490, 1496, 6 Cal. Rptr. 3d 148 (2003). Thus, based on the allegations in the complaint, Mendoza‟s sixth cause of action is 9 duplicative of her first cause of action. Even if the Court considers the allegations made in Mendoza‟s first and sixth claims for relief collectively, Mendoza‟s UCL claim still fails to allege 11 sufficient facts to state a lausible claim against CitiMortgage. Therefore, Mendoza‟s sixth claim United States District Court For the Northern District of California for relief is dismissed without leave to amend. Mendoza may, however, still amend her UCL claim 13 as stated above.
C. Motion to Strike
As the Court has dismissed Mendoza‟s complaint, the Court need not reach CitiMortgage‟s motion to strike and denies the motion as moot.
For the foregoing reasons, the Court GRANTS CitiMortgage‟s motion to dismiss, with leave to amend in part and with prejudice in part, and DENIES CitiMortgage‟s motion to strike as moot. Mendoza‟s UCL, RESPA, TILA damages, fraud, and fraud in the inducement claims are dismissed with leave to amend. Mendoza‟s TILA rescission claim and her sixth cause of action are 22 dismissed with prejudice. If any amended complaint does not remedy the deficiencies explained in this Order, Mendoza's complaint may be dismissed with prejudice.
Plaintiff shall file an amended complaint, if any, within 30 days of the date of this Order to cure the deficiencies discussed herein. Plaintiff may not add new causes of action or parties 3 without leave of Court or by stipulation of the parties pursuant to Federal Rule of Civil Procedure 15.
IT IS SO ORDERED.
United States District Court For the Northern District of California