ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
On August 25, 2010, Plaintiffs Chang Bee Yang and Lau Yang filed a
Complaint against Defendant SunTrust Mortgage, Inc.*fn1
In the Complaint, Plaintiffs allege twenty-three separate
causes of action against Defendant, which relate to a Residential
Construction Loan Agreement ("RCLA") entered into between Plaintiffs
and Defendant. Defendant moves to dismiss the Complaint pursuant to
Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons
that follow, the motion will be granted.
Under Federal Rule of Civil Procedure 12(b)(6), a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). 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, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). As the Supreme Court has explained:
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, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).
To avoid a Rule 12(b)(6) dismissal, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face[.]" Telesaurus VPC, LLC v. Power, 623 F.3d 998, 1003 (9th Cir. 2010) (citations omitted). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).
If a Rule 12(b)(6) motion to dismiss is granted, "[the] 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." Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).
On December 16, 2006, Plaintiffs and Defendant entered into a RCLA. Complaint at ¶ 8. Under the RCLA, Defendant agreed to loan Plaintiffs $742,450.00 in order to purchase real property located at 10966 E. Promontory Way, Clovis CA, 93619. Id. at ¶ ¶ 8-9. Plaintiffs used $200,000.00 of the loan money to purchase the lot and the remaining $542,450.00 for construction. Id. at ¶ 11. Plaintiffs hired Sierra Custom Homes Inc. ("Contractor") to construct the residential home on the property. Id. at ¶ 10.
Pursuant to the RCLA, the loan proceeds were to be deposited into an account held by Defendant and advanced to Contractor when Contractor reached stages of completed work. Id. at ¶ 12. According to the RCLA, Plaintiffs were to supervise Contractor and inform Defendant about Contractor's need for monies. Id.
Paragraph 7 of the RCLA granted Defendant "Power-of-Attorney" and allowed Defendant to make payments directly to Contractor. Id. at ¶ 13. Defendant hired an appraiser to evaluate and inspect Contractor's work on the project and each of Contractor's draw requests. Id. at ¶ 16. Contractor made fifteen total draw requests. Id. at ¶ 17. Each draw request was paid by Defendant without Plaintiffs' authorization or approval. Id. Subsequently, Contractor failed to complete work paid by Defendant. Id. at ¶ 18.
1. Causes of Action 1-3 and 5-13
In Causes of Action 1-3 and 5-13, Plaintiffs allege that Defendant breached the RCLA by failing to complete, provide and maintain valid inspection reports for the Contractor's numerous draw requests. Complaint at ¶ ¶ 21, 26, 31, 41, 46, 51, 56, 61, 66, 71, 76, 81. Defendant contends that the RCLA did not impose an affirmative duty to complete, provide and maintain inspection reports. Motion at 5:15-16.
"When ruling on a Rule 12(b)(6) motion to dismiss, if a district court considers evidence outside the pleadings, it must normally convert the motion into a Rule 56 motion for summary judgment[.]" United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). "A court may, however, consider certain materials-documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice-without converting the motion to dismiss into a motion for summary judgment." Id. at 908. In this case, Plaintiffs have attached the RCLA to their Complaint and incorporated the document by reference. Complaint at ¶ 8 and Complaint at Exhibit A. Therefore, the Court will consider the RCLA in ruling on Defendant's Motion to Dismiss.
In California, "[a] cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff's performance or excuse for nonperformance; (3) defendant's breach; and (4) damages to plaintiff as a result of the breach." Williams v. Bank of Am., No. 2:09-CV-3060-JAM-KJM, 2010 WL 3034197, at *4 (E.D. Cal. Jul. 30, 2010) (quoting CDF Firefighters v. Maldonado, 158 Cal. App. 4th 1226, 1239 (2008)).
In their opposition, Plaintiffs state that the purpose of the agreement with Defendant "was to provide funds at certain times to Contractor in order to facilitate construction of the project in accordance with the specific terms of the [RCLA] set forth in Paragraph 2." Opposition at 6:9-11. Plaintiffs state that "[i]mplicit in the [RCLA], therefore, is the obligation on behalf of the party disbursing those funds, to review the draw requests submitted by Contractor, then complete, provide and maintain a valid inspection report before disbursing those funds." Id. at 6:11-13. Therefore, Plaintiffs contend ...