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Ferdinand Lugo and Cymbeline Gomez-Lugo v. Bank of America

March 14, 2012

FERDINAND LUGO AND CYMBELINE GOMEZ-LUGO PLAINTIFFS,
v.
BANK OF AMERICA, N.A., ET AL. DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

Plaintiffs Ferdinand Lugo and Cymbeline Gomez-Lugo (collectively, "Plaintiffs") brought this action in state court against Defendant Bank of America ("BAC" or "Defendant") seeking redress for a litany of statutory and common law violations arising from the origination and subsequent refinancing of their home mortgage. Defendant thereafter removed the action to this court. Currently before the Court is Defendant's Motion to Dismiss Plaintiffs' Complaint.

For the reasons set forth below, Defendant's Motion is GRANTED with leave to amend.*fn1

BACKGROUND*fn2

Plaintiffs allege that, in 2005, they acquired a mortgage in the amount of $329,500 from Country Wide, a BAC subsidiary. In 2006, Plaintiffs refinanced their mortgage as an adjustable rate loan for the amount of $520,000 ("the Subject Loan"). The Subject Loan is currently served by BAC. The current balance on the Subject Loan is approximately $555,000. The current market value of Plaintiffs' house is approximately $285,000.

Under the terms of the Subject Loan, the interest rate was fixed for only the first month at 1.500% margin added to the Current Index, and increased monthly thereafter to a recast rate of 3.575% added to the Current Index. Plaintiffs' initial monthly payments constituted $1,800 per month. In 2007, their payments constituted $4,000 per month. According to Plaintiffs, they could not afford to make such monthly payments, and thus made multiple loan modification requests with BAC. BAC denied all of Plaintiffs' requests.

In 2009, Plaintiff Ferdinand Lugo, who was employed as a mailman, lost his overtime pay. In 2010, Plaintiff Cymbeline Gomez-Lugo lost her part-time job as a nurse.

As a result of financial hardship, in January 2010, Plaintiffs began missing their monthly payments on the Subject Loan.

According to Plaintiffs, Defendant should not have qualified them for the Subject Loan based on normal underwriting guidelines. Defendant allegedly marketed the Subject Loan as "safe and affordable" and failed to disclose the material terms and risks of the Subject Loan to Plaintiffs. According to Plaintiffs, they would not have accepted the Subject Loan terms had they been fully and properly informed of the inherent risks.

Plaintiffs also allege that their primary language is Tagalog, and that Defendant failed to provide them with a translator during negotiations of the Subject Loan.

REQUEST FOR JUDICIAL NOTICE

Defendant has filed a request seeking judicial notice under Federal Rule of Civil Procedure 201*fn3 of three documents, copies of which are attached as exhibits to the request: (1) Adjustable Rate Note, signed by Plaintiffs, and dated May 12, 2006; (2) Deed of Trust, signed by Plaintiffs, dated May 12, 2006, and recorded in the official records of San Joaquin County on May 22, 2006, as Document 2006-109962; and (3) Fannie May Historical Conventional Loan Limits, updated January 21, 2011. (Def.'s Request for Judicial Notice ["RJN"], filed Aug. 1, 2011 [ECF No. 6].)

The Court "may take judicial notice of 'matters of public record' without converting a motion to dismiss into a motion for summary judgment." Lee v. City of L.A., 250 F.3d 668, 689 (9th Cir. 2001). Additionally, under the "incorporation by reference" doctrine, a court may also review documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (citation omitted). The incorporation by reference doctrine also applies "to situations in which the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the contents of that document in the complaint." Id. The matters of which a court may take judicial notice should be "generally known," or "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(f); U.S. v. Camp, 723 F.2d 741, 744 (9th Cir. 1984).

Having reviewed the exhibits to Defendant's RJN, the Court finds that it may take judicial notice of all three attached documents. The Court may properly take judicial notice of the Deed of Trust (RJN Ex. B), because it is a public record and is also referenced in the Complaint. (See Compl. ¶¶ 24,94.) The Court may take judicial notice of the Adjustable Rate Note (RJN Ex. A), under the "incorporation by reference" doctrine, because Plaintiffs have specifically referred to this document in the Complaint but have not attached it thereto. (See id.)

Finally, the Court may take judicial notice of Fannie May Historical Conventional Loan Limits because the Court determines that the content of this document is "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." See Fed. R. Evid. 201(f); Camp, 723 F.2d at 744. Plaintiffs have not objected to Defendant's request or challenged the authenticity of any of the attached documents.

LEGAL STANDARD UNDER RULE 12(b)(6)

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) "requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant a fair notice of what the . . . claim is and the grounds upon which it rests.'"

Bell. Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. Id. However, "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." Id. (internal citations omitted). A court is not required to accept as true a "legal conclusion couched as a factual allegation."

Ashcroft v. Iqbal,129 S. Ct. 1937, 1949-50 (2009) (quoting Twombly, 550 U.S. at 555). "Factual allegations must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555.

Furthermore, "Rule 8(a)(2) . . . requires a 'showing,' rather than a blanket assertion, of entitlement to relief." Twombly, 550 U.S. at 556 n.3 (internal citations omitted). "Without some factual allegation . . . , it is hard to see how a claimant could satisfy the requirements of providing not only 'fair notice' of the nature of the claim, but also 'grounds' on which the claim rests." Id. (citation omitted). A pleading must contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs . . . have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Id.

A court granting a motion to dismiss a complaint must then decide whether to grant a leave to amend. Leave to amend should be "freely given" where there is no "undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment . . . ." Foman v. Davis, 371 U.S. 178, 182 (1962). Dismissal without leave to amend is proper only if it is clear that "the complaint could not be saved by any amendment." Intri-Plex Techs., Inc. v. Crest Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (internal citations omitted).

ANALYSIS

Defendant now seeks dismissal of Plaintiffs' Complaint in its entirety. For the purposes of providing a more logical presentation. Plaintiffs' claims are not ...


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