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Kristi Williams Dumas v. Saxon Mortgage Services

May 16, 2012




Defendant Saxon Mortgage Services, Inc., has filed a motion to dismiss the complaint of plaintiff Kristi Williams Dumas pursuant to Federal Rule of Civil Procedure 12(b)(6). For reasons discussed below, the motion shall be granted with leave to amend.


On October 27, 2011, plaintiff Kristi Williams Dumas (hereinafter referred to as "Plaintiff") filed her complaint in Kern County Superior Court against defendants Saxon Mortgage Services, Inc., Old Republic Title Co. and Does 1 to 50, asserting causes of action for (1) violation of the California Civil Code, (2) violation of the Truth in Lending Act, (3) fraud, (4) breach of fiduciary duty, (5) nuisance, (6) negligence and (7) preliminary and permanent injunction of foreclosure proceedings. On March 12, 2012, defendant Saxon Mortgage Services, Inc. (hereinafter referred to as "Defendant") removed the action to this Court pursuant to 28 U.S.C. § 1441(b). On March 19, 2012, Defendant filed a motion to dismiss the complaint in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff did not file a written opposition to Defendant's motion to dismiss.


A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Where the plaintiff fails to allege "enough facts to state a claim to relief that is plausible on its face," the complaint may be dismissed for failure to allege facts sufficient to state a claim upon which relief may be granted. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007); see Fed. R. Civ. P. 12(b)(6). "A claim has facial plausibility," and thus survives a motion to dismiss, "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1940, 173 L.Ed.2d 868 (2009). On a Rule 12(b)(6) motion to dismiss, the court accepts all material facts alleged in the complaint as true and construes them in the light most favorable to the plaintiff. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). However, the court need not accept conclusory allegations, allegations contradicted by exhibits attached to the complaint or matters properly subject to judicial notice, unwarranted deductions of fact or unreasonable inferences. Daniels-Hall v. National Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). "Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . the complaint could not be saved by amendment." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).


A. First cause of action (violation of California Civil Code) -- Plaintiff's first cause of action is for violation of the California Civil Code. Plaintiff first alleges Defendant failed to contact her in good faith to assess her financial situation and explore alternative options of addressing her default so as to avoid foreclosure of her home, presumably in violation of California Civil Code § 2923.5. These allegations are insufficient to state a claim. Section 2923.5 provides, "A mortgagee, trustee, beneficiary, or authorized agent may not file a notice of default pursuant to Section 2924 until 30 days after initial contact is made as required by paragraph (2) or 30 days after satisfying the due diligence requirements as described in subdivision (g)." Cal. Civ. Code, § 2923.5, subd. (a)(1). Paragraph (2) provides, "A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure." Id., § 2923.5, subd. (a)(2). Subdivision (g) provides, "A notice of default may be filed pursuant to Section 2924 when a mortgagee, beneficiary, or authorized agent has not contacted a borrower as required by paragraph (2) of subdivision (a) provided that the failure to contact a borrower occurred despite the due diligence of the mortgagee, beneficiary, or authorized agent." Id., § 2923.5 subd. (g). In other words, actual contact is not required. Thus, the mere allegation Defendant failed to contact Plaintiff does not establish a violation of the statute.

Furthermore, the copy of the notice of default submitted in support of Defendant's request for judicial notice contains a declaration from Amber Trejo, Defendant's default coordinator, stating she had tried with due diligence to contact Plaintiff in accordance with section 2923.5, subdivision (g). Plaintiff has not contested the veracity of the copy of the notice of default provided by Defendant. The complaint also shows Plaintiff and Defendant discussed the possibility of a short sale. This "negate[s] a claim that section 2923.5 was violated." Davenport v. Litton Loan Servicing, LP, 725 F.Supp.2d 862, 877 (N.D.Cal. 2010). Plaintiff further alleges Defendant failed to properly record the notices of default and sale in Kern County recorder's office. But these allegations, too, are controverted by the copies of the notices of default and sale provided with Defendant's request for judicial notice. Plaintiff, again, has not contested the veracity of either document.

Plaintiff further alleges that even if Defendants did record the notices of default and sale, copies of the notices were not timely mailed, delivered and/or properly served to Plaintiff, in violation of section 2924. A recorded notice of default and notice of sale must be mailed to the mortgagee, beneficiary or owner. Cal. Civ. Code §§ 2924.3; see id., § 2924b, subd. (e). Plaintiff, however, offers no facts surrounding Defendant's failure to mail/serve, and chooses instead to rely solely on conclusory allegations. Plaintiff further alleges she never received copies of either notice. Problematically for Plaintiff, "California courts do not require actual receipt of default and sale notices[.]" Rodela v. Guild Mortg. Co., slip copy, 2012 WL 169772 (E.D.Cal. 2012), at *5 (citing Lupertino v. Carbahal, 35 Cal.App.3d 742, 746-47, 111 Cal.Rptr. 112 (1973) and Knapp v. Doherty, 123 Cal.App.4th 76, 88-89, 20 Cal.Rptr.3d 1 (2004)). Lastly, Plaintiff alleges Defendant violated section 2924 by failing to mail "warning statements" to Plaintiff after recording the notices of default and sale. Plaintiff has provided no authority -- and the Court's research reveals no authority -- to suggest the mailing of a warning statement is a prerequisite to non-judicial foreclosure under section 2924. Accordingly, Defendant's motion to dismiss this cause of action shall be granted.

B. Second cause of action (violation of Truth in Lending Act) -- Plaintiff's second cause of action is for violation of the Truth in Lending Act (TILA, 15 U.S.C. §§ 1601 et seq.). TILA "is designed 'to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit.' 15 U.S.C. § 1601(a)." Barrer v. Chase Bank USA, N.A., 566 F.3d 883, 887 (9th Cir. 2009). Regulation Z, 12 C.F.R. § 226, which implements TILA, "establish[es] two conditions a creditor must meet. 'First, it must have disclosed all of the information required by the statute.' [Citation.] That is, disclosures must be complete. 'And second, [they] must have been true -- i.e., . . . accurate representation[s] of the legal obligations of the parties at [the] time [the agreement was made].' [Citation.]" Barrer, supra, at p. 887. Under this cause of action, Plaintiff, incorporating previous allegations by reference, first alleges: "SAXON misrepresented to KRISTI that her premium and/or mortgage payments would be properly credited toward her mortgage principal loan debt; that her short-sale application would be properly and promptly processed; that she was not at risk of losing her home to foreclosure without proper notice." Plaintiff, however, has provided no authority -- and the Court's research reveals no authority - to suggest the information allegedly misrepresented by Defendant was governed by TILA (i.e., required to be accurately disclosed at the time Plaintiff's loan agreement was entered into). Furthermore, "TILA governs disclosures and notices provided at the time of loan origination." Choudhuri v. Wells Fargo Bank, N.A., 2011 WL 2415755 (N.D.Cal. 2011) at *3 (citing 15 U.S.C. § 1638(b) and 12 C.F.R. § 226.17(b)). The misrepresentations appear to concern misconduct occurring well after the formative stage of Plaintiff's loan agreement.

Plaintiff further alleges Defendant violated TILA in that "[a]ny and all disclosures sent to KRISTI by SAXON did not meet the 'clear and conspicuous' standard set forth under TILA[.]" TILA provides that certain material information must be "clearly and conspicuously disclosed." 15 U.S.C. § 1632(a); 12 C.F.R. § 226.17(a)(1) ("The creditor shall make the disclosures required . . . clearly and conspicuously in writing, in a form that the consumer may keep"). This information includes "the annual percentage rate, the method of determining the finance charge and the balance upon which a finance charge will be imposed, the amount of the finance charge, the amount to be financed, the total of payments, the number and amount of payments, the due dates or periods of payments scheduled to repay the indebtedness," as well as other disclosures required by 15 U.S.C. § 1639(a). 15 U.S.C. § 1602(v). Plaintiff, however, has not identified what disclosures were allegedly sent to her, nor has she alleged facts to show how they were unclear or inconspicuous.

In addition, the cause of action is likely barred by the applicable statutes of limitations. Plaintiff requests damages for Defendant's alleged violations, and further appears to request rescission of her loan agreement in alleging that "by reason of the aforesaid violations, any security interest in KRISTI's house in Bakersfield, CA is automatically void." A claim for damages under TILA is subject to a one-year statute of limitations, 15 U.S.C. § 1640(e); a TILA rescission claim is subject to a three-year statute of limitations, see 15 U.S.C. § 1635(f). In both cases, the limitations period begins to run from "the date of consummation of the transaction." King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986); 15 U.S.C. § 1635(f). "Consummation means the time that a consumer becomes contractually obligated on a credit transaction." 12 C.F.R. § 226.2. In this case, Defendant's request for judicial notice establishes the loan agreement at issue was signed by Plaintiff and notarized on September 3, 2005. Plaintiff has not alleged facts to support the application of equitable tolling or the delayed discovery rule, nor has she contested the veracity of the copy of the loan agreement provided by Defendant. Thus, Plaintiff was required to file suit by September 2006 (for damages) or September 2008 (for rescission). The complaint was not filed until October 2011. Accordingly, Defendant's motion to dismiss this cause of action shall be granted.

C. Third cause of action (fraud) -- Plaintiff's third cause of action is for fraudulent concealment. "The elements of an action for fraud based on concealment are: (1) the defendant concealed or suppressed a material fact; (2) the defendant had a duty to disclose the fact to the plaintiff; (3) the defendant intentionally concealed the fact with the intent to defraud the plaintiff; (4) the plaintiff was unaware of the fact and would not have acted as he did if he had known of the concealed fact; and (5) as a result of the concealment of the fact, the plaintiff sustained damage." Knox v. Dean, _Cal.Rptr.3d_, 2012 WL 1402350 (Cal.App. 4 Dist. 2012), at *10 (citing Hahn v. Mirda, 147 Cal.App.4th 740, 748, 54 Cal.Rptr.3d 527 (2007)). Federal Rule of Civil Procedure 9(b) requires that, in alleging fraud, "a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). "To comply with Rule 9(b), allegations of fraud must be 'specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so they can defend against the charge and not just deny that they have done anything wrong.' [Citation.]" Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001). Having reviewed the complaint, the Court finds Plaintiff has failed to allege facts sufficient to establish one or more of the foregoing elements for fraudulent concealment. Plaintiff has also failed to comply with the requirement of specificity, as the allegations are simply too vague and generalized to state a claim. The Court further notes that "Rule 9(b) does not allow a complaint to merely lump multiple defendants together but 'require[s] plaintiffs to differentiate their allegations when suing more than one defendant . . . and inform each defendant separately of the allegations surrounding his alleged ...

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