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Gurvinder Ghuman; Parminder Ghuman v. Wells Fargo Bank

July 24, 2012

GURVINDER GHUMAN; PARMINDER GHUMAN,
PLAINTIFFS,
v.
WELLS FARGO BANK, N.A. DBA AMERICA'S SERVICING COMPANY; AND DOES 1 THROUGH 100, INCLUSIVE, DEFENDANTS.



ORDER RE: MOTION TO DISMISS COMPLAINT (Doc. 11)

I. INTRODUCTION

Defendant Wells Fargo Bank, N.A., moves to dismiss the complaint of plaintiffs Gurvinder Ghuman and Parminder Ghuman. For reasons discussed below, the motion shall be granted.

II. FACTS AND PROCEDURAL BACKGROUND

The Court refers the parties to previous orders for a complete chronology of the proceedings. On June 1, 2012, plaintiffs Gurvinder Ghuman and Parminder Ghuman ("Plaintiffs") filed their complaint against defendants Wells Fargo Bank, N.A., dba America's Servicing Company and Does 1 through 100, inclusive, asserting causes of action for (1) declaratory relief, (2) contractual breach of the implied covenant of good faith and fair dealing, (3) violation of the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq., (4) violation of the Real Estate Settlement Procedures Act, 1 U.S.C. §§ 2601 et seq., (5) rescission, (6) fraud, (7) "Unfair and Deceptive Business Act Practices," (8) breach of fiduciary duty and (9) "unconscionability -- UCC-2-3202." On July 4, 2012, defendant Wells Fargo Bank, N.A. ("Defendant") filed a motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs did not file a written opposition to Defendant's motion to dismiss.

III. LEGAL STANDARD

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).

IV. DISCUSSION

1. Cause of action for contractual breach of good faith and fair dealing -- Plaintiffs first assert a cause of action against Defendant for breach of the implied covenant of good faith and fair dealing. "It has long been recognized in California every contract contains an implied covenant of good faith and fair dealing that " 'neither party will do anything which will injure the right of the other to receive the benefits of the agreement.' " Wolf v. Walt Disney Pictures and Television, 162 Cal.App.4th 1107, 1120, 76 Cal.Rptr.3d 585 (2008) (quoting Kransco v. American Empire Surplus Lines Ins. Co., 23 Cal.4th 390, 400, 97 Cal.Rptr.2d 151, 2 P.3d 1 (2000)). "[T]he covenant is implied as a supplement to the express contractual covenants, to prevent a contracting party from engaging in conduct which (while not technically transgressing the express covenants) frustrates the other party's rights to the benefits of the contract." Racine & Laramie, Ltd. v. Department of Parks and Recreation, 11 Cal.App.4th 1026, 1031-32, 14 Cal.Rptr.2d 335 (1992). Plaintiffs allege "Defendant willfully breached its implied covenant of good faith and fair dealing with Plaintiffs when Defendant in its actions and omissions as servicer of Plaintiffs' mortgage loan, including without limitation Defendant's failure to provide accurate accounting of amounts paid and due, Defendant's decision to accelerate and foreclose and its improper assessment of fees to Plaintiffs' account." Problematically for Plaintiffs, a "prerequisite for any action for breach of the implied covenant of good faith and fair dealing is the existence of a contractual relationship between the parties[.]" Smith v. City and County of San Francisco, 225 Cal.App.3d 38, 49, 275 Cal.Rptr. 17 (1990) (citing, inter alia, Foley v. Interactive Data Corp., 47 Cal.3d 654, 683-84, 690, 254 Cal.Rptr. 211, 765 P.2d 373 (1988)). Plaintiffs have alleged no facts to establish the existence of a contract with Defendant. Although Defendant is alleged to have serviced Plaintiffs' mortgage on behalf of Deutsche Bank National Trust Company, the purported assignee of the loan agreement, nothing suggests Defendant was a party to the agreement itself. Absent allegations of a contractual relationship with Defendant, dismissal of this cause of action shall be granted.

2. Cause of action for violation of Truth in Lending Act -- Plaintiffs further assert a cause of action against Defendant 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. Incorporating previous allegations by reference, Plaintiffs allege: "Defendant violated [TILA] by failing to provide Plaintiff with accurate material disclosures required under TILA by its failure (a) to identify the itself [sic] as the assignee of the Note or to identify the true owner of the Note to Plaintiffs; (b) promptly credit payments to Plaintiffs' account; and (c) by assessing excessive late fees on Plaintiffs' account." Plaintiffs, however, have provided no authority -- and the Court's research reveals no authority - to show the information allegedly not disclosed by Defendant was governed by TILA (i.e., required to be accurately disclosed at the time Plaintiffs' 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 nondisclosures appear to concern misconduct occurring after the formative stage of Plaintiffs' loan agreement. Accordingly, Defendant's motion to dismiss this cause of action shall be granted.

3. Cause of action for violation of Real Estate Settlement Procedures Act -- Plaintiffs further assert a cause of action against Defendant for violationof the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. §§ 2601 et seq. RESPA provides in pertinent part, "If any servicer of a federally related mortgage loan receives a qualified written request from the borrower . . . for information relating to the servicing of such loan, the servicer shall provide a written response acknowledging receipt of the correspondence within 5 days . . . unless the action requested is taken within such period." 12 U.S.C. § 2605(e)(1)(A). A "qualified written request" is correspondence that provides, or otherwise enables the servicer to identify, "the name and account of the borrower" and "a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower." Id., § 2605(e)(1)(B). Within 30 days, the servicer must provide the borrower with "a written explanation or clarification" of "the reasons for which the servicer believes the account of the borrower is correct" or "why the information requested is unavailable or cannot be obtained[.]" Id., § 2605(e)(2)(B), (C). Incorporating previous allegations by reference, Plaintiffs allege their loan was a federally regulated mortgage loan as defined in RESPA and that Defendant "violated RESPA as a servicer on Plaintiffs' account by its failure to meaningfully respond to Plaintiffs' qualified written request pursuant to Section 6, 12 USC Section 2605(e), and by failing to properly administer Plaintiffs' mortgage account (including escrow reserves and payments)." Problematically for Plaintiffs, these allegations are too vague and generalized to support liability.

As noted above, a qualified written request (QWR) seeks information related to the "servicing" of a loan. 12 U.S.C. § 2605(e)(1)(A). RESPA defines "servicing" to mean "receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan . . . and making the payments of principal and interest and such other payments with respect to the amounts received from the borrower as may be required pursuant to the terms of the loan." 12 U.S.C. § 2605(i)(3). Plaintiffs' conclusory assertion they sent Defendant a "qualified written request" does not, without more, establish it was a QWR within the meaning of RESPA triggering Defendant's duty to respond. Plaintiffs must allege facts to show they requested information related to the servicing of their loan agreement or alleged errors in their account. That was not done here. Plaintiffs' conclusory assertion Defendant "violated RESPA . . . by its failure to meaningfully respond" is also insufficient to show Defendant did not comply with any RESPA obligations it may have had. Plaintiffs likewise fail to explain how Defendant "fail[ed] to properly administer Plaintiffs' mortgage account[.]"

RESPA further provides in any action by an individual, "[a non-complying servicer] shall be liable to the borrower for each such failure in . . . [¶] . . . an amount equal to the sum of -- [¶] (A) any actual damages to the borrower as a result of this failure; and [¶] (B) any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $1,000." 12 U.S.C. § 2605(f)(1). "Although this section does not explicitly set this out as a pleading standard, a number of courts have read the statute as requiring a showing of pecuniary damages in order to state a claim." Allen v. United Financial Mortg. Corp., 660 F.Supp.2d 1089, 1097 (N.D.Cal. 2009) (citing Hutchinson v. Delaware Sav. Bank FSB, 410 F.Supp.2d 374, 383 (D.N.J. 2006)) ("[A]lleging a breach of RESPA duties alone does not state a claim under RESPA. Plaintiffs must, at a minimum, also allege that the breach resulted in actual damages"). Thus, even assuming Plaintiffs' correspondence qualified as a QWR, Plaintiffs were required to allege actual damages resulting from Defendant's purported failure to properly respond. That was not done here. Accordingly, dismissal of this cause of action must be granted.

4. Cause of action for rescission -- Plaintiffs further assert a cause of action Defendant for rescission of their loan agreement, alleging they are "entitled to rescind the loan on Plaintiffs' property for all of the foregoing reasons: 1) TILA violations; 2) failure to provide Mortgage Loan Origination Agreement; 3) fraudulent concealment; and 4) public policy grounds, each of which provides independent grounds for relief." As the Court concludes in various sections of this order, Plaintiffs have failed to allege facts sufficient to state plausible claims to relief for fraud or violations of TILA. Plaintiffs have also articulated no public policy grounds for rescission. Even assuming, without deciding, that Defendant's alleged failure to provide a mortgage loan origination agreement could conceivably serve as a basis for rescission (unlikely, given Defendant does not appear to be Plaintiffs' original lender or even an assignee), Plaintiffs must nonetheless allege an ability to tender the loan proceeds. See Yamamoto v. Bank of New York, 329 F.3d 1167, 1171-73 (9th Cir. 2003). That was not done here. Accordingly, dismissal of this cause of action shall be granted.

5. Cause of action for fraud -- Plaintiffs further assert a cause of action against Defendant for fraud. In California, " 'fraud is an intentional tort, the elements of which are (1) misrepresentation; (2) knowledge of falsity; (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage. [Citation.]' [Citation.]" Intrieri v. Superior Court, 117 Cal.App.4th 72, 85-86, 12 Cal.Rptr.3d 97 (2004). Having reviewed the complaint in its entirety, ...


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