Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-02372/USCOURTS-caed-2_09-cv-02372-0/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 15:1601 Truth in Lending

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28 This matter is deemed suitable for decision without oral *

argument. E.D. Cal. R. 230(g).

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

JEFFREY Y. PICA and TESSIE Y. PICA,)

)

Plaintiffs, ) 2:09-cv-02372-GEB-KJN

)

v. ) ORDER GRANTING DEFENDANT’S

) MOTION TO DISMISS*

WACHOVIA MORTGAGE; WORLD SAVINGS )

BANK FSB; NOVIA REALTY & FINANCIAL;)

INC.; TONY DIHN; and DOES 1-20 )

inclusive, )

)

Defendants. )

)

Defendant Wachovia Mortgage (“Wachovia”) filed a motion to

dismiss Plaintiffs’ complaint under Federal Rule of Civil Procedure

(“Rule”) 12(b)(6) for failure to state a claim upon which relief can

be granted. Wachovia also seeks in this motion to have portions of

Plaintiffs’ complaint stricken under Rule 12(f). Wachovia also argues

it is erroneously sued in this case separately as “Wachovia Mortgage”

and “World Savings Bank, FSB.” Since Plaintiffs have not disputed

this contention, the allegations against both entities are treated as

allegations against Wachovia. Wachovia also argues Plaintiffs’ state

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Plaintiffs erroneously allege they were approached in July 1

2009 but that the transaction was completed in October 2006. Plaintiffs

correct this error in their opposition, in which they assert “[i]n July

2006 the Plaintiffs began discussions with Defendant Dihn . . . .”

(Opp’n 11:19.)

2

law claims are preempted by the Home Owners’ Loan Act. (Mot. 2:12-

13.) Since it is unclear precisely what Plaintiffs allege in each

state law claim, and these claims will be dismissed based on arguments

made in Wachovia’s Rule 12(b)(6) motion, the merits of Wachovia’s

preemption arguments are not decided. See Webb v. Indymac Bank Home

Loan Servicing, No. CIV 2:09-2380 WBS DAD, 2010 WL 121084, at *6 n.2

(E.D. Cal. Jan. 7, 2010) (declining to reach HOLA preemption since

“plaintiffs’ [state law] claim is facially deficient and will be

dismissed”).

I. Plaintiffs’ Factual Allegations in their Complaint

In July 2006, Plaintiffs Jeffrey and Tessie Pica sought to 1

purchase the residential property located at 44 South Pacifico Street,

Mountain House, in San Joaquin County, California. (Compl. ¶¶ 7, 20.) 

Plaintiffs met with Novia Realty & Financial loan officer Tony Dihn

(“Dihn”), who informed Plaintiffs he could get them the “best deal”

and the “best interest rates” available on the market. (Id. ¶ 21.) 

Plaintiffs requested and Dihn guaranteed an “affordable loan.” (Id.

¶ 22.) Plaintiffs agreed to a loan with an adjustable rate of 7.590%

with a “cap” of 11.950%. (Id.) Dihn informed Plaintiffs that if the

loan ever became unaffordable, he would refinance the loan. (Id. ¶

24.)

Plaintiffs were not given a copy of the loan documents prior 

to closing as required, and at the time of closing, Plaintiffs were

rushed to sign the documents. (Id. ¶ 25.) The loan documents were

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never explained to Plaintiffs, Plaintiffs were never given an

opportunity to review them, and Plaintiffs never received the required

copies of the notice of cancellation. (Compl. ¶ 25.) Plaintiffs’

English skills are limited. (Id. ¶ 23.) Plaintiffs’ native language

is Tagalog, and there was no translator at the signing of the loan

documents, nor were the loan documents in Tagalog. (Id.)

On October 9, 2006, Plaintiffs completed the loan 

transaction. (Id. ¶ 27.) The terms of the loan were memorialized in

a promissory note, which was secured by a deed of trust. (Id.) The

deed of trust identified Golden West Savings Association Service Co.

as the trustee. (Id.)

Plaintiffs sent a Qualified Written Request (“QWR”) to 

Wachovia under the Real Estate Settlement Procedures Act (“RESPA”) on

May 18, 2009, in which Plaintiffs demanded rescission of the loan

under the Truth in Lending Act (“TILA”). (Compl. ¶ 28.)

Plaintiffs allege the following ten claims against Wachovia: 

(1) violation of TILA, 15 U.S.C. §§ 1601, et seq.; (2) violation of

the California Rosenthal Act, Cal. Civil Code §§ 1788 et seq.; (3)

negligence; (4) violation of RESPA, 12 U.S.C. §§ 2601, et seq.; (5)

breach of fiduciary duty; (6) fraud; (7) violation of the California

Business and Professions Code, Cal. Civ. Code §§ 17200, et seq.; (8)

breach of contract; (9) breach of the implied covenant of good faith

and fair dealing; and (10) violation of California Civil Code § 1632.

II. Legal Standards

A Rule 12(b)(6) motion “challenges a complaint’s compliance

with . . . pleading requirements.” Champlaie v. BAC Home Loans

Servicing, LP, No. S-09-1316 LKK/DAD, 2009 WL 3429622, at *1 (E.D.

Cal. Oct. 22, 2009). A pleading must contain “a short and plain

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statement of the claim showing that the pleader is entitled to relief

. . . .” Fed. R. Civ. P. 8(a)(2). The complaint must “give the

defendant fair notice of what the [plaintiff’s] claim is and the

grounds upon which relief rests . . . .” Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 555 (2007). Further, “[a] pleading that offers

labels and conclusions or a formulaic recitation of the elements of a

cause of action will not do. Nor does a complaint suffice if it

tenders naked assertions devoid of further factual enhancement.” 

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). 

To avoid dismissal, the plaintiff must allege “only enough

facts to state a claim to relief that is plausible on its face.” 

Twombly, 550 U.S. at 547. “A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw the

reasonable inference that the defendant is liable for the misconduct

alleged.” Iqbal, 129 S. Ct. at 1949. Plausibility, however, requires

more than “a sheer possibility that a defendant has acted unlawfully.” 

Id. “When a complaint pleads facts that are merely consistent with a

defendant’s liability, it stops short of the line between possibility

and plausibility of entitlement to relief.” Id. (quotations and

citation omitted).

In evaluating a dismissal motion under Rule 12(b)(6), the

court “accept[s] as true all facts alleged in the complaint, and

draw[s] all reasonable inferences in favor of the plaintiff.” Al-Kidd

v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, neither

conclusory statements nor legal conclusions are entitled to a

presumption of truth. See Iqbal, 129 S. Ct. at 1949-50.

Further, a court may strike from a pleading “an insufficient

defense or any redundant, immaterial, impertinent, or scandalous

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matter.” Fed. R. Civ. P. 12(f). “The function of a 12(f) motion to

strike is to avoid the expenditure of time and money that must arise

from litigating spurious issues by dispensing with those issues prior

to trial.” Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th

Cir.1983). “[M]otions to strike should not be granted unless it is

clear that the matter to be stricken could have no possible bearing on

the subject matter of the litigation.” Colaprico v. Sun Microsystems,

Inc., 758 F. Supp. 1335, 1339 (N.D. Cal. 1991) (citation omitted).

III. Judicial Notice

Wachovia requests that judicial notice be taken of two

documents related to Plaintiffs’ mortgage loan which are publicly

recorded in the Official Records of San Joaquin County: an October 9,

2006 Deed of Trust and a September 8, 2006 Grant Deed. (RJN Exs. C,

D.) “[A]s a general rule, a district court may not consider materials

not originally included in the pleadings in deciding a Rule 12

motion[,] . . . [however,] it may take judicial notice of matters of

public record and may consider them without converting a Rule 12

motion into one for summary judgment.” United States v. 14.02 Acres

of Land, 547 F.3d 943, 955 (9th Cir. 2008) (quotations and citations

omitted). Exhibits C and D are publicly recorded and may be

considered in deciding Wachovia’s dismissal motion. See Champlaie,

2009 WL 3429622, at *4 (taking judicial notice of recorded Notice of

Default, Notice of Trustee’s Sale, and Trustee’s Deed Upon Sale).

Wachovia also requests that judicial notice be taken of an 

October 9, 2006 Adjustable Rate Mortgage Note signed by Plaintiffs and

an October 11, 2006 Federal Truth in Lending Disclosure signed by

Plaintiffs. (RJN Exs. B, E.) Under the “incorporation by reference”

doctrine, the court may consider documents “whose contents are alleged

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in a complaint and whose authenticity no party questions, but which

are not physically attached to the [plaintiff’s] pleading.” In re

Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999)

(internal quotations omitted). Here, Plaintiffs allege the existence

of Exhibits B and E in their complaint and have not disputed their

authenticity. (See, e.g., Compl. ¶¶ 17, 32, 52-53.) Accordingly,

Exhibits B and E may be considered in deciding Wachovia’s dismissal

motion. See Rivera v. Wachovia Bank, No. 09-cv-0433-JM-AJB, 2009 WL

2406301, at *1 n.1 (S.D. Cal. Aug. 4, 2009) (incorporating by

reference the Mortgage Note and Lending Disclosures).

Finally, Wachovia requests that judicial notice be taken of 

four documents related to Wachovia’s status as a federal savings bank

subject to the Home Owners’ Loan Act (“HOLA”): an April 12, 2006

Certificate of Corporate Existence issued by the Office of Thrift

Supervision, Department of Treasury (the “OTS”); a letter dated

November 19, 2007 from the OTS; Wachovia’s Corporate Charter dated

December 31, 2007; and the Federal Deposit Insurance Corporation

(“FDIC”) profile and history of Wachovia dated July 9, 2009, from the

FDIC’s official website. (RJN Ex. A.) Plaintiffs have not disputed

the authenticity of these documents, nor have Plaintiffs disputed

Wachovia’s status as a federal savings bank subject to HOLA. 

Wachovia’s request for judicial notice of these documents is granted. 

See Molina v. Washington Mutual Bank, No. 09-cv-00894-IEG-AJB, 2010 WL

431439, at *3 (E.D. Cal. 2010 Jan. 29, 2010) (stating that

“[i]nformation on government agency websites has often been treated as

properly subject to judicial notice” and taking judicial notice of

FDIC website).

//

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IV. Analysis

A. Plaintiffs’ Truth in Lending Act Claim

1. Plaintiffs’ Claim for Damages Under TILA

Wachovia seeks dismissal of the civil damages portion of 

Plaintiffs’ TILA claim, arguing, inter alia, it is time barred. (Mot.

6:27.) Wachovia further argues “no basis for equitable tolling

exists.” (Id. 7:13.) Plaintiffs rejoin they have plead sufficient

facts to show that the statute of limitations period should be

equitably tolled. (Opp’n 13:2-14:12.)

An action under TILA for actual or statutory damages must be 

brought “within one year from the date of the occurrence of the

violation.” 15 U.S.C. § 1640(e). The limitation period starts to run

“at the consummation of the [loan] transaction.” King v. California,

784 F.2d 910, 915 (9th Cir. 1986). However, the doctrine of equitable

tolling may “suspend the limitations period” “in certain

circumstances,” such as where the allegations in the complaint permit

a reasonable inference that the borrower did not have a reasonable

opportunity to discover the alleged fraud or nondisclosures that form

the basis of the plaintiff’s TILA claim. Id. at 914-15; Al-Kidd, 580

F.3d at 956.

Plaintiffs allege the TILA violations occurred on October 9, 

2006, the date Plaintiffs entered into the loan agreement with

Defendants and consummated the loan transaction. Since Plaintiffs did

not bring their TILA damages claim until August 25, 2009, which is

more than one year after July 21, 2006, this claim was brought after

the one-year statute of limitations period.

//

//

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Plaintiffs further allege “the misrepresentations and 

allegations stated herein were all discovered within the past year,

such that any applicable statute of limitations are extended or should

be extended pursuant to the equitable tolling doctrine or other

equitable principles.” (Compl. ¶ 43.) However, these “mere

conclusory statements [] do not suffice” to provide a basis for

equitable tolling. Iqbal, 129 S. Ct. at 1950; see also Lopez v.

Wachovia Mortg., No. 2:09-CV-01510-JAM-DAD, 2009 WL 4505919, at *2

(E.D. Cal. Nov. 20, 2009) (dismissing identical allegations for

failure to allege equitable tolling).

Plaintiffs also argue their TILA damages claim should be 

equitably tolled because Plaintiffs are not native English speakers. 

Plaintiffs allege their “English skills . . . are limited” and

“[t]here was no translator at the actual signing of the loan documents

nor were the loan documents in the Plaintiff[s’] native language.” 

(Compl. ¶ 23.) However, Plaintiffs have not explained how these

limitations prevented them from discovering the allegations which form

the basis of their TILA claim. These bare assertions are therefore

insufficient to provide a basis for equitable tolling. Therefore, the

damages portion of Plaintiffs’ TILA claim is dismissed with leave to

amend.

2. Plaintiffs’ Claim for Rescission Under TILA

Wachovia also seeks dismissal of Plaintiffs’ TILA claim for 

rescission, arguing that the right to rescind does not apply to a

purchase money loan, defined as a residential mortgage transaction. 

(Mot. 8:20-21.) Plaintiffs do not oppose this portion of Wachovia’s

dismissal motion.

//

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[T]he rescission provision of TILA contains a

specific exemption for a ‘residential mortgage

transaction,’ which is defined in the statute as:

‘a transaction in which a mortgage, deed of trust,

purchase money security interest arising under an

installment sales contract, or equivalent

consensual security interest is created or retained

against the consumer's [d]welling to finance the

acquisition or initial construction of such

dwelling.’ 15 U.S.C. § 1602(w). Under TILA, a

residential mortgage transaction includes the

initial construction financing of the principal

dwelling, as well as a permanent loan to satisfy

the construction financing. See 12 C.F.R. 226,

Supp. I 2(a)(24)(4)(1998). Moreover, the exemption

applies whether it is the same lender providing the

permanent financing or an entirely different

lender. Id. In addition, as long as proceeds from

the loan are used to acquire the home, the

residential mortgage transaction exemption applies,

even if some proceeds are used for other purposes.

Zakarian v. Option One Mortg. Corp., 642 F.Supp.2d 1206, 1214-15 (D.

Hawaii 2009); see also Yazdanpanah v. Sacramento Valley Mortg. Group,

2009 WL 4573381, *6 (N.D. Cal. 2009) (stating no statutory right of

rescission exists “where the loan at issue involves the creation of a

first lien to finance the acquisition of a dwelling in which the

customer resides or expects to reside.”). Here, Plaintiffs obtained

the loan from Wachovia to purchase the subject property and therefore

this case involves a “residential mortgage transaction.” (Compl. ¶¶

20, 27, 84; RJN Exs. C, D.) Since Plaintiffs seek rescission of their

residential mortgage transaction, which is specifically exempted from

TILA, Wachovia’s motion to dismiss this portion of Plaintiffs’ TILA

claim is granted with prejudice.

B. Plaintiffs’ Real Estate Settlement Procedures Act Claim

Wachovia seeks dismissal of Plaintiffs’ RESPA claim, arguing 

inter alia, that Plaintiffs’ letter does not qualify as a QWR, and

therefore Wachovia’s failure to respond is not a RESPA violation. 

(Mot. 11:26-12:1.) Plaintiffs respond, arguing Wachovia was required

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to make certain disclosures to Plaintiffs at the time their mortgage

loan closed. (Opp’n 19:13-14.)

RESPA requires that lenders provide borrowers with a 

standard disclosure form at or before the “settlement” of a mortgage

loan transaction. 12 U.S.C. § 2603(b). The disclosure form is

required to “conspicuously and clearly itemize all charges imposed

upon the borrower and . . . the seller . . . in connection with the

settlement . . . .” 12 U.S.C. § 2603(a). RESPA also requires that

lenders and loan servicers make certain disclosures and communications

to the borrower regarding the servicing of a mortgage loan. See 12

U.S.C. § 2605(e)(1)(A) (“If any servicer of a federally related

mortgage loan receives a [QWR] 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 20

days . . . .”) (emphasis added).

Plaintiffs allege in their complaint that Wachovia violated 

RESPA “at the time of the closing of the [l]oan . . . by failing to 

correctly and accurately comply with the disclosure requirements

provided therein.” (Compl. ¶ 77.) However, there is no private right

of action for violations of the section 2603 disclosure requirements. 

Bloom v. Martin, 865 F. Supp. 1377, 1384 (N.D. Cal. 1994) (finding

that Congress did not intend to create a private right of action for

violations of Section 2603), aff’d, 77 F.3d 318 (1996). Further, the

disclosure provisions of RESPA that do confer a private right of

action do not pertain to disclosures at a loan’s closing. Lopez, 2009

WL 4505919, at *3. Therefore, Plaintiffs’ RESPA claim brought under

Section 2603 against Wachovia is dismissed with prejudice.

//

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Plaintiffs further allege Wachovia violated section 

2605(e)(2) “by failing and refusing to provide a proper written

explanation or response to Plaintiffs’ QWR.” (Compl. ¶ 78.) 

Plaintiffs allege the QWR “included a demand to rescind the loan under

the TILA provisions.” (Id. ¶ 28.) However, Plaintiffs have not

alleged that Wachovia is either a lender or a loan servicer to whom

the requirements of section 2605 apply. Plaintiffs merely allege that

they “are not certain at this time exactly which of Defendants was

actually the servicer of [their] [l]oan at any given time.” (Id. ¶

76.) Further, “nothing in the complaint indicates that the written

correspondence . . . concerned the servicing of Plaintiff[s’] loan,

which is required to qualify the correspondence as a [QWR] under

RESPA. A conclusory allegation that the correspondence was a [QWR] is

insufficient.” Sipe v. Countrywide Bank, -- F. Supp. 2d ---, 2010 WL

596322, at *10 (E.D. Cal. Feb. 16, 2010). Without alleging that

Wachovia was a lender or loan servicer for the purposes of section

2605, or how the correspondence qualifies as a QWR, Plaintiffs’ claim

cannot survive Wachovia’s dismissal motion.

Plaintiffs’ opposition raises the argument that “[i]t

remains unclear whether . . . Defendant Wachovia . . . received

‘kickbacks’ or referral fees disproportional to the work performed,

which is prohibited under 12 U.S.C. § 2607(a).” (Opp’n 19:25-27.) 

Plaintiffs’ complaint, however, does not contain an allegation that

Wachovia violated section 2607 or facts supporting a claim under

section 2607. A motion to dismiss “addresses the present state of the

pleadings, not what an amended complaint might state.” Champlaie,

2009 WL 3429622, at *7. Therefore, these new allegations have no

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bearing on the motion and Plaintiff’s RESPA claim against Wachovia is

dismissed.

C. Plaintiffs’ Rosenthal Act Claim

Wachovia also seeks dismissal of Plaintiffs’ claim for 

violation of the California Rosenthal Act, arguing the complaint

asserts only “vague and conclusory allegations.” (Mot. 9:24-27.) 

Wachovia also argues it “is not a debt collector within the meaning of

the Rosenthal Act.” (Mot. 9:11-12.) Plaintiffs respond by

reiterating the allegations in their complaint. (Opp’n 15:21-28.) 

The Rosenthal Act serves to “prohibit debt collectors from 

engaging in unfair or deceptive acts or practices in the collection of

consumer debts and to require debtors to act fairly in entering into

and honoring such debts.” Arikat v. JP Morgan Chase & Co., 430 F.

Supp. 2d 1013, 1026 (N.D. Cal. 2006) (citing Cal. Civ. Code § 1788.1)

(emphasis omitted). However, the Act only governs the conduct of a

“debt collector,” which under the statute is defined as “any person

who, in the ordinary course of business, regularly, and on behalf of

himself or herself . . . engages in debt collection.” Cal. Civ. Code

§ 1788.2.

Plaintiffs allege:

Defendants’ actions constitute a violation of the

Rosenthal Act in that they threatened to take

actions not permitted by law, including but not

limited to the following: collecting on a debt not

owed the Defendants, making false reports to credit

reporting agencies, falsely stating the amount of a

debt, increasing the amount of a debt by including

amounts that are not permitted by law or contract,

and using unfair and unconscionable means in an

attempt to collect a debt.

(Compl. ¶ 63.) Such broad allegations are insufficient to survive

Wachovia’s dismissal motion. Plaintiffs “fail to allege facts that

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would support the inference that [Wachovia] is a ‘debt collector’”

under the Rosenthal Act. Pok v. Am. Home Mortg. Servicing, Inc., 2010

WL 476674, at *2 (E.D. Cal. Feb. 3, 2010). Plaintiffs also fail to

allege which sections of the Rosenthal Act Wachovia violated. See

Blanco v. Am. Home Mortg. Servicing, Inc., No. CIV 2:09-578 WBS DAD,

2009 WL 4674904, at *4 (E.D. Cal. Dec. 4, 2009) (dismissing claim

under Rosenthal Act, in part, for failing to identify the provisions

of the statute allegedly violated). Therefore, Plaintiffs’ Rosenthal

Act claim is dismissed.

D. Plaintiffs’ Negligence Claim

Wachovia also argues Plaintiffs’ negligence claim should 

be dismissed since Plaintiffs have failed to plead any facts

establishing that Wachovia owed Plaintiffs a duty of care which could

give rise to a negligence claim. (Mot. 11:1.) Plaintiffs respond,

arguing “Wachovia owed a general duty of care to Plaintiffs to perform

their function in such a manner as to avoid causing the harm.” (Opp’n

17:17-18.)

“The elements of a cause of action for negligence are: the 

defendant had a duty to use due care, . . . he or she breached that

duty, and . . . the breach was the proximate or legal cause of the

[plaintiffs’] resulting injur[ies].” Vasquez v. Residential Invs.,

Inc., 118 Cal. App. 4th 269, 278 (2004). “[T]he threshold element of

a cause of action for negligence is the existence of a duty to use due

care toward an interest of another . . . . Whether this essential

prerequisite has been satisfied in a particular case is a question of

law.” Glenn K. Jackson, Inc. v. Roe, 273 F.3d 1192, 1196-97 (9th Cir.

2001) (quotations and citations omitted) (applying California law).

“Under California law, ‘as a general rule, a financial institution

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owes no duty of care to a borrower when the institution's involvement

in the loan transaction does not exceed the scope of its conventional

role as a mere lender of money.’” Bledea v. Indymac Federal Bank, No.

CIV S-09-1239 LKK/GGH, 2010 WL 715255, at *9 (E.D. Cal. Feb. 25, 2010)

(citing and quoting Nymark v. Heart Fed. Savings & Loan Assn., 231

Cal. App. 3d 1089, 1096 (1991)). “Thus, for a lender . . . to owe a

duty of care, the lender’s activities must have exceeded those of a

conventional lender or the activities must fit within some exception

to the ‘general’ rule.” Id. (citations omitted). 

Plaintiffs allege Wachovia “breached [its] duty of care to 

the Plaintiffs when [it] failed to maintain the original [m]ortgage

note, failed to properly create original documents, [and] failed to

make the required disclosures to the Plaintiffs.” (Compl. ¶ 70.) 

Plaintiffs also allege Wachovia “breached [its] duty of care to the

Plaintiffs when they took payments to which they were not entitled,

charged fees they were not entitled to charge, and made or otherwise

authorized negative reporting of Plaintiff[s’] creditworthiness to

various credit reporting agencies wrongfully.” (Id. ¶ 71.) 

These allegations are insufficient to show that Wachovia’s

activities “exceeded those of a conventional lender.” Bledea, 2010 WL

715255, at *9. “As to the allegations regarding maintenance of the

original note and creation of original documents, these are normal

activities for a lender, and there is no special reason to impose a

duty of care here.” Id. at *10. Moreover, “taking payments, charging

fees, and reporting on creditworthiness are conventional activities

for a lender.” Id. These bare allegations do not show reason to

depart from Nymark’s general rule and impose a negligence duty of care

“with respect to these activities. Even assuming, however, that such

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a duty of care exists, plaintiffs’ allegations do not indicate that

any of these acts were a breach of said duty.” Id. Finally, as to

the allegations regarding failure to make the required disclosures,

Plaintiffs do not identify which disclosures Wachovia failed to make,

how Wachovia failed to “make” them, and how this failure establishes a

“special relationship giving rise to a duty between Plaintiff[s] and

the lender.” Sorenson v. Countrywide Home Loans, Inc., No. 2:09-cv01943-MCE-KJM, 2010 WL 308794, at *5 (E.D. Cal. Jan. 12, 2010)

(dismissing identical allegations for failure to “plead any action

beyond the domain of a usual money lender which would create . . . a

duty”). Therefore, Plaintiffs’ negligence claim is dismissed.

E. Plaintiffs’ Breach of Fiduciary Duty Claim

Wachovia also seeks dismissal of Plaintiffs’ breach of 

fiduciary duty claim, arguing “a lender does not owe a fiduciary duty

to its borrowers.” (Mot. 13:3-4.) Plaintiffs respond, arguing

Wachovia “interfered with Defendant Dihn’s fiduciary obligation by

offering [him] financial incentives to violate Plaintiff[s’] trust.” 

(Opp’n 22:14-15.)

To state a claim for breach of fiduciary duty, a plaintiff

must show: (1) the existence of a fiduciary relationship; (2) the

breach of that relationship; and (3) damage proximately caused by the

breach. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003). 

However, “[a]bsent special circumstances . . . a loan transaction is

[an] at arms-length [transaction] and there is no fiduciary

relationship between the borrower and lender.” Oaks Mgmt. Corp. v.

Superior Court, 145 Cal. App. 4th 453, 466 (2006). “A commercial

lender is entitled to pursue its economic interest in a loan

transaction. This right is inconsistent with the obligations of a

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fiduciary, which require that the fiduciary knowingly agree to

subordinate its interests to act on behalf of and for the benefit of

another.” Gonzalez, 2010 WL 144862, at *13.

Here, Plaintiffs have not alleged “special circumstances” 

which could give rise to a fiduciary relationship with Wachovia. And

“although Plaintiff[s] ha[ve] alleged that [Wachovia] offered the

brokers incentives to act in ways that furthered [Wachovia’s]

interest, there is no allegation indicating that [Wachovia] gave the

brokers identified here the authority to represent or bind [Westcare]

or that [Westcare] took some action that would have given the

Plaintiff[s] the impression that such a relationship existed.” Id. at

*10. Further, Plaintiffs “do[] not explain the sense in which

[Wachovia] directed or authorized [Dihn’s] conduct.” Id. Plaintiffs,

therefore, have not pleaded facts demonstrating that Wachovia owed

Plaintiff a fiduciary duty which could give rise to a claim for breach

of that duty. Accordingly, Plaintiffs’ breach of fiduciary duty claim

against Wachovia is dismissed.

F. Plaintiffs’ Fraud Claim

Wachovia argues Plaintiffs’ fraud claim should be dismissed

because Plaintiffs’ complaint fails to comply with the heightened

pleading standard required by Federal Rule of Civil Procedure 9(b)

(“Rule 9(b)”). Plaintiffs argue they have satisfied Rule 9(b)’s

requirements.

Under California law, the elements of a fraud claim are: (1) 

misrepresentation (including, false representation, concealment, or

nondisclosure); (2) knowledge of falsity; (3) intent to induce

reliance; (4) justifiable reliance; and (5) resulting damage. Lazar

v. Superior Court, 12 Cal.4th 631, 638 (1996). A claim for fraud in

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federal court, however, must satisfy Rule 9(b)’s particularity

requirements. See Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1103 (9th

Cir. 2003). “A pleading is sufficient under Rule 9(b) if it

identifies the circumstances constituting fraud so that the defendant

can prepare an adequate answer from the allegations. The complaint

must specify such facts as the times, dates, places, benefits

received, and other details of the alleged fraudulent activity.” 

Neubronner v. Milken, 6 F.3d 666, 671-72 (9th Cir. 1993) (quotations

and citations omitted).

Plaintiffs allege in their fraud claim that Defendant Dihn

made false representations to Plaintiffs at the inception of the loan

transaction regarding interest rates, financing options, the

availability of refinancing and Plaintiffs’ qualifications for the

loan. (Compl. ¶ 93.) Plaintiffs also allege “[Wachovia] regularly

trained, directed, authorized and/or participated with mortgage

brokers to implement [a] scheme, giving them monetary incentives to

violate the borrowers’ trust.” (Id. ¶ 94.)

Plaintiffs’ fraud claim clearly fail to satisfy the

requirements of Rule 9(b). Although Plaintiffs allege Defendant Dihn

made false representations at the inception of Plaintiffs’ loan

transaction, Plaintiffs fail to adequately allege how Wachovia is

responsible for those alleged misrepresentations. Further,

Plaintiffs’ allegations do not include the time, date, place, or

benefits resulting from Wachovia’s allegedly fraudulent activity. 

Since Plaintiff’s fraud claim against Wachovia fails to satisfy Rule

9(b), it is dismissed.

//

//

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G. Plaintiffs’ Breach of Contract Claim

Wachovia argues Plaintiffs’ claim for breach of contract 

should be dismissed since, inter alia, Plaintiffs have not alleged

“the terms and conditions” of the contract. (Mot. 17:10-11.) 

Plaintiffs argue “the terms of the Note, albeit not directly

negotiated by [Wachovia] were approved and accepted by [Wachoviva].” 

(Opp’n 26:22-24.) 

To state a claim for breach of contract under California

law, a plaintiff “must plead and prove (1) a contract, (2) plaintiff’s

performance or excuse for non-performance, (3) defendant’s breach, and

(4) damages to Plaintiffs.” Troyk v. Farmers Group, Inc., 171 Cal.

App. 4th 1305, 1352 (2009).

Plaintiffs allege they “entered into an agreement with

Defendants [Wachovia] and Dihn, whereby Defendants promised to provide

Plaintiff with an affordable loan” and they breached the agreement by

“failing to provide Plaintiff with an affordable loan.” (Compl. ¶¶

110, 112.) However, earlier in their complaint, Plaintiffs allege

that it was Defendant Dihn who told them that he could get him the

“best deal” and the “best interest rates” and that if the loan became

unaffordable, it could be refinanced. (Id. ¶¶ 21, 24.) Plaintiffs

have not alleged that these oral promises made by Dihn were

incorporated into their loan agreement with Wachovia or that Wachovia

was aware of or agreed to those terms. Plaintiffs, therefore, have

not demonstrated that their loan agreement with Wachovia included the

promises that were allegedly breached. Accordingly, Plaintiff’s

breach of contract claim against Wachovia cannot survive Wachovia’s

dismissal motion. See Logan v. Resmae Mortg. Corp., No. 2:09-cvCase 2:09-cv-02372-GEB-DAD Document 23 Filed 04/15/10 Page 18 of 23
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016132-MCE-GGH, 2009 WL 5206716, at *4 (E.D. Cal. Dec. 24, 2009)

(dismissing breach of contract claim with same allegations).

H. Plaintiffs’ Breach of Implied Covenant of Good Faith and Fair

Dealing Claim

Wachovia also argues Plaintiffs’ breach of the implied 

covenant of good faith and fair dealing claim should be dismissed

since Plaintiffs have “fail[ed] to plead the basic elements of [their]

claim.” (Mot. 18:9-10.) Plaintiffs rejoin their allegations

demonstrate “[Wachovia] is guilty of not dealing in good faith.” 

(Opp’n 29:28-30:1.)

“Generally, every contract, . . . imposes upon each party a 

duty of good faith and fair dealing in its performance and its

enforcement.” McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784,

799 (2008) (quotations and citations omitted). 

[T]he implied covenant operates to protect the

express covenants or promises of [a] contract. In

essence, the 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.

Id. at 806 (quotations and citations omitted) (emphasis in original). 

Therefore, the implied covenant “cannot impose substantive duties or

limits on the contracting parties beyond those incorporated in the

specific terms of [the parties] agreement.” Id. 

Under California law, “no cause of action for the tortious

breach of the implied covenant of good faith and fair dealing can

arise unless the parties are in a ‘special relationship’ with

‘fiduciary characteristics.’” Pension Trust Fund v. Federal Ins. Co.,

307 F.3d 944, 955 (9th Cir. 2002) (applying California law) (citing

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Mitsui Mfrs. Bank v. Superior Court, 212 Cal. App. 3d 726, 730

(1989)). “A central test of whether a lender is subject to this tort

is whether there is a fiduciary relationship in which the financial

dependence or personal security by the damaged party has been

entrusted to the other.” Id. (quotations and citations omitted). 

Further, the implied covenant “does not require parties to negotiate

in good faith prior to any agreement.” McClain, 159 Cal. App. 4th at

799.

Plaintiffs’ complaint alleges “a duty of good faith and fair

dealing was implied by law into the contract at issue in this action”

and: 

Defendants . . . breached the duty of good faith

and fair dealing by: (a) [f]ailing to pay at least

as much regard to Plaintiffs’ interests as to

Defendants’ interests; (b) failing to disclose to

Plaintiffs the true nature of the loan that is the

subject of this action; [and] (c) failing to give

Plaintiffs the requisite notice and disclosures.

 

(Compl. ¶¶ 116-117.) Plaintiffs’ claim, however, fails since they

have not alleged what contract forms the basis of their claim; nor

have they identified any express provision which has been frustrated

by Wachovia’s conduct. Further, Plaintiffs have not alleged the

existence of any “special relationship” with Wachovia to invoke the

implied covenant. Therefore, Plaintiffs’ claim for breach of the

implied covenant of good faith and fair dealing against Wachovia is

dismissed.

I. Plaintiffs’ California Translation Act Claim

Wachovia argues Plaintiffs’ claim for violation of 

California Civil Code section 1632, known as the California

Translation Act (the “CTA”), should be dismissed since Plaintiffs have

not satisfied the pleading requirements of the CTA. Specifically,

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Wachovia argues Plaintiffs have not alleged the loan was negotiated in

Tagalog. (Mot. 19:18-19.) Plaintiffs rejoin “[t]o allow Defendants

to subvert the purpose of the section of the code simply because there

were no negotiations that took place in Tagalog would defeat the

purpose the legislature had in mind when enacting this law.” (Opp’n

30:14-17.)

Section 1632(b) of the CTA provides:

Any person engaged in a trade or business who

negotiates primarily in Spanish, Chinese, Tagalog,

Vietnamese, or Korean, orally or in writing, in the

course of entering into any of the following, shall

deliver to the other party to the contract or

agreement and prior to the execution thereof, a

translation of the contract or agreement in the

language in which the contract or agreement was

negotiated, which includes a translation of every

term and condition in that contract or agreement.

Cal. Civ. Code § 1632(b) (emphasis added). Here, Plaintiffs seek

rescission of the loan because they did not receive the loan documents

in Tagalog. (Compl. ¶ 124.) However, Plaintiffs have not alleged the

negotiations for the loan were conducted in Tagalog. Plaintiffs do

allege “[n]egotiations were not translated into Tagalog . . . .” 

(Id.) Therefore, Plaintiffs have failed to allege facts which, if

taken as true, would require Wachovia to provide the loan documents in

Tagalog and Plaintiffs’ CTA claim is dismissed.

J. Plaintiffs’ California Business & Professions Code § 17200 Claim

Lastly, Wachovia argues Plaintiffs’ claim under California

Business & Professions Code § 17200 et seq. (the “UCL”) should be

dismissed, arguing Plaintiffs have failed to allege facts “showing

ongoing unlawful, unfair, and fraudulent business acts . . . .” (Mot.

16:10-13.) Plaintiffs argue their UCL claim is sufficient since they

have alleged “multiple violations . . . of specific statutory and

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common law provisions under federal and state laws . . . .” (Opp’n

25:8-12.)

The UCL “prohibits specific practices which the legislature

has determined constitute unfair trade practices.” Cal-Tech Commc’ns.

Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 179 (1999)

(quotations and citations omitted). “[A]n action based on [the UCL]

to redress an unlawful business practice ‘borrows’ violations of other

laws and treats these violations . . . as unlawful practices,

independently actionable under section 17200 et seq. and subject to

the distinct remedies provided thereunder.” Farmers Ins. Exch. v.

Superior Court, 2 Cal. 4th 377, 383 (1992) (quotations and citations

omitted). “A plaintiff alleging unfair business practices under [the

UCL] must state with reasonable particularity the facts supporting the

statutory elements of the violation.” Khoury v. Maly’s of California,

Inc., 14 Cal. App. 4th 612, 619 (1993).

Plaintiffs allege “Defendants’ acts alleged [in the

complaint] constitute unlawful, unfair, and/or fraudulent business

practices, as defined” in the UCL. (Compl. ¶ 105.) Further,

Plaintiffs allege “[a]s a result of Defendants’ wrongful conduct,

Plaintiffs have suffered various injuries according to proof at

trial.” (Id. ¶ 106.)

Plaintiff’s UCL claim is deficient. First, Plaintiffs’

claim is vague and conclusory and fails to state any supporting facts. 

Plaintiffs have not differentiated between the conduct of Wachovia and

the other defendants; nor have they identified a specific practice

that they contend is “unfair” or “fraudulent.” Plaintiffs’

allegations, therefore, lack the “reasonable particularity” that is

required to state a claim under the UCL. Second, Plaintiffs’ UCL

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claim is entirely premised upon the other claims they allege in their

complaint, all of which fall to state a claim. Since none of the

other claims are viable, by necessity, the UCL claim must also fail. 

Therefore, Plaintiffs’ UCL claims against Wachovia is dismissed.

V. Conclusion

For the stated reasons, Wachovia’s motion to dismiss is 

GRANTED and Plaintiffs’ complaint is DISMISSED. Since all claims

against Wachovia are dismissed, Wachovia’s motion to strike is DENIED

as MOOT. Plaintiffs, however, are granted leave to amend any claim

that has not been dismissed with prejudice, provided that the amended

complaint is filed within fourteen (14) days of the date on which this

order is filed.

Dated: April 14, 2010

 

GARLAND E. BURRELL, JR.

United States District Judge

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