Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-01185/USCOURTS-caed-2_07-cv-01185-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1

UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

PREMIUM CAPITAL FUNDING, 

LLC, A New York Limited

Liability Company,

NO. CIV. S-07-1185 LKK/EFB 

Plaintiff,

v. O R D E R

AR HOME LOANS, INC., a

California corporation,

TIMOTHY BARRON, an 

individual, and AMERICAN

MUTUAL FINANCIAL SERVICES,

a California corporation,

Defendants.

 /

I. Background

This case involves an allegedly fraudulent real estate and

mortgage loan transaction that induced plaintiff, Premium

Capital Funding (“PCF”), into funding mortgage loans based on

materially false information and documentation and the omission

of material information. The defendants in this action are AR

Home Loans, Inc. (“AR”), Timothy Barron, and American Mutual

Financial Services. Pending before the court is AR’s motion to

Case 2:07-cv-01185-LKK -EFB Document 20 Filed 10/02/07 Page 1 of 4
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1 In its opposition, PCF dismissed its claim for fraud with

respect to AR.

2

dismiss. 

AR submitted the mortgage application that PCF allegedly

relied upon when funding the loans. Pursuant to its June 2006

Mortgage Broker Agreement with PCF, AR warranted the accuracy of

the information contained in the application. Compl., Ex. A, ¶

13(d)-(e). PCF alleges that contrary to this warranty, the loan

application contained false information. With respect to AR,

PCF has brought causes of action for breach of contract,

negligence, and negligent misrepresentation.1

The court resolves the motion on the parties’ papers

without oral argument. For the reasons explained below, the

motion is denied.

II. Standard

On a motion to dismiss, the allegations of the complaint

must be accepted as true. See Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give the plaintiff the benefit of

every reasonable inference to be drawn from the "well-pleaded"

allegations of the complaint. See Retail Clerks Intern. Ass'n,

Local 1625, AFL-CIO v. Schermerhorn, 373 U.S. 746, 753 n.6

(1963). Thus, the plaintiff need not necessarily plead a

particular fact if that fact is a reasonable inference from

facts properly alleged. See id.; see also Wheeldin v. Wheeler,

373 U.S. 647, 648 (1963) (inferring fact from allegations of

complaint).

Case 2:07-cv-01185-LKK -EFB Document 20 Filed 10/02/07 Page 2 of 4
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

In general, the complaint is construed favorably to the

pleader. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The

court may not dismiss the complaint if there is a plausible,

reasonably founded hope that the plaintiff may show a set of

facts consistent with the allegations. Bell Atlantic Corp. v.

Twombly, 127 S. Ct. 1955, 1967-69 (2007). In spite of the

deference the court is bound to pay to the plaintiff's

allegations, however, it is not proper for the court to assume

that "the [plaintiff] can prove facts which [he or she] has not

alleged, or that the defendants have violated the . . . laws in

ways that have not been alleged." Associated General

Contractors of California, Inc. v. California State Council of

Carpenters, 459 U.S. 519, 526 (1983).

III. Analysis

A. Breach of Contract

First, AR argues that “[t]he First Cause of Action, Breach

of Contract [] is bad, because it does not allege any facts

showing that AR breached the contract.” Mot. at 9. To the

contrary, however, plaintiff alleges that AR breached the

contract because the contract specified that AR warranted the

information contained in the mortgage application, and that the

information ultimately submitted was false. This is sufficient

to state a claim for breach of contract.

B. Negligence

Second, AR argues that it is only subject to liability for

its own conduct as a broker, rather than the actions of its

Case 2:07-cv-01185-LKK -EFB Document 20 Filed 10/02/07 Page 3 of 4
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

4

principal. PCF’s allegation, however, is targeted toward AR’s

own conduct in reviewing the mortgage application and then

warranting the allegedly false information contained therein. 

Accordingly, the complaint sufficiently states a claim for

negligence.

C. Negligent Misrepresentation

Third, AR argues that this cause of action has not been

pleaded with particularity. Only allegations of fraud or

mistake must be pleaded with particularity, Fed. R. Civ. P.

9(b), not general negligence or negligent misrepresentation

claims. PCF alleges that AR knew or should have known of the

false information contained in the application because it

accepted the pre-prepared loan application package. Compl. ¶

17. This too sufficiently states a claim.

IV. Conclusion

The motion to dismiss is DENIED.

IT IS SO ORDERED.

DATED: October 2, 2007.

Case 2:07-cv-01185-LKK -EFB Document 20 Filed 10/02/07 Page 4 of 4