Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-00894/USCOURTS-casd-3_09-cv-00894-0/pdf.json

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

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

IRIS MOLINA and RENE MOLINA,

Plaintiff,

CASE NO. 09-CV-00894-IEG (AJB)

ORDER GRANTING

DEFENDANTS’ MOTION TO

DISMISS 

[Doc. No. 29]

vs.

WASHINGTON MUTUAL BANK,

MERITAGE MORTGAGE, NETBANK, JP

MORGAN CHASE BANK, N.A. AS

SUCCESSOR IN INTEREST TO

WASHINGTON MUTUAL, WILSHIRE

CREDIT CORPORATION, CALIFORNIA

RECONVEYANCE COMPANY,

MORTGAGE ELECTRONIC

REGISTRATION SYSTEM, STATE

MORTGAGE & FINANCE, INC., ED AKEL

and DOES 1-20 inclusive,

Defendant.

Presently before the Court is Defendants JPMorgan Chase Bank, N.A. and California

Reconveyance Company’s Motion to Dismiss Plaintiffs’ Complaint. (Doc. No. 29.) Defendant

Wilshire Credit Corporation joins in the motion. (Doc. No. 35.) Plaintiffs filed an opposition, and

Defendant filed a reply. 

The Court finds Defendant’s motion suitable for disposition without oral argument pursuant

to Local Civil Rule 7.1(d)(1). For the reasons stated herein, the Court GRANTS the motion to

dismiss.

//

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FACTUAL BACKGROUND

The following facts are drawn from the Complaint. This matter involves a loan obtained

by Plaintiffs Iris Molina and Rene Molina (“Plaintiffs”), secured by property located at 39878

Millbrook Way Unit B, Murrieta, County of Riverside, California. 

Plaintiffs allege Defendant State Mortgage & Finance, Inc. sold them the loan and

Defendant Ed Akel was the purported loan officer. Defendant Akel allegedly told Plaintiffs he

was the Operations Manager for State Mortgage & Finance, Inc., but in fact was not even

registered with the Department of Real Estate. Defendant Akel advised Plaintiffs he could get

them the “best deal” and the “best insurance rates” available on the market. Defendant Akel also

assured Plaintiffs they would receive a loan with a fixed rate for 30 years, as they had repeatedly

requested. The only financial documents Defendant Akel requested were Plaintiffs’ bank

statements. Plaintiffs allege they primarily speak and read Spanish, but that the loan documents

and their conversations with Defendant Akel were not translated into Spanish. 

Plaintiffs consummated the loan on June 16, 2006. According to Plaintiffs, Defendant

Akel did not explain any of the documents, and simply asked them to sign and initial the

documents. Plaintiffs allege they did not receive the required documents and disclosures when the

loan was consummated, as required by TILA. The Deed of Trust identified California Title Co. as

trustee and Defendant Meritage Mortgage as the lender. Subsequently, Defendant Mortgage

Electronic Registration Systems, Inc. became nominee for Meritage Mortgage and its successors

and assigns.

On July 24, 2008, Defendant California Reconveyance Company (“CRC”) filed a Notice of

Default, and on or about October 27, 2008, CRC sent Plaintiffs a Notice of Trustee Sale. 

On April 17, 2009, Plaintiffs mailed a Qualified Written Request to Defendant Washington

Mutual Bank (“WAMU”), which included a demand to cancel the pending Trustee Sale and to

rescind the loan under TILA. WAMU allegedly has not responded. Plaintiffs have sued

JPMorgan Chase Bank, N.A. (“JPMorgan”) as successor in interest to WAMU.

PROCEDURAL HISTORY

On April 28, 2009, Plaintiffs filed the Complaint. Plaintiffs name nine defendants and set

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1

 In the December 30, 2009 Order on Wilshire’s notice of joinder, the Court 

ordered that the notice of joinder was proper to the extent Wilshire joined in the arguments raised

in the Motion to Dismiss, but that the Court would not consider the new arguments raised in the

notice of joinder. (Doc. No. 39.)

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forth ten causes of action: (1) violation of the Truth in Lending Act, (2) violation of the California

Rosenthal Fair Debt Collection Practices Act, (3) wrongful foreclosure, (4) violation of the Real

Estate Settlement Procedures Act, (5) breach of fiduciary duty, (6) fraud, (7) violation of

California Business and Professions Code § 17200, (8) breach of contract, (9) breach of the

implied covenant of good faith and fair dealing, and (10) violation of California Civil Code §

2923.5. 

On November 23, 2009, Defendants JPMorgan and CRC filed this motion to dismiss the

Complaint for failure to state a claim upon which relief may be granted, seeking dismissal of all

ten causes of action. (Doc. No. 29.) On December 29, 2009, Defendant Wilshire Credit

Corporation (“Wilshire”) filed a notice of joinder in the motion to dismiss.1 (Doc. No. 35.) 

DISCUSSION

I. 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) (2009). A motion to dismiss pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in

the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The

court must accept all factual allegations pled in the complaint as true, and must construe them and

draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mut.

Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). 

To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual

allegations, rather, it must plead “enough facts to state a claim to relief that is plausible on its

face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 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.” Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937,

1939 (2009) (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a

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‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted

unlawfully.” Id. at 1949 (citing Twombly, 550 U.S. at 556). “Where 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. (citing Twombly, 550 U.S. at 557). 

Furthermore, “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to

relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a

cause of action will not do.” Id. at 555 (citation omitted). “Factual allegations must be enough to

raise a right to relief above the speculative level, on the assumption that all the allegations in the

complaint are true (even if doubtful in fact).” Id. (citation omitted). In spite of the deference the

court is bound to pay to the plaintiff’s allegations, it is not proper for the court to assume that “the

[plaintiff] can prove facts that [he or she] has not alleged or that defendants have violated the . . .

laws in ways that have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State

Council of Carpenters, 459 U.S. 519, 526, (1983). Also, the court need not accept “legal

conclusions” as true. Iqbal, 129 S.Ct. at 1949. However, “[w]hen there are well-pleaded factual

allegations, a court should assume their veracity.” Id. at 1941. 

II. Request for Judicial Notice

In ruling on a motion to dismiss for failure to state a claim, “a court may generally consider

only allegations contained in the pleadings, exhibits attached to the complaint, and matters

properly subject to judicial notice.” Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007). A

fact properly subject to judicial notice is one “not subject to reasonable dispute in that it is either

(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate

and ready determination by resort to sources whose accuracy cannot reasonably be questioned.”

Fed. R. Evid. 201 (2009). Accordingly, a court may consider matters of public record on a motion

to dismiss, and in doing so “does not convert a Rule 12(b)(6) motion to one for summary

judgment.” Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir. 1986), abrogated

on other grounds by Astoria Fed. Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 111 (1991). 

Defendants request judicial notice of the following documents recorded with the Riverside

County Recorder’s Office: (1) Deed of Trust, recorded on or about June 26, 2006; (2) Second

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Deed of Trust, recorded on or about June 26, 2006; (3) Notice of Default and Election to Sell

Under Deed of Trust, recorded on or about July 24, 2008; (4) Substitution of Trustee, recorded on

or about October 29, 2008; and (5) Notice of Trustee’s Sale, recorded on or about October 29,

2008. These documents are public records and the Court takes judicial notice of them pursuant to

Federal Rule of Evidence 201.

Defendants also request judicial notice of (1) the Purchase and Assumption Agreement

among Federal Deposit Insurance Organization, Receiver of Washington Mutual Bank,

Henderson, Nevada (“FDIC”) and JPMorgan, dated September 25, 2008, available on the FDIC’s

website, and (2) the Order from the Office of Thrift Supervision (“OTC”) appointing the FDIC as

Receiver of Washington Mutual Bank, available on OTC’s website. The Court grants Defendants’

request for judicial notice of these documents. Information on government agency websites has

often been treated as properly subject to judicial notice.” Paralyzed Veterans of Am. v.

McPherson, 2008 U.S. Dist. LEXIS 69542, at *5 (N.D. Cal. Sept. 8, 2008); see also United States

ex rel. Dingle v. BioPort Corp., 270 F. Supp. 2d 968, 972 (W.D. Mich. 2003) (“Public records and

government documents are generally considered ‘not to be subject to reasonable dispute.’ This

includes public records and government documents available from reliable sources on the

Internet.”) (citing Jackson v. City of Columbus, 194 F.3d 737, 745 (6th Cir. 1999)). 

III. Analysis

A. JPMorgan’s Assumption of Liability 

As an initial matter, JPMorgan argues that Plaintiffs incorrectly sue JPMorgan as successor

in interest to WAMU. JPMorgan argues that the Purchase and Assumption Agreement entered into

with the FDIC establishes that JPMorgan expressly did not assume WAMU’s liabilities relating to

borrower claims. 

On September 25, 2008, the Office of Thrift Supervision closed WAMU and appointed the

FDIC as WAMU’s receiver. On the same day, JPMorgan acquired certain assets and liabilities of

WAMU pursuant to the Purchase and Assumption Agreement. (Def.’s Req. for Jud. Notice in Supp.

of Mot. to Dismiss (“RJN”), Exhibit 6.) Section 2.5 of the agreement provides: “any liability

associated with borrower claims, . . . related in any way to any loan or commitment to lend made by

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 Section 2.5 states in full: Borrower Claims. Notwithstanding anything to the contrary in this

Agreement, any liability associated with borrower claims for payment of or liability to any borrower

for monetary relief, or that provide for any other form of relief to any borrower, whether or not such

liability is reduced to judgment, liquidated or unliquidated, fixed or contingent, matured or unmatured,

disputed or undisputed, legal or equitable, judicial or extrajudicial, secured or unsecured, whether

asserted affirmatively or defensively, related in any way to any loan or commitment to lend made by

the Failed Bank prior to failure, or to any loan made by a third party in connection with a loan which

is or was held by the Failed Bank, or otherwise arising in connection with the Failed Bank's lending

or loan purchase activities are specifically not assumed by the Assuming Bank.

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the Failed Bank prior to failure, . . . are specifically not assumed by the Assuming Bank.”2 (RJN,

Exhibit 6, at 5.) This provision establishes that JPMorgan has expressly not assumed WAMU’s

liabilities relating to borrower claims. See Yeomalakis v. F.D.I.C., 562 F.3d 56, 62 (1st Cir. 2009)

(finding that Section 2.5 of JPMorgan’s agreement with the FDIC retained for the FDIC “any liability

associated with borrower claims”); Hilton v. Wash. Mut. Bank., 2009 WL 3485953, at *2 (N.D. Cal.

October 28, 2009) (same); Cassese v. Wash. Mut. Bank, 2008 WL 7022845, at *2-3 (E.D.N.Y. Dec.

22, 2008) (same).

Accordingly, any of Plaintiffs’ claims arising out of JPMorgan’s alleged status as successor

in interest to Plaintiffs’ borrower claims against WAMU must fail.

B. Truth in Lending Act

Plaintiffs allege violations of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601-1693

(2009), as well as TILA’s implementing regulation (known as “Regulation Z”), 12 C.F.R. § 226.23

(2009). Regulation Z requires creditors to make certain disclosures “clearly and conspicuously in

writing, in a form that the consumer may keep.” Id. § 226.17.

1. Damages Claim

a. Statute of Limitations

Defendants argue that Plaintiffs’ claim for damages is time-barred by the one-year statute of

limitations. Plaintiffs consummated the loan on June 26, 2006 and filed this action almost three years

later on April 28, 2009. 

Any action for TILA damages must be brought “within one year from the date of the

occurrence of the violation.” 15 U.S.C. § 1640(e). As a general rule, the statutory period “starts at the

consummation of the [loan] transaction.” King v. California, 784 F.2d 910, 915 (9th Cir. 1986).

Because any claim under Regulation Z is derivative of a TILA claim, the same statute of limitations

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A“creditor” is defined as “a person who both (1) regularly extends, whether in connection

with loans, sales of property or services, or otherwise, consumer credit which is payable by agreement

in more than four installments or for which the payment of a finance charge is or may be required, and

(2) is the person to whom the debt arising from the consumer credit transaction is initially payable on

the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by

agreement.” 15 U.S.C. § 1602(f).

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applies to Regulation Z claims. However, equitable tolling may be appropriate “in certain

circumstances,” such as when a borrower might not have had a reasonable opportunity to discover the

fraud or nondisclosures at the time of loan consummation. Id. at 915. District courts have discretion

to adjust the limitations period in cases where “the general rule would be unjust or frustrate the

purpose of [TILA].” Id. The general applicability of equitable tolling often depends on matters

outside the pleadings, and “is not generally amenable to resolution on a Rule 12(b)(6) motion.”

Supermail Cargo v. United States, 68 F.3d 1204, 1206 (9th Cir. Cal. 1995). When determining

whether the statute of limitations has run on a motion to dismiss, a court may only grant the motion

“if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to

prove that the statute was tolled.” Id.

In this case, Plaintiffs allege they are natives of Mexico and primarily speak and read Spanish,

but none of the documents or conversations relating to the loans were translated into Spanish. (Compl.

at 4:27-5:4.) Reading the Complaint liberally, the Court finds applicability of equitable tolling in this

case depends on factual questions not clearly resolved in the pleadings, specifically, when Plaintiffs

had the “reasonable opportunity” to discover the allegedly deficient disclosures. Accordingly,

Plaintiffs have pled sufficient facts to support the applicability of equitable tolling. 

b. TILA Violations

Plaintiffs allege Defendants violated TILA by failing to provide required disclosures and

notices, placing prohibited terms into the loans, and failing to disclose all finance charge details and

the annual percentage rate. (Compl. at 10:8-14.) Plaintiffs allege all Defendants are “creditors” as

defined by the statute. (Compl. at 9:23-24.)

 Civil liability under TILA applies to creditors.3

 See 15 U.S.C. § 1640(a). In addition, the

assignee of a creditor may be liable “if the violation for which such action or proceeding is brought

is apparent on the face of the disclosure statement.” Id. § 1641(a). “[A] violation apparent on the face

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of the disclosure statement includes, but is not limited to (1) a disclosure which can be determined to

be incomplete or inaccurate from the face of the disclosure statement or other documents assigned,

or (2) a disclosure which does not use the terms required to be used by this subchapter.” Id. Liability

does not extend to a loan servicer as an assignee “unless the servicer is or was the owner of the

obligation.” Id. § 1641(f).

Defendants argue that Plaintiffs impermissibly lump together all defendants in their

allegations, and that the allegations are conclusory. The Court agrees that Plaintiffs’ blanket

allegation that all Defendants are “‘creditors” and therefore had a duty to provide the required

disclosures is conclusory. Plaintiffs’ only allegation as to JPMorgan’s role in the loan transaction is

that JPMorgan is the successor in interest to WAMU, and Plaintiffs mailed a Qualified Written

Request to WAMU. (Compl. 6:4-7.) Similarly, Plaintiffs’ only allegations relating to CRC’s role in

the loan transaction are that CRC sent Plaintiffs a Notice of Trustee Sale and that CRC claimed it was

the trustee. (Compl. at 8:19-20, 12:26-27.) The Complaint contains no allegations relating to

Wilshire’s role in the loan transaction.

Because the Court cannot assume Plaintiffs can prove facts that they have not alleged,

Plaintiffs’ allegations fail to establish that Defendants are subject to liability under TILA. See

Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526,

(1983). Accordingly, the Court dismisses without prejudice the damages claim under TILA.

2. Rescission Claim

Plaintiffs acknowledge in their opposition that rescission under TILA is not available for

purchase money loans. (Pl.’s Opp’n to Def.’s Mot. to Dismiss at 10:17-18.) Rather, Plaintiffs argue

they are entitled to rescission due to fraud and a lack of “meeting of the minds” at the inception of the

loan. (Pl.’s Opp’n at 19-20.)

Therefore, the Court dismisses with prejudice Plaintiffs’ rescission claim under TILA.

C. California Rosenthal Act

Plaintiffs allege Defendants violated California’s Rosenthal Fair Debt Collection Practices Act

(“RFDCPA”), Cal. Civ. Code §§ 1788-1788.33 (2009), by threatening to take actions not permitted

by law, including: “foreclosing upon a void security interest; foreclosing upon a note of which they

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were not in possession nor otherwise entitled to payment; 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. at 11:22-27.)

Defendants argue that the act of foreclosure on the subject property pursuant to Plaintiffs’

default on the Deed of Trust does not constitute “debt collection” under the RFDCPA. The Court

agrees that Defendants’ foreclosure as security on a debt cannot form the basis for an RFDCPA claim.

See, e.g., Izenberg v. ETS Servs., LLC,589 F. Supp. 2d 1193, 1199 (C.D. Cal. 2008), Blanco v. Am.

Home Mortg. Servicing, Inc., 2009 WL 4674904, at *4 (E.D. Cal. Dec. 4, 2009). 

The remaining allegations also fail because Plaintiffs do not identify the sections of the

RFDCPA that are allegedly violated nor allege Defendants are “debt collectors” subject to the statute.

Accordingly, the Court dismisses without prejudice Plaintiffs’ claim under the RFDCPA.

D. Wrongful Foreclosure

Plaintiffs’ Complaint alleges wrongful foreclosure based on two theories. First, Plaintiffs

allege Defendants are not in possession of the Note and cannot produce the Note and therefore are not

“person[s] entitled to enforce” the security interest on the property, as that term is defined in

California Commercial Code § 3301. Defendants argue that there is only liability for “wrongful

foreclosure” where the property was fraudulently or illegally sold under a power of sale in a deed of

trust. Plaintiffs’ first argument fails. Neither possession nor production of the original

promissory note is required in order to initiate a nonjudicial foreclosure. See, e.g., Cal. Civ. Code

2924; Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1186 (N.D. Cal. 2009);

Blanco v. Am. Home Mortg. Servicing, Inc., 2009 WL 4674904, at *9 (E.D. Cal. Dec. 4, 2009); Wood

v. Aegis Wholesale Corp., 2009 WL 1948844, at *4 (E.D. Cal. July 6, 2009). Courts have reasoned

that the detailed non-judicial foreclosure procedures provided by California Civil Code §§ 2924-2924k

are exhaustive, and these procedures do not require possession and production of the note:

The comprehensive statutory framework established to govern nonjudicial

foreclosure sales is intended to be exhaustive . . . . It includes a myriad of rules

relating to notice and right to cure. It would be inconsistent with the comprehensive

and exhaustive statutory scheme regulating nonjudicial foreclosures to incorporate

another unrelated cure provision into statutory nonjudicial foreclosure proceedings.

Moeller v. Lien, 30 Cal. Rptr. 2d 777 (1994). Plaintiffs’ second theory of wrongful foreclosure is that

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Defendants “failed to properly record and give notice of the Notice of Default” as required by

California Civil Code § 2923.5(b). This theory fails because Plaintiffs’ allegation is directly

controverted by the Notice of Default, recorded by CRC on July 24, 2008. (RJN, Exhibit 3.) 

Accordingly, the Court grants the motion to dismiss Plaintiffs’ claim for wrongful foreclosure.

E. Real Estate Settlement Procedures Act

Plaintiffs allege Defendants violated the Real Estate Settlement Procedures Act (“RESPA”),

12 U.S.C. §§ 2601-2617 (2009), which protects consumers from unnecessarily high settlement charges

and abusive mortgage practices in connection with federally related mortgage loans. See 12 U.S.C.

§ 2601 (2009). 

1. Failure to Respond to Plaintiffs’ Qualified Written Request

Generally, if the loan servicer of a federally related mortgage loan receives a qualified written

request (“QWR”) from the borrower for information relating to the servicing of such loan, the loan

servicer shall provide a written response within 20 days. Id. § 2605(e)(1)(A). A QWR is defined as:

a written correspondence, other than notice on a payment coupon or other payment

medium supplied by the servicer, that --

(i) includes, or otherwise enables the servicer to identify, the name and account of

the borrower; and 

(ii) includes 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). When the loan servicer receives a QWR, it must either correct the borrower’s

account, or, after conducting an investigation, provide the borrower with a written explanation of: (1)

why the loan servicer believes the account is correct, or (2) why the requested information is

unavailable. See id. § 2605(e)(2).

Plaintiffs concede they do not know which of the Defendants was actually the servicer of the

loan at any given time. (Compl. at 14:6-10.) However, Plaintiffs allege they made a QWR to WAMU

on April 17, 2009 which included a demand to cancel the pending Trustee sale and to rescind the loan

under TILA. (Compl. at 6:4-7.) Plaintiffs allege Defendants failed to provide a written explanation

or response to Plaintiffs’ QWR. (Compl. at 14:12-14.) Defendants argue that WAMU had become

defunct on September 25, 2008 and could not have responded to the alleged QWR, and therefore

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JPMorgan could not have responded either. Defendants’ assertion that JPMorgan could not have

responded does not resolve the question whether JPMorgan was obligated to respond. In any event,

Plaintiffs’ claim fails for the reasons set forth below.

Defendants argue that Plaintiffs fail to allege pecuniary loss. Section 2605(f)(1)(A) provides

that whoever violates RESPA is liable for “any actual damages to the borrower as a result of the

failure.” Numerous courts have read Section 2605 as requiring a showing of pecuniary damages in

order to state a claim. See, e.g., Shepherd v. Am. Home Mortg. Servs., Inc., L 4505925, at *3-4

(E.D. Cal. Nov. 20, 2009); Reynoso v. Paul Fin., LLC, 2009 WL 3833298, at *7 (N.D. Cal. Nov. 16,

2009); Llaban v. Carrington Mortg. Servs., LLC, 2009 WL 2870154, at *4 (S.D. Cal. Sept. 3, 2009).

But “[c]ourts have interpreted this requirement liberally.” Yulaeva v. Greenpoint Mortg. Funding,

Inc., 2009 WL 2880393, at *15 (E.D. Cal. Sept. 3, 2009) (plaintiff sufficiently pled actual damages

where plaintiff alleged she was required to pay a referral fee prohibited under RESPA); see also

Hutchison v. Del. Sav. Bank FSB, 410 F. Supp. 2d 374, 383 (D.N.J. 2006) (plaintiffs alleged they

suffered negative credit ratings as a result of RESPA violations). Here, Plaintiffs allege that they

“have suffered and continues [sic] to suffer damages and costs of suit” as a result of Defendants’

alleged failure to comply with RESPA. (Compl. 14:18-19.) This allegation is conclusory, and

Plaintiffs have failed to sufficiently plead pecuniary loss.

Plaintiffs cannot state a claim against CRC and Wilshire for the additional reason that Plaintiffs

do not allege they sent a QWR to CRC or Wilshire or that these defendants are loan servicers covered

by RESPA. 

2. Other RESPA Violations

Plaintiffs further allege Defendants violated RESPA at the time of closing on the sale of the

property by failing to comply with disclosure requirements, and have engaged in a “pattern or practice

of non-compliance” with Section 2605. (Compl. at 14:11-12, 15-17.) These allegations are

conclusory in that they fail to identify what disclosure requirements were violated and fail to set forth

facts relating to the alleged “pattern or practice of non-compliance.” 

Accordingly, the Court grants Defendants’ motion to dismiss the RESPA claim.

//

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F. Breach of Fiduciary Duty

Plaintiffs concede in their opposition that this claim is inapplicable to Defendants. Therefore,

the Court dismisses this claim with prejudice.

 G. Fraud

Plaintiffs’ sixth cause of action is for fraud. Under California law, there are five elements of

common law fraud: (1) misrepresentation, (2) knowledge of its falsity, (3) intent to defraud, (4)

justifiable reliance, and (5) resulting damage. Gil v. Bank of Am., N.A., 42 Cal. Rptr. 3d 310, 317

(Ct. App. 2006). Rule 9(b) of the Federal Rules of Civil Procedure requires plaintiff to allege

circumstances constituting the alleged fraud that are “specific enough to give defendants notice of the

particular misconduct . . . so that they can defend against the charge and not just deny that they have

done anything wrong.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting

Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir. 2001)). Plaintiff must allege “the who, what,

when, where, and how” of the misconduct charged. Vess, 317 F.3d at 1106. “[A] plaintiff must set

forth more than the neutral facts necessary to identify the transaction. The plaintiff must set forth what

is false or misleading about a statement, and why it is false.” Id. (quoting Decker v. GlenFed, Inc. (In

re GlenFed, Inc. Sec. Litig.), 42 F.3d 1541, 1548 (9th Cir. 1994)).

Defendants argue that Plaintiffs’ fraud allegations fail to meet the particularity requirement

of Rule 9(b) because the only allegations of fraud relate to the conduct of Defendants Akel, State

Mortgage & Finance, Inc., and Meritage in the execution of the loan. The Court agrees that Plaintiffs

fail to sufficiently plead that JPMorgan, CRC, or Wilshire made any misrepresentation in connection

with the loan. Plaintiffs’ fraud allegations relate only to the original loan transaction. Specifically,

Plaintiffs allege Defendant Akel made assurances to Plaintiffs that they would receive a loan with a

fixed rate for 30 years, which he knew were false and would induce them to accept the loan. (Compl.

at 5:7-10.) Plaintiffs also allege Defendants have a practice of approving loans to unqualified

borrowers. (Compl. at 6:16-23.) Again, this allegation relates only to lending activities. The Court

does not accept Plaintiffs’ conclusory allegation that “each of the Defendants was an agent and

employee of each of the remaining Defendants” as true. 

The only allegation of a representation made by CRC is the allegation that “in pursuing the

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non-judicial foreclosure, Defendants represented that they have the right to payment under the note.”

Assuming this is an allegation of fraud, it is not pled with particularity.

Accordingly, the Court dismisses without prejudice Plaintiffs’ cause of action for fraud.

H California Business and Professions Code § 17200

Plaintiffs allege Defendants violated California’s unfair competition statute, which prohibits

“any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200 (2009).

Because Section 17200 is written in the disjunctive, it prohibits three separate types of unfair

competition: (1) unlawful acts or practices, (2) unfair acts or practices, and (3) fraudulent acts or

practices. Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co., 83 Cal. Rptr. 2d 548, 561 (Cal.

1999). By proscribing “unlawful” acts or practices, “Section 17200 ‘borrows’ violations of other laws

and treats them as unlawful practices independently actionable.” Id. at 539-40.

The definition of “unfair” acts or practices in consumer actions is uncertain. There are two

opposing lines of California appellate court opinions. See, e.g., Morgan v. Harmonix Music Sys, Inc.,

2009 WL 2031765, at *4 (N.D. Cal. July 7, 2009) (noting the split in authority); Bardin v.

DaimlerChrysler Corp., 39 Cal. Rptr. 3d 634, 639-48 (Ct. App. 2006) (same). “One line defines

‘unfair’ as prohibiting conduct that is immoral, unethical, oppressive, unscrupulous or substantially

injurious to consumers and requires the court to weigh the utility of the defendant’s conduct against

the gravity of the harm to the alleged victim.” Id. (citing Smith v. State Farm Mut. Auto. Ins. Co. 113

Cal. Rptr. 2d 399, 415 (Ct. App. 2001). “The other line of cases holds that the public policy which

is a predicate to a consumer unfair competition action under the ‘unfair’ prong of the UCL must be

tethered to specific constitutional, statutory, or regulatory provisions.” Bardin, 39 Cal. Rptr. 3d at 626

(citing Scripps Clinic v. Superior Court, 134 Cal. Rptr. 2d 101, 116 (Ct. App. 2003)).

The term “fraudulent” as used in Section 17200 “does not refer to the common law tort of

fraud” but only requires a showing members of the public “are likely to be deceived.” Puentes v.

Wells Fargo Home Mortg., Inc., 72 Cal. Rptr. 3d 903, 909 (Ct. App. 2008) (quoting Saunders v.

Superior Court, 33 Cal. Rptr. 2d 438, 441 (Ct. App. 1994). “Unless the challenged conduct ‘targets

a particular disadvantaged or vulnerable group, it is judged by the effect it would have on a reasonable

consumer.’” Puentes, 72 Cal. Rptr. 3d at 909 (quoting Aron v. U-Haul Co. of Cal., 49 Cal. Rptr. 3d

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555, 562 (Ct. App. 2006)).

Plaintiffs allege “Defendants committed unlawful, unfair, and/or fraudulent business practices,

as defined by California and Professions Code section 17200, by engaging in the unlawful, unfair, and

fraudulent business practices alleged herein.” (Compl. at 17:1-4.) Defendants argue that Plaintiffs

fail to provide specific factual allegations to support their claims. The Court agrees that Plaintiffs fail

to allege facts demonstrating how JPMorgan, CRC, or Wilshire’s actions were “fraudulent,” “immoral,

unethical, oppressive, unscrupulous,” or “substantially injurious to consumers.” Plaintiffs’ claim

therefore must rest on Defendants’ “unlawful” acts. The Court interprets Plaintiffs’ allegations as

identifying the other causes of action in the Complaint as the “borrowed” violations of law. As set

forth in this Order, however, Plaintiffs fail to sufficiently plead any of their causes of action. 

Accordingly, Plaintiffs’ claim under Section 17200 is dismissed without prejudice.

I. Breach of Contract

Plaintiffs concede in their opposition that this claim is inapplicable to Defendants. Therefore,

the Court dismisses this claim with prejudice.

J. Breach of Implied Covenant of Good Faith and Fair Dealing

Plaintiffs concede in their opposition that this claim is inapplicable to Defendants. Therefore,

the Court dismisses this claim with prejudice.

K. California Civil Code § 2923.5

Plaintiffs allege Defendants violated California Civil Code § 2923, which requires a

mortgagee, trustee, beneficiary, or authorized agent to contact the borrower to explore options to avoid

foreclosure before filing a notice of default. Cal. Civ. Code § 2923.5(a)(1) (2009). Section 2923.5(b)

requires the notice of default to include a declaration that the mortgagee, trustee, beneficiary, or

authorized agent contacted or tried with due diligence to contact the borrower. Id. § 2923.5(b).

 Plaintiffs allege Defendants failed to contact and assess Plaintiffs’ financial situation and

Defendants failed to explore options to avoid foreclosure. (Compl. at 20:2-3.) Plaintiffs also allege

Defendants failed to include a declaration in the Notice of Default outlining their due diligence in

contacting them. (Compl. at 20:4-6.) 

 However, these requirements are inapplicable when the notice of default was recorded prior

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4

Defendants argue that they complied with Section 2923.5(c) and submit the Notice of

Trustee’s Sale, recorded on October 28, 2009, which states: “In compliance with California Civil

Code 2923.5(c) the mortgagee, trustee, beneficiary, or authorized agent declares that it has contacted

the borrower(s) to assess their financial situation and to explore options to avoid foreclosure; or that

it has made efforts to contact the borrower(s) to assess their financial situation and to explore options

to avoid foreclosure by one of the following methods; by telephone, United States mail; either 1st

class or certified; by overnight delivery; by personal delivery; by e-mail; by face to face meeting.”

(RJN, Exhibit 5.) 

Defendants also argue that Civil Code 2923.5 does not provide borrowers with a private cause

of action. Because the district courts in California have consistently adjudicated private claims for

violation of 2923.5 and Defendants point to no case to the contrary, the Court rejects this argument.

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to the date of the statute’s enactment on September 6, 2008. Section 2923.5(c) provides:

If a mortgagee, trustee, beneficiary, or authorized agent had already filed the notice

of default prior to the enactment of this section and did not subsequently file a notice

of rescission, then the mortgagee, trustee, beneficiary, or authorized agent shall, as

part of the notice of sale filed pursuant to Section 2924f, include a declaration that

either:

(1) States that the borrower was contacted to assess the borrower's financial situation

and to explore options for the borrower to avoid foreclosure.

(2) Lists the efforts made, if any, to contact the borrower in the event no contact was

made.

Id. § 2923.5(c). In this case, CRC filed the Notice of Default on July 24, 2008, before the date of the

statute’s enactment, and therefore was not required to include a declaration of due diligence in the

notice of default. (RJN, Exhibit 3.) Plaintiffs do not allege the notice of sale was deficient under

Section 2923.5(c).4

 Accordingly, the Court grants Defendants’ motion to dismiss this claim. 

This claim fails as to JPMorgan and Wilshire for the additional reason that Plaintiffs do not

allege either defendant is a mortgagee, trustee, beneficiary, or authorized agent, nor do Plaintiffs

allege either defendant participated in the Notice of Default or foreclosure sale. 

CONCLUSION

For the foregoing reasons, the Court grants the motion to dismiss Plaintiffs’ Complaint against

Defendants JPMorgan, CRC, and Wilshire. Plaintiffs’ causes of action for rescission under TILA,

breach of fiduciary duty, breach of contract, and breach of the implied covenant of good faith and fair

dealing are DISMISSED WITH PREJUDICE, and the remaining claims are DISMISSED WITHOUT

PREJUDICE. 

//

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Plaintiffs may file the amended complaint no later than 20 days from the filing date of this

order. 

IT IS SO ORDERED.

DATED: January 29, 2010

IRMA E. GONZALEZ, Chief Judge

United States District Court

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