Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-00043/USCOURTS-casd-3_09-cv-00043-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 18:1961 Racketeering (RICO) Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

EVA L. WATTS,

Plaintiff,

CASE NO. 09 CV 0043 JM (BLM)

ORDER GRANTING MOTION TO

DISMISS BY DEFENDANTS

COUNTRYWIDE HOME LOANS,

INC., MORTGAGE ELECTRONIC

REGISTRATION SERVICES, INC.,

and SAXON MORTGAGE

SERVICES, INC.

Doc. No. 5

vs.

DECISION ONE MORTGAGE COMPANY,

LLC; COUNTRYWIDE HOME LOANS;

SAXON MORTGAGE SERVICES, INC.;

MORTGAGE ELECTRONIC

REGISTRATION SYSTEMS, INC.,

Defendants.

On October 9, 2008, Plaintiff Eva L. Watts (“Plaintiff”) originally filed a complaint in the

Superior Court of the State of California, County of San Diego, raising claims arising out of a

mortgage loan transaction. (Doc. No. 1, Exh. A, “Complaint.”) The proceeds of the loan were used

to purchase Plaintiff’s principal dwelling (the “Property”), which is now subject to nonjudicial

foreclosure . Following service of the Summons and Complaint, Defendant Countrywide Home

Loans, Inc. (“Countrywide”) timely removed the action to federal court on January 12, 2009. (Doc.

No. 1.) On January 20, 2009, Defendants Countrywide and Mortgage Electronic Registration

Systems, Inc. (“MERS”) submitted the pending motion to dismiss under Fed.R.Civ.P. (“Rule”)

12(b)(6). (“Mot.,” Doc. No. 5.) Defendant Saxon Mortgage Services, Inc. (“Saxon” and collectively

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To the extent Countrywide and MERS offer general arguments in their motion to dismiss,

such arguments are construed as having been made by Countrywide, MERS, and Saxon. 

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with Countrywide and MERS, “Defendants”) joined the motion by notice dated January 30, 2009.1

(Doc. No. 7.) It does not appear Defendant Decision One Mortgage Company (“Decision One”) has

been served in this action.

Under the Civil Local Rules, Plaintiff’s response to the motion was due on or before February

6, 2009. See Civ.L.R. 7.1(e)(2). To date, Plaintiff has neither filed an opposition nor sought

additional time to do so. On February 11, 2009, Defendants filed a reply requesting the motion be

granted based on Plaintiff’s non-opposition. (Doc. No. 9.) When an opposing party does not file

papers in the manner required by Civ.L.R. 7.1(d)(2), the court may deem the failure to “constitute a

consent to the granting of a motion or other request for ruling by the court.” Civ.L.R. 7.1(f)(3)(c).

Notwithstanding Plaintiff’s failure to respond, the court reviews the motion on the merits to ensure

dismissal is appropriate. Pursuant to Civ.L.R. 7.1(d), the matter was taken under submission by the

court on February 20, 2009.

//

Discussion

According to the Complaint, Decision One offered Plaintiff a home mortgage loan to finance

the purchase of the Property and the loan closed on August 7, 2006. (Compl. at ¶¶ 12, 26.) Plaintiff

later defaulted on the loan, leading to entry of a Notice of Default on September 2, 2008. (Compl. at

¶ 35.) The present status of any pending or completed sale is unclear from the parties’ submissions.

Plaintiff assert federal causes of action under the Racketeer Influenced and Corrupt Organizations Act,

18 U.S.C. § 1961 et seq. (“RICO”), the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”), and

the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601 et seq. (“RESPA”). Plaintiff also raises

state law claims to quiet title and for fraud, negligent infliction of emotional distress, negligence,

cancellation based on impossibility, and slander of title. Plaintiff seeks injunctive relief (labeled as

a “first cause of action”), damages, attorneys’ fees and costs, declaration that the loan and Deed of

Trust are null and void, and rescission. 

//

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I. Legal Standards 

A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the pleadings. De

La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir. 1978). In evaluating the motion, the court must construe

the pleadings in the light most favorable to the plaintiff, accepting as true all material allegations in

the complaint and any reasonable inferences drawn therefrom. See, e.g., Broam v. Bogan, 320 F.3d

1023, 1028 (9th Cir. 2003). While Rule 12(b)(6) dismissal is proper only in “extraordinary” cases,

the complaint’s “factual allegations must be enough to raise a right to relief above the speculative

level....” U.S. v. City of Redwood, 640 F.2d 963, 966 (9th Cir. 1981); Bell Atlantic Corp. v.

Twombly, 127 S.Ct. 1955, 1965 (2007) (allegations must provide “plausible grounds to infer” that

plaintiff is entitled to relief). The court should grant 12(b)(6) relief only if the complaint lacks either

a “cognizable legal theory” or facts sufficient to support a cognizable legal theory. Balistreri v.

Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).

Where a plaintiff sues multiple defendants and sets forth multiple causes of action, he “must

allege the basis of his claim against each defendant to satisfy Federal Rule of Civil Procedure 8(a)(2),

which requires a short and plain statement of the claim to put defendants on sufficient notice of the

allegations against them.” Gauvin v. Trombatore, 682 F.Supp. 1067, 1071 (N.D.Cal. 1988). Even

absent other pleading deficiencies, such “confusion of which claims apply to which defendants would

require that the complaint be dismissed with leave to file an amended complaint.” Gen-Probe, Inc.

v. Amoco Corp., 926 F.Supp. 948, 961 (S.D.Cal. 1996)(citing Gauvin, 682 F.Supp. at 1071.)

“Specific identification of the parties to the activities alleged is required...to enable the defendant[s]

to plead intelligently.” Van Dyke Ford, Inc. v. Ford Motor Co., 399 F.Supp. 277, 284 (E.D.Wis.

1975). 

//

II. Analysis

 A. Failure of the Pleadings to Allege Facts Sufficient to Survive a Rule 12(b)(6)

Motion to Dismiss

As a first consideration, as Defendants note, the Complaint relates almost no facts

demonstrating any wrongs by particular defendants, but rather ascribes nearly all allegations

collectively to “Defendants.” Outside the section identifying the parties, Countrywide is mentioned

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only as assignee of a “beneficial interest” in the loan and having “approved loans with higher and

higher debt-to-income...ratios” to “expand market share.” (Compl. at ¶¶ 24, 35.) MERS is mentioned

only once, as “the current but unascertained beneficiary of the Deed of Trust.” (Compl. at ¶ 95.)

These averments are insufficient to state a claim on Plaintiff’s behalf. Further, Plaintiff has not

specified which claims are brought against which defendants for what conduct. Rather, Plaintiff

simply asserts all defendants are acting in concert and therefore alleges all claims indiscriminately.

This “shotgun” approach does not meet the Rule 8 pleading standard. While this failing alone

warrants dismissal of the Complaint, the motion’s substantive arguments are addressed in the

following sections.

 B. RICO and Fraud

Countrywide and MERS argue Plaintiff’s fraud and RICO causes of action must be dismissed

because they have not been pled with particularity with respect to any defendants, as required by Rule

9(b). (Mot. at 7-10.) The court agrees.

“Rule 9(b)’s particularity requirement applies to state-law causes of action.” Vess v. CibaGeigy Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). On a claim for fraud, then, a “pleading is

sufficient under rule 9(b) if it identifies the circumstances constituting fraud so that a defendant can

prepare an adequate answer from the allegations.” Moore v. Kayport Package Express, Inc., 885 F.2d

531, 540 (9th Cir. 1989)(citations omitted). “While statements of the time, place and nature of the

alleged fraudulent activities are sufficient, mere conclusory allegations of fraud” are not. Id. Further,

Rule 9(b) requires a plaintiff to attribute particular fraudulent statements or acts to individual

defendants. Id. Here, Plaintiff has not identified any particular statements or misrepresentations,

much less linked them to specific defendants.

A claim under RICO must also satisfy Rule 9(b)’s particularity requirements. In her RICO

claim, brought under 18 U.S.C. § 1962(c), Plaintiff alleges Defendants were involved in “racketeering

activity” by virtue of their allegedly collusive participation in indictable activities including mail fraud

(18 U.S.C. § 1341), wire fraud (§ 1343), obstruction of justice (§ 1503), obstruction of criminal

investigations (§ 1510), and obstruction of State or local law enforcement (§ 1511). See 18 U.S.C.

§ 1961(B). However, Plaintiff’s Complaint is completely void of factual support for these wildly

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broad, conclusory, and largely irrelevant statements. “To state a claim under 18 U.S.C. § 1962(c), a

plaintiff must allege ‘(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering

activity.’” Odom v. Microsoft Corp., 486 F.3d 541, 547 (9th Cir. 2007)(quoting Sedima, S.P.R.L. v.

Imprex Co., 473 U.S. 479, 496 (1985). Citation of random statutory language does not a viable claim

make. Plaintiff’s allegations do not state a claim for relief and do not meet the Rule 9(b) particularity

standard.

Plaintiff’s RICO and fraud causes of action are therefore dismissed without prejudice as to all

defendants.

 C. TILA and RESPA

Plaintiff alleges Defendants failed to provide her with the required early Disclosure Statement

under 12 C.F.R. § 226 (“Regulation Z”), and did not properly disclose material loan terms, including

applicable finance charges, interest rate, and total payments as required by 15 U.S.C. § 1632. (Compl.

at ¶¶ 74-75.) Plaintiff seeks rescission of the mortgage loan as well as damages and attorneys’ fees.

(Compl. at ¶ 78, p. 19.). 

Plaintiff’s request for damages relating to improper disclosures under TILA is subject to a oneyear statute of limitations, typically running from the date of loan execution. See 15 U.S.C. §1640(e)

(any claim under this provision must be made “within one year from the date of the occurrence of the

violation.”). Plaintiff alleges the loan closed on August 7, 2006. (Compl. at ¶ 12.) The instant suit

was not filed until October 9, 2008, well over two years later. (Compl. Summons.)

The Ninth Circuit has held equitable tolling of civil damages claims brought under TILA may

be appropriate “in certain circumstances,” such as when a borrower might not have had a reasonable

opportunity to discover the nondisclosures at the time of loan consummation. King v. State of

California, 784 F.2d 910, 915 (9th Cir. 1986). Courts then have discretion to “adjust the limitations

period accordingly.” Id. The applicability of equitable tolling often depends on matters outside the

pleadings. Supermail Cargo, Inc. v. U.S., 68 F.3d 1204, 1206 (9th Cir. 1995) (citing Cervantes v. City

of San Diego, 5 F.3d 1273, 1276 (9th Cir. 1993). Therefore, the determination “is not generally

amenable to resolution on a Rule 12(b)(6) motion.” Id. Here, however, not only has Plaintiff failed

to state relevant facts to support a TILA claim, she has not demonstrated any entitlement to equitable

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tolling. For these reasons, Plaintiff’s claim for damages under TILA is dismissed with prejudice as

to all defendants.

Defendants argue Plaintiff’s request for rescission under TILA, 15 U.S.C. § 1635, fails as a

matter of law because, as an assignee, Countrywide could only be liable “if violations of TILA are

apparent on the face of the loan documents.” 15 U.S.C. § 1641; (Mot. at 12-13.) Plaintiff’s purported

right to rescission does flow as against any assignee. 15 U.S.C. § 1641(c) (“Any consumer who has

the right to rescind a transaction under section 1635...may rescind the transaction as against any

assignee of the obligation.”). In addition, assessment of the facial sufficiency of the loan documents

is a question of fact inappropriate for a Rule 12(b)(6) motion to dismiss, particularly where such

documents are not properly before the court. This argument is moot, however, because Plaintiff’s

claim is fatally flawed. Under 15 U.S.C. § 1635(e),“residential mortgage transactions” are excluded

from the three-year right of rescission. A “residential mortgage transaction” is defined by 15 U.S.C.

§ 1602(w) to include “a mortgage, deed of trust, ... or equivalent consensual security

interest...created...against the consumer’s dwelling to finance the acquisition...of such dwelling.”

Thus, while home equity loans and refinancing transactions would be amenable to rescission,

Plaintiff’s purchase money mortgage is not. Plaintiff’s TILA rescission claim is therefore dismissed

with prejudice as to all defendants.

In her RESPA claim, Plaintiff alleges Defendants violated section 8(a), 12 U.S.C. § 2607(a),

by giving and accepting improper fees or kickbacks, by “driving up settlement costs, by failing to

disclose business relationships between service providers, by failing to properly follow notice of

transfer provisions, [and] by failing to properly inform Plaintiff about all closing costs.” (Compl. at

¶ 84.) Although Countrywide and MERS protest the sufficiency of the allegations (Mot. at 13-14),

Plaintiff’s claim fails for a more basic reason – she faces yet another procedural bar. Plaintiff’s

RESPA section 8 claim is precluded by the applicable one-year statute of limitations under 12 U.S.C.

§ 2614 and is hereby dismissed with prejudice as to all defendants.

 D. Negligence and Negligent Infliction of Emotional Distress

“Negligent infliction of emotional distress is not an independent tort; it is the tort of negligence

to which the traditional elements of duty, breach of duty, causation, and damages apply.” Ess v.

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Eskaton Properties, Inc., 97 Cal.App.4th 120, 126 (2002)(citing Marlene F. v Affiliated Psychiatric

Med. Clinic, Inc., 48 Cal.3d 583, 588 (1989)). For both causes of action, then, a plaintiff must allege

a valid legal duty owed by the defendants. Here, Plaintiff argues Defendants owed her a “duty...of

due care,” and in particular, a “duty to exercise reasonable care and skill in performing their duties”

for her benefit. (Compl. at ¶¶ 47, 52.) Generally, barring an assumption of duty or a special

relationship, “financial institutions owe 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.” Nymark v. Heart Fed. Sav. & Loan Ass’n, 231 Cal.App.3d 1089, 1096 (1991). Although

California law imposes a fiduciary duty on a mortgage broker for the benefit of the borrower, no such

duty is imposed on a lender. UMET Trust v. Santa Monica Med. Inv. Co., 140 Cal.App.3d 864, 872-

73 (1983); Price v. Wells Fargo Bank, 213 Cal.App.3d 465, 476 (1989)(citing Downey v. Humphreys,

102 Cal.App.2d 323, 332 (1951))(“‘A debt is not a trust and there is not a fiduciary relation between

debtor and creditor as such.’ The same principle should apply with even greater clarity to the

relationship between a bank and its loan customers.”). Plaintiff characterizes Countrywide as a

“lender and/or loan servicer” and does not allege MERS acted as a mortgage broker. (Compl. at ¶¶

3-4.) In fact, all defendants are collectively referred to as “Mortgage Lenders” throughout the

Complaint. Plaintiff has not alleged any duty for Countrywide or MERS that has been imposed by

law, assumed by the defendants, or created by a special relationship with Plaintiff. Thus, Plaintiff’s

claims for negligence and negligent infliction of emotional distress are dismissed without prejudice

as to Countrywide and MERS only.

 E. Quiet Title and Slander of Title

Plaintiff seeks to quiet title in the property as against each defendant, and argues “[t]he

foreclosure of the Subject Property is wrongful and should be voided by virtue of Defendants’

fraudulent conduct...and by reason of the defective Deeds of Trust.” (Compl. at ¶ 91.) In order to

adequately allege a cause of action to quiet title, a plaintiff’s pleadings must include a description of

“[t]he title of the plaintiff as to which a determination...is sought and the basis of the title...” and “[t]he

adverse claims to the title of the plaintiff against which a determination is sought.” Cal. Code Civ.

Proc. § 761.020. A plaintiff is required to name the “specific adverse claims” that form the basis of

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In fact, Plaintiff asserts unnamed party Recontrust, acting as the agent for MERS, recorded

the Notice of Default. (Compl. at ¶ 95.) 

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the property dispute. See Cal. Code Civ. Proc. § 761.020, cmt. at ¶ 3. None of Plaintiff’s allegations

show any adverse claims; the recorded Notices do not affect Plaintiff’s title, ownership, or possession

in the Property. As discussed herein, Plaintiff has not adequately alleged any fraudulent conduct

which might serve as a basis for the cause of action. Finally, in California, a quiet title pleading must

be verified through a sworn statement; Plaintiff’s Complaint is unverified. The cause of action to

quiet title is therefore dismissed without prejudice as to all defendants.

In her “slander of title” claim, Plaintiff avers Defendants “wrongfully and without privilege”

caused recordation of the Notice of Default, in violation of Cal. Civ. Code § 2924.2 (Compl. at ¶¶ 95-

98.) Slander of title is a “tortious injury to property resulting from unprivileged, false, malicious

publication of disparaging statements regarding the title to property owned by plaintiff, to plaintiff’s

damage.” Southcott v. Pioneer Title Co., 203 Cal.App.2d 673, 676. A disparaging statement is one

intended to cast doubt the existence or extent of one’s interest in the property. Glass v. Gulf Oil

Corp., 12 Cal.App.3d 412, 423. As mentioned above, though, the recorded Notices make no claim

to Plaintiffs’ property nor cast any doubt to their ownership. 

Whether MERS’s actions are privileged is unclear. In Kachlon v. Markowitz, 168 Cal.App.4th

316, 333 (2008), the court held that “section 2924 deems the statutorily required mailing, publication,

and and delivery of notices in nonjudicial foreclosure, and the performance of nonjudicial foreclosure

procedures, to be privileged communications under the qualified, common-interest privilege of [Civ.

Code] section 47, subdivision (c)(1).” Thus, if MERS were properly acting as the foreclosure trustee,

or otherwise as an agent of the beneficiary, it could claim the privilege. However, Plaintiff suggests

that MERS cannot because, as a suspended California corporation, “is not qualified to do business in

California.” (Compl. at ¶¶ 5.) MERS offers no rebuttal.

In the end, regardless of whether MERS’s conduct was privileged, the recorded documents do

not qualify as disparaging statements. Thus, Plaintiff’s slander of title cause of action is dismissed

with prejudice as to all defendants.

 F. Cancellation of Deed of Trust Based on Fraud and Impossibility 

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Plaintiff offers that, because Defendants “fabricated and submitted falsified loan documents”

and because Plaintiff “lacked ability to perform the loan,” the loan contracts and Promissory Notes

are null and void. (Compl. at ¶ 88.) Consequently, Plaintiff asks the court to cancel the Deeds of

Trust. While fraudulent loan documents might provide grounds for loan cancellation, as stated above,

Plaintiff’s Complaint fails to meet the fraud pleading standards of Rule 9(b). Further, Plaintiff’s

inability to perform the obligations to which she agreed, without more, does not provide a basis for

cancellation of the loan. Plaintiff’s claim for cancellation is dismissed without prejudice as to all

defendants.

 G. Lis Pendens

While ignoring the pleading requirements for a quiet title request, Plaintiff did comply with

Cal. Civ. Code § 761.010 by recording a lis pendens with the county. Defendants ask the court to

expunge the lis pendens pursuant to Cal. Civ. Code §§ 405.31 and 405.32. A court “shall order the

notice [of pendency] expunged if...the pleading on which the notice is based does not contain a real

property claim.” Cal. Civ. Code § 405.31. A “real property claim” is defined, inter alia, as a cause

of action “which would, if meritorious, affect...title to, or the right to possession of, specific real

property....” Cal. Civ. Code § 405.4. Since Plaintiff has alleged no viable claims, much less a “real

property claim,” the court grants Defendants’ request to expunge the lis pendens.

 H. Injunctive Relief

Finally, Plaintiff seeks injunctive relief to forestall any foreclosure sale but does not offer any

particular supporting cause of action. A request for injunctive relief by itself does not state a cause

of action and is properly brought before the court as a separate motion. Shamsian v. Atl. Richfield

Co., 107 Cal.App.4th 967, 984-85 (2003). Even if the court were to construe this request as derivative

of all other alleged causes of action, Plaintiff would still bear the burden of showing: (1) a

combination of probable success and the possibility of irreparable harm, or (2) serious questions and

the balance of hardship tips in her favor. Arcamuzi v. Continental Air Lines, Inc., 819 F.2d 935, 937

(9th Cir. 1987). Under either formulation, however, Plaintiff must demonstrate a “fair chance of

success on the merits" and a "significant threat of irreparable injury.” Id. As the discussion above

outlines, Plaintiff has failed to demonstrate a likelihood of success on the merits and is not entitled to

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injunctive relief based on her pleadings.

//

Conclusion

For the reasons set forth above, the motion to dismiss (Doc. No. 5) is GRANTED. In

particular, Plaintiff’s fraud, RICO, cancellation, quiet title, and slander of title causes of action are

hereby DISMISSED as to all defendants, without prejudice and with leave to amend. Plaintiff’s

causes of action for TILA and RESPA are hereby DISMISSED with prejudice as to all defendants.

Plaintiff’s causes of action for negligence and negligent infliction of emotional distress are hereby

DISMISSED without prejudice as to Countrywide and MERS only. Further, the court ORDERS the

lis pendens recorded by Plaintiff expunged from the title record of the Property identified in the

Complaint as 688 Rue Avallon, Chula Vista, California, 93913.

In light of the disposition of Plaintiff’s claims, Plaintiff is granted leave to amend. Plaintiff

shall file and serve an amended complaint within 20 days of the filing of this Order.

IT IS SO ORDERED.

DATED: March 9, 2009

 Hon. Jeffrey T. Miller

 United States District Judge

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