Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-03490/USCOURTS-caed-2_09-cv-03490-3/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1441 Petition for Removal

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

STEVE LINDER,

 Plaintiff,

v.

AURORA LOAN SERVICING, LLC; 

HOMECOMINGS FINANCIAL, LLC; 

ROGER O‟KEEFE, individually; 

UNION FIDELITY MORTGAGE, INC.; 

and DOES 1 through 100, 

inclusive,

 Defendants.

______________________________/

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2:09-CV-03490-JAM-KJM

ORDER GRANTING DEFENDANT‟S

MOTION TO DISMISS

This matter comes before the Court on Defendant Homecomings 

Financial, LLC‟s, (“Defendant‟s”) Motion to Dismiss Plaintiff 

Steve Linder‟s (“Plaintiff‟s”) complaint (“Complaint”)for 

failure to state a claim pursuant to Federal Rule of Civil 

Procedure 12(b)(6). (Doc. #23). Defendant also moves to strike 

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portions of the Complaint. (Doc. #23). Plaintiff opposes the 

motion.1 (Doc. #30). 

I. FACTUAL AND PROCEDURAL BACKGROUND

In April 2007, Plaintiff obtained a loan in connection with 

property located at 2632 Westview Drive, Lincoln, California 

95648 (“subject property”). The terms of the loan were 

memorialized in the promissory Note, which was secured by a Deed 

of Trust on the subject property. Defendant was the lender. 

Defendants Union Fidelity Mortgage, Inc. (“Union”) and 

Roger O‟Keefe (“O‟Keefe”) were Plaintiff‟s brokers for the loan. 

Plaintiff alleges that Union and O‟Keefe explained to Plaintiff 

that the loan was the best available on the market, and 

Plaintiff alleges he accurately stated his income on the loan, 

but Union and O‟Keefe overstated his income when completing the 

application. Prior to signing the application, Plaintiff alleges 

he corrected his income. Lastly, Plaintiff alleges that “the 

loan was also fraudulent and in violation of state and federal 

law for one or more of the following reasons,” and then proceeds 

to list twelve possible violations that may have occurred. 

On September 9, 2009, a Notice of Default and Election to 

Sell was recorded on the subject property. On December 10, 

 

1 This motion was determined to be suitable for decision without 

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

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2009, a Notice of Trustee‟s Sale of the subject property was 

recorded. 

Plaintiff alleges that a Qualified Written Request (“QWR”) 

will be mailed to defendants pursuant to the Real Estate 

Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601-2617, 

demanding rescission of the loan.

Plaintiff filed his Complaint on November 20, 2009 in 

Placer County Superior Court, alleging ten causes of action, 

including federal and state claims. Defendant Aurora Loan 

Services, LLC, removed the case to this Court on December 17, 

2009 with Defendant‟s consent and joinder in the removal. The 

Court issued an order on April 14, 2010, granting a motion to 

dismiss all claims against defendant Aurora Loan Services. 

II. OPINION

A. Legal Standard

A party may move to dismiss an action for failure to state a 

claim upon which relief can be granted pursuant to Federal Rule 

of Civil Procedure 12(b)(6). In considering a motion to 

dismiss, the court must accept the allegations in the complaint 

as true and draw all reasonable inferences in favor of the 

plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1975),

overruled on other grounds by Davis v. Scherer, 468 U.S. 183 

(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). “Notwithstanding 

this deference, it is improper for a court to assume the 

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plaintiff can prove fact which he or she has not alleged.” Ozuna 

v. Home Capital Funding, 2009 WL 2496804, at *1 (S.D. Cal. Aug. 

13, 2009). 

Assertions that are mere “legal conclusions,” however, are 

not entitled to the assumption of truth. Ashcroft v. Iqbal, 129 

S. Ct. 1937, 1950 (2009), citing Bell Atl. Corp. v. Twombly, 550 

U.S. 544, 555 (2007). To survive a motion to dismiss, a 

plaintiff needs to plead “enough facts to state a claim to 

relief that is plausible on its face.” Twombly, 550 U.S. at 

570. Dismissal is appropriate where the plaintiff fails to 

state a claim supportable by a cognizable legal theory. 

Balistreri v. Pacifica Police Dep‟t, 901 F.2d 696, 699 (9th Cir. 

1990). 

Generally, the court may not consider material beyond the 

pleadings in ruling on a motion to dismiss for failure to state 

a claim. Sherman v. Stryker Corp., 2009 WL 2241664 at *2 (C.D. 

Cal. Mar. 30, 2009) (internal citations omitted). There are two 

exceptions: when material is attached to the complaint or relied 

on by the complaint, or when the court takes judicial notice of 

matters of public record, provided the facts are not subject to 

reasonable dispute. Id. Here, Plaintiff attached to the 

Complaint an unsigned copy of a loan application and a “mortgage 

compliance analysis report” that appears to be based on a loan 

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application. The Court will consider these documents, as they 

were attached to the Complaint.

Upon granting a motion to dismiss for failure to state a 

claim, the court has discretion to allow leave to amend the 

complaint pursuant to Federal Rule of Civil Procedure 15(a). 

“Dismissal with prejudice and without leave to amend is not 

appropriate unless it is clear . . . that the complaint could 

not be saved by amendment.” Eminence Capital, L.L.C. v. Aspeon, 

Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). 

B. Federal Claims

1. Violation of Truth in Lending Act, First Cause of Action

Plaintiff alleges that Defendant violated the Truth in 

Lending Act, (“TILA”), 15 U.S.C. §1601 et seq., and seeks

damages and rescission. Defendant‟s alleged violations include

failing to provide required disclosure statements, failing to 

make required disclosure clearly and conspicuously in writing, 

failing to timely deliver to Plaintiff required notices, and 

failing to disclose all finance charge details. Defendant

contends that the action for damages is barred by the statute of 

limitations. 

An action for damages under TILA must be brought within one 

year of the violation. 8 U.S.C. §1640(e). A TILA violation 

occurs on “the date of consummation of the transaction,” King v. 

California, 784 F.2d 910, 915 (9th Cir. 1986), and 

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“consummation” means “the time that a consumer becomes 

contractually obligated on a credit transaction.” 12 C.F.R. 

§226(a)(13). Accordingly, Defendant argues that the claim for 

damages is time barred. The doctrine of equitable tolling, 

however, may “suspend the limitations period until the borrower 

discovers or had reasonable opportunity to discover the fraud or 

nondisclosures that form the basis of the TILA action.” King, 

784 F.2d at 915. 

Here, Plaintiff consummated his loan in April 2007, but the

Complaint was not filed until November 20, 2009, well over a 

year after the consummation of the transaction. The Complaint

alleges that “[t]he misrepresentations and allegations stated 

herein were all discovered within the past year, such that any 

applicable statutes of limitations are extended or should be 

extended pursuant to the equitable tolling doctrine or other 

equitable principles.” Complaint ¶ 30. Beyond this conclusory 

statement, the Complaint does not contain any relevant dates or 

similar information to provide a basis from which to allege 

equitable tolling. See also Ashcroft v. Iqbal, 129 S. Ct. 1937, 

1950 (2009) (“Threadbare recitals of the elements of a cause of 

action, supported by mere conclusory statements, do not 

suffice.”). Accordingly, Plaintiff‟s TILA claim for damages is 

dismissed, with prejudice.

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Plaintiff also brings a claim for rescission under TILA. 

Defendant argues that Plaintiff‟s claim for rescission should be 

dismissed because Plaintiff‟s loan is a purchase money loan that 

does not qualify for TILA rescission, and because Plaintiff does

not allege his ability to tender the full amount of the loan.

Plaintiff states that the loan was a purchase money loan. He 

then argues that he should not be required to allege tender in 

order to state a claim for TILA rescission. If Plaintiff‟s loan 

was indeed a purchase money loan, 15 U.S.C. § 1635(e) bars 

rescission. Even if it was not a purchase money loan, or if 

Plaintiff is attempting to plead rescission under another 

theory, Plaintiff still cannot maintain the claim because he has 

not alleged an ability to tender what he owes. 

The Ninth Circuit has held that rescission under TILA 

“should be conditioned on repayment of the amounts advanced by 

the lender.” Keen v. Am. Home Mortgage Serv., Inc., 2009 WL 

3380454 at *4 (E.D. Cal. Oct. 21, 2009) (quoting Yamamoto v. 

Bank of N.Y., 329 F.3d 1167, 1170 (9th Cir. 2003)). 

Additionally, the Ninth Circuit has explained that prior to 

ordering rescission based on a lender‟s alleged TILA violations, 

a court may require borrowers to prove ability to repay loan 

proceeds, and “there is no reason why a court that may alter the 

sequence of procedures after deciding that rescission is 

warranted, may not do so before deciding that rescission is 

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warranted. . . the court does not lack discretion to do before 

trial what it could do after.” Garza v. Am. Home Mortgage, 2009 

WL 188604 at *4 (E.D. Cal. Jan. 27, 2009) (quoting Yamamoto, 329 

F.3d at 1173). 

The court in Keen noted that a number of California

district courts have required plaintiffs to plead facts 

demonstrating ability to tender the loan principal in order to 

withstand a 12(b)(6) motion to dismiss and proceed with a claim 

for rescission under TILA. Id. at *4-5 (citing Garza, 2009 WL 

188604; Serrano v. Sec. Nat‟l Mortgage Co., 2009 U.S. Dist. 

LEXIS 71725 (S.D. Cal. Aug. 14, 2009); Pesayco v. World Sav.

Inc., 2009 U.S. Dist. LEXIS 73299 (C.D. Cal. July 29, 2009).

Accordingly, Plaintiff‟s claim under TILA for rescission 

fails both because Plaintiff has alleged that that it was a 

purchase money loan and because the Complaint contains no 

allegations that Plaintiff is able to tender the full amount of 

the loan. Thus, Plaintiff‟s claim for rescission is dismissed, 

with prejudice. 

2. Violation of Real Estate Settlement Procedures Act 

(“RESPA”), Fourth Cause of Action

Plaintiff alleges that Defendant violated RESPA, 12 U.S.C. 

§2605 et seq., by failing to make correct disclosure 

requirements, and by “engaging in a pattern or practice of noncompliance with the requirements of the mortgage servicer 

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provisions of RESPA as set forth in 12 U.S.C. §2605.” Complaint 

¶ 67. Defendant argues that the claim is time-barred and that 

Plaintiff failed to state a claim under RESPA because the 

Complaint only states bare, conclusory allegations. As with 

Plaintiff‟s TILA claim, Plaintiff fails to plead any facts that 

would allow this Court to find equitable tolling of the statue 

of limitations. 

Additionally, Plaintiff‟s broad and conclusory allegation 

that Defendant failed to comply with RESPA Section 2605 is not 

sufficient. Without pleading any facts to support the 

generalized claim that Defendant violated Section 2605, 

Plaintiff has failed to plead a plausible claim. See also

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (“Threadbare 

recitals of the elements of a cause of action, supported by mere 

conclusory statements, do not suffice.”). Accordingly, the RESPA 

claim is dismissed, with prejudice.

C. State Law Claims

1. Unfair Debt Collections Act

Plaintiff alleges that Defendant violated the California 

Rosenthal Fair Debt Collection Practices Act (“RFDCPA”) by 

“threatening to take actions not permitted by law, including...

collecting on a debt not owed to the Defendant, making false 

reporting to credit report agencies, falsely stating the amount 

of a debt, increasing the amount of a debt by including amounts 

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that are not permitted by law or contract and using unfair and 

unconscionable means in an attempt to collect a debt.” Complaint 

¶ 54.

The RFDCPA was enacted “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.” Cal. Civ. 

Code § 1788.1. Based on the language of the statute, courts 

have declined to regard a residential mortgage loan as a „debt‟ 

under the RFDCPA. See Cal. Civ. Code § 1788.2(e)-(f); Ines v. 

Countrywide Home Loans, Inc., 2008 WL 4791863, at *3 (S.D. Cal. 

2008) (stating plaintiff‟s mortgage debt claim did not fall 

within the meaning of the RFDCPA); Pittman v. Barclays Capital 

Real Estate, Inc., 2009 WL 1108889, at *3 (S.D. Cal. April 24, 

2009) (dismissing plaintiff‟s mortgage-related RDFCPA claim for 

failing to “invoke statutory protections”). A claim under RFDCPA 

must be brought within one year from the date of the occurrence 

of the violation. Cal. Civ. Code § 1788.30(f).

Plaintiff has failed to demonstrate that the RFDCPA applies 

to Defendant as the lender because a residential mortgage is not 

a debt under RFDCPA. All of Plaintiff‟s allegations of debt 

collecting exist in connection with the residential loan 

mortgage. As such, Plaintiff cannot state a plausible claim 

under RFDCPA. This Court need not address the statute of 

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limitation issue since RFDCPA is inapplicable to this loan. 

Accordingly, the claim for unfair debt collection practices is 

dismissed, with prejudice.

2. Negligence

In his negligence claim, Plaintiff contends that Defendant 

owed a duty to the Plaintiff to perform acts as the lender. 

Defendant claims it owes no duty to Plaintiff.

In order to state a cause of action for negligence, a 

plaintiff must allege: (1) the defendant has a legal duty to use 

due care; (2) the defendant breached such legal duty; (3) the 

defendant‟s breach was the proximate or legal cause of the 

resulting injury; and (4) damage to the plaintiff. Ladd v. 

County of San Mateo, 12 Cal. 4th 913, 917 (1996). The existence 

of a legal duty on the part of the defendant is a question of 

law to be determined by the court. Ky. Fried Chicken of Cal., 

Inc. v. Superior Court, 14 Cal. 4th 814, 819 (1997); Isaacs v. 

Huntington Mem‟l Hosp., 38 Cal. 3d 112, 124 (1985). 

In the lending context, “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, no 

such duty is imposed on a lender. Price v. Wells Fargo Bank, 

213 Cal. App. 3d 465, 476 (1989).

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Plaintiff‟s negligence claim against Defendant fails to 

establish a claim upon which relief can be granted. Defendant 

is the lender on Plaintiff‟s loan. As the “mere lender of 

money,” Defendant has no duty towards Plaintiff. As such, 

without the required existence of a duty, Plaintiff has no claim 

for negligence against Defendant. Accordingly, the negligence 

claim is dismissed, with prejudice.

3. Breach of Fiduciary Duty

Plaintiff alleges that Defendant “owed a fiduciary duty to 

the Plaintiff to act primarily for his benefit...and owed 

Plaintiff a duty of loyalty and a duty to deal fairly with him 

at all times.” Complaint ¶¶ 75-76. Plaintiff alleges this duty 

was breached by placing Plaintiff in a loan with unfavorable 

terms that he could not ultimately afford, by not disclosing the 

negative consequences of the loan, and by not complying with 

TILA and RESPA. Id. ¶ 77.

“The elements of a cause of action for breach of fiduciary 

duty are: 1) the existence of a fiduciary duty; 2) a breach of 

the fiduciary duty; and 3) resulting damage.” Pellegrini v. 

Weiss, 165 Cal. App. 4th 515, 524 (2008). “A fiduciary duty...

can arise when confidence is reposed by persons in the integrity 

of others, and if the latter voluntarily accepts or assumes to 

accept the confidence, he or she may not act so as to take 

advantage of the other‟s interest without that person‟s 

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knowledge or consent.” Pierce v. Lyman, 1 Cal. App. 4th 1093, 

1101-02 (1991). As explained above, a financial institution, 

acting as a mere lender of money, owes no duty of care to a 

borrower. Nymark, 231 Cal. App. 3d at 1096. 

Plaintiff‟s allegations against Defendant fail to establish 

a claim for breach of fiduciary duty. As stated above, as the 

lender, Defendant holds no fiduciary duty towards Plaintiff. 

Without the required existence of a fiduciary relationship, 

there can be no claim for relief against Defendant. 

Accordingly, the breach of fiduciary duty claim is dismissed, 

with prejudice.

4. Fraud

“In all averments of fraud or mistake, the circumstances 

constituting fraud or mistake shall be stated with 

particularity. Malice, intent, knowledge and other condition of 

mind of a person may be averred generally.” Fed. R. Civ. P. 

9(b). A claim of fraud must have the following elements: “(a) a 

misrepresentation (false representation, concealment, or 

nondisclosure); (b) knowledge of falsity (or „scienter‟); (c) 

intent to defraud, i.e., to induce reliance; (d) justifiable 

reliance; and (e) resulting damage.” In re Estate of Young, 160 

Cal. App. 4th 62, 79 (2008) (quoting Lazar v. Superior Court, 12 

Cal. 4th 631, 638 (1996) (internal quotation marks omitted)).

The Ninth Circuit has “interpreted Rule 9(b) to mean that the 

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pleader must state the time, place and specific content of the 

false representations as well as the identities of the parties 

to the misrepresentation. Alan Neuman Prods., Inc. v. Albright, 

862 F.2d 1388, 1393 (9th Cir. 1988).

Plaintiff has not alleged fraud with the required 

particularity to state a plausible claim for relief. Plaintiff 

alleges that Union and O‟Keefe, not Defendant, increased 

Plaintiff‟s income on the loan application without Plaintiff‟s 

permission so that Plaintiff was forced into an unaffordable 

loan. Plaintiff‟s only allegations regarding Defendant are that

Defendant should have known that Plaintiff‟s income was 

falsified, and Defendant extended credit to Plaintiff without

regard to his ability to pay. These minimal factual allegations 

do not explain with specificity the false misrepresentations

made by Defendant. Further, Plaintiff alleges that Defendant‟s 

“material misrepresentations were false” and that Plaintiff 

relied on Defendant‟s false material representations. Complaint 

¶¶ 85, 87. These vague legal conclusions and minimal factual 

allegations are insufficient. Accordingly, the fraud claim is 

dismissed, with prejudice.

5. Violation of Bus. & Prof. Code § 17200, et seq.

The California Business & Professions Code § 17200 

prohibits unfair competition including any “unlawful, unfair or 

fraudulent business act or practice and unfair, deceptive, 

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untrue or misleading advertising.” This statute has a “broad 

scope that allows for „violations of other laws to be treated as 

unfair competition that is independently actionable‟ while also 

„sweep[ing] within its scope acts and practices not specifically 

proscribed by any other law.‟” Hauk v. JPMorgan Chase Bank USA, 

552 F.3d 1114, 1122 (9th Cir. 2009) (quoting Kasky v. Nike, 

Inc., 27 Cal. 4th 939, 949 (2002)). While the statute is broad 

in scope, a plaintiff must still plead his claim so as to 

establish a violation of the “other law” or unfair practice in 

question. See Constantini v. Wachovia Mortg. FSB, 2009 WL 

1810122 at *3 (E.D. Cal. June 24, 2009) (citing Walker v. 

Countrywide Home Loans, Inc., 98 Cal. App. 4th 1158, 1169-70 

(2002)).

Here, Plaintiff alleges unfair competition based on the 

allegations in the Complaint of Defendant‟s wrongful acts. As 

mentioned above, Plaintiff has failed to state a claim for any 

of these causes of action upon which the wrongful acts are 

based. Accordingly, Plaintiff‟s cause of action for unfair 

business practices is dismissed, with prejudice.

6. Breach of Contract

In California, “[a] cause of action for breach of contract 

requires proof of the following elements: (1) existence of the 

contract; (2) plaintiff's performance or excuse for 

nonperformance; (3) defendant‟s breach; and (4) damages to 

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plaintiff as a result of the breach.” CDF Firefighters v. 

Maldonado, 158 Cal. App. 4th 1226, 1239 (2008). 

Plaintiff alleges the contract was breached when Defendant

failed to exercise due diligence which resulted in Plaintiff 

entering a loan not in his best interest, failed to submit an 

accurate loan application, failed to supervise, failed to 

provide loan documents prior to closing, and failed to explain 

the loan documents to Plaintiff.

However, despite these allegations, Plaintiff never alleges 

where in his mortgage loan contract, or any contract, these 

promises were explicitly memorialized. A breach of contract 

claim rests upon the actual terms of the contract, but Plaintiff 

fails to allege any breach of the express provisions of the loan 

agreement. Consequently, Plaintiff‟s claim for breach of 

contract fails. Accordingly, Plaintiff‟s cause of action for 

breach of contract is dismissed, with prejudice.

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

Plaintiff alleges that Defendant breached the implied 

covenant of good faith and fair dealing by failing to provide 

disclosures and forcing Plaintiff into a loan that was not in

his best interest.

“To establish a breach of an implied covenant of good faith 

and fair dealing, a plaintiff must establish the existence of a 

contractual obligation, along with conduct that frustrates the 

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other party‟s rights to benefit from the contract.” Fortaleza 

v. PNC Fin. Servs. Group, Inc., 2009 U.S. Dist. LEXIS 64624

**15-16 (N.D. Cal. July 27, 2009). This covenant “does not 

require parties to negotiate in good faith prior to any 

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

784, 799 (2008) (citing Racine & Laramie, Ltd. v. Dep‟t of Parks 

& Recreation, 11 Cal. App. 4th 1026, 1031-35 (1992)) (emphasis 

added). See also Quezada v. Loan Ctr. Of Cal., Inc., No. 08-

177, 2008 WL 5100241, at 9 (E.D. Cal. Nov. 26, 2008) (“To the 

extent that plaintiff‟s claim is based on defendants‟ 

participation in the marketing, promotion, or distribution of 

her loan before consummation..., the implied covenant of good 

faith and fair dealing is inapplicable.”).

Here, Plaintiff fails to allege that any contractual 

relationship between Plaintiff and Defendant existed prior to 

the alleged breach of the implied covenant of good faith and 

fair dealing. All the alleged breaches occurred in connection 

with the negotiations during the loan application process. 

Plaintiff does not allege any breach occurred subsequent to the 

consummation of Plaintiff‟s loan. Thus, Plaintiff has failed to 

plead enough facts to state a plausible claim for relief. 

Accordingly, Plaintiff‟s cause of action for breach of implied 

covenant of good faith and fair dealing is dismissed, with 

prejudice.

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8. Injunctive Relief

“It is appropriate to deny an injunction where there is no 

showing of reasonable probability of success, even though the 

foreclosure will create irreparable harm, because there is no 

justification in delaying that harm where, although irreparable, 

it is also inevitable.” Jessen v. Keystone Sav. & Loan Ass‟n., 

142 Cal. App. 3d 454, 459 (1983). Plaintiff has not shown a 

reasonable probability of success on the merits as discussed 

above. Additionally, although foreclosure will create 

irreparable harm, foreclosure is inevitable because Plaintiff 

has not repaid the loan nor alleged his ability to repay the 

loan. Accordingly, Plaintiff‟s claim for injunctive relief is 

dismissed, with prejudice.

III. ORDER

For the reasons set forth above, Defendant‟s Motion to 

Dismiss is GRANTED, With Prejudice. Defendant‟s Motion to Strike

is dismissed as moot.

IT IS SO ORDERED.

DATED: July 26, 2010

Case 2:09-cv-03490-JAM -KJM Document 37 Filed 07/26/10 Page 18 of 18