Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_10-cv-00639/USCOURTS-caed-2_10-cv-00639-1/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

MICHAEL C. CARTER,

Plaintiff,

 v.

GMAC MORTGAGE, LCC; FIRST

CALIFORNIA MORTGAGE, a

California corporation; and

DOES 1 through 100, inclusive,

Defendants. /

NO. CIV. 2:10-639 WBS DAD

MEMORANDUM AND ORDER RE:

MOTION TO DISMISS

----oo0oo----

Plaintiff Michael C. Carter brought this action against

defendants GMAC Mortgage, LLC (“GMAC”) and First California

Mortgage (“First California”) alleging various federal and state

claims arising out of plaintiff’s mortgage transaction. 

Presently before the court is First California’s motion to

dismiss plaintiff’s First Amended Complaint (“FAC”) pursuant to

Federal Rule of Civil Procedure 12(b)(6).

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I. Factual and Procedural Background

On December 7, 2005, plaintiff obtained a loan from

First California to purchase his home, located at 1664 Baroness

Way in Roseville, California. (FAC ¶ 6; Docket No. 17.) 

Plaintiff claims that he was channeled into this allegedly

unaffordable loan through the conduct of First California, who

allegedly exaggerated plaintiff’s earnings and the value of the

property to secure the loan and falsely told plaintiff that the

loan had a fixed interest rate when interest rate was actually

adjustable. (FAC ¶¶ 14-16, 20.) Plaintiff further alleges that

he did not receive required Notice of Right to Cancel as provided

by the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667f, at

the time of loan origination. (FAC ¶ 72A.) The FAC also alleges

that First California forged plaintiff’s name on the Notice of

Right to Cancel to make it appear as if he received adequate

disclosures under TILA. (Id.)

Plaintiff filed his original complaint in California

Superior Court in Placer County on February 18, 2010. (Docket

No. 1.) First California then removed the case to this court on

March 18, 2010 with the consent of GMAC. (Id.) Plaintiff filed

the FAC after the court granted defendants’ motions to dismiss

the original complaint in its entirety on May 12, 2010. (Docket

No. 17.) First California now moves to dismiss the causes of

action in the FAC that apply to it. 

II. Discussion

On 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

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U.S. 232, 236 (1974), overruled on other grounds by Davis v.

Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

(1972). To survive a motion to dismiss, a plaintiff needs to

plead “only 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). This “plausibility standard,” however, “asks

for more than a sheer possibility that a defendant has acted

unlawfully,” and where a complaint pleads facts that are “merely

consistent with” a defendant’s liability, it “stops short of the

line between possibility and plausibility.” Ashcroft v. Iqbal,

129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-

57).

A. TILA Claim

Plaintiff’s first cause of action prays for damages and

rescission of his loan under TILA. 

1. Rescission

As the court noted in its previous Order dismissing the

original complaint, if a creditor in a loan transaction fails to

provide a borrower with the required notice of the right to

rescind, the borrower has three years from the date of

consummation of the loan to rescind the transaction. Id. §

1635(f); see 12 C.F.R. § 226.23(a)(3) (“If the required notice or

material disclosures are not delivered, the right to rescind

shall expire 3 years after consummation.”). However, “[section]

1635(f) completely extinguishes the right of rescission at the

end of the 3-year period,” which cannot be tolled. Beach v.

Ocwen Fed. Bank, 523 U.S. 410, 412, (1998); see also Miguel v.

Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir. 2002)

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(“[S]ection 1635(f) represents an ‘absolute limitation on

rescission actions’ which bars any claims filed more than three

years after the consummation of the transaction. (quoting King v.

California, 784 F.2d 910, 913 (9th Cir. 1986))); Cazares v.

Household Fin. Corp., 2005 U.S. Dist. LEXIS 39222, at *24-25

(C.D. Cal. 2005) (concluding that, “[i]f certain Plaintiffs did

exercise their rights to rescind[ ] prior to the expiration of

the three-year limitation period,” such facts “would only entitle

Plaintiffs to damages, not rescission” (citing Belini v. Wash.

Mut. Bank, FA, 412 F.3d 17 (1st Cir. 2005))). 

The FAC again alleges that the original complaint,

filed on February 18, 2010, served as plaintiff’s notice of

rescission. (FAC ¶ 72A.) However, plaintiff’s loan closed on

December 7, 2005, putting his notice of rescission well outside

of the three-year limitations period. Accordingly, the court

must dismiss plaintiff’s request for rescission under TILA.

2. Damages

The statute of limitations for a TILA damages claim is

one year from the date of the alleged TILA violation. 15 U.S.C.

§ 1640(e). Plaintiff argues that the statute of limitations

should be tolled because the circumstances of the loan were

hidden from him at the outset. “Equitable tolling may be applied

if, despite all due diligence, a plaintiff is unable to obtain

vital information bearing on the existence of his claim.” Santa

Maria v. Pac. Bell, 202 F.3d 1170, 1178 (9th Cir. 2000). Even if

plaintiff is legally entitled to equitable tolling of his TILA

damages claim, plaintiff has still not alleged any facts in the

FAC that would warrant tolling the statute of limitations. 

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In the FAC, plaintiff simply asserts that he was unable

to discover defendants’ TILA violations until within the last

year because he was not given time to review his loan documents

at the time of closing, (FAC ¶ 33), and “did not have occasion to

review that Application until within the past year” when he gave

the documents in his possession to his attorney. (Id. ¶ 58.) 

The vague allegation that plaintiff did not have adequate time to

review his loan documents at closing and then did not “have

occasion” to later review them is insufficient to demonstrate

that plaintiff exercised due diligence and nevertheless was

unable to discover his TILA claim. See Hubbard v. Fidelity Fed.

Bank, 91 F.3d 75, 79 (9th Cir. 1996) (holding that equitable

tolling was inappropriate for a TILA claim where “nothing

prevented [plaintiff] from comparing the loan contract, []

initial disclosures, and TILA’s . . . requirements”). 

Plaintiff’s vague allegations do not support tolling of the

statute of limitations and accordingly the court must dismiss

plaintiff’s TILA claim. See Cervantes v. Countrywide Home Loans,

Inc., 2009 U.S. Dist. LEXIS 87997, at * 13-*14 (D. Ariz. 2009).

B. Negligence

The negligence allegations in the FAC are almost

identical to the allegations in the original complaint that the

court previously found to be insufficient. The FAC alleges that

First California owed plaintiff a duty to “perform acts as

brokers and lenders in such a manner as to not cause [p]laintiff

harm.” (FAC ¶ 80.) Plaintiff further contends that defendants

breached this duty when “they used their knowledge and skill to

direct [him] into a loan for which [he] was not qualified . . .

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.” (Id. ¶ 81.) 

Plaintiff once again cites no authority for the

proposition that First California owed a duty to not cause

plaintiff harm. Generally, “[a]bsent ‘special circumstances’ a

loan transaction ‘is at arms-length’” and no duties arise from

the loan transaction outside of those in the agreement. Rangel

v. DHI Mortgage Co., Ltd., No. CV F 09-1035 LJO GSA, 2009 WL

2190210, at *3 (E.D. Cal. July 21, 2009) (quoting Oaks Management

Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006)). 

Plaintiff has not shown that First California acted beyond the

scope of a mere lender of money. Absent contrary authority, a

pleading of an assumption of duty by defendants, or a special

relationship, plaintiff cannot establish defendants owed him a

duty of care. See Hardy v. Indymac Fed. Bank, --- F.R.D. ---,

No. CV F 09-935 LJO SMS, 2009 WL 2985446, at *7 (E.D. Cal. Sept.

15, 2009); Bentham v. Aurora Loan Servs., No. C-09-2059 SC, 2009

WL 2880232, at *2-3 (N.D. Cal. Sept. 1, 2009). Accordingly, the

court will grant First California’s motion to dismiss plaintiff’s

negligence claim. 

C. Fraud Claim

In California, the essential elements of a claim for

fraud are “(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). Under the heightened

pleading requirements for claims of fraud under Federal Rule of

Civil Procedure 9(b), “a party must state with particularity the

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circumstances constituting the fraud.” Fed. R. Civ. P. 9(b). A

plaintiff must include the “who, what, when, where, and how” of

the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106

(9th Cir. 2003) (citation omitted); Decker v. Glenfed, Inc., 42

F.3d 1541, 1548 (9th Cir. 1994). Additionally, “[w]here multiple

defendants are asked to respond to allegations of fraud, the

complaint must inform each defendant of his alleged participation

in the fraud.” Ricon v. Reconstrust Co., No. 09-937, 2009 WL

2407396, at *3 (S.D. Cal. Aug. 4, 2009) (quoting DiVittorio v.

Equidyne Extractive Indus., 822 F.2d 1242, 1247 (2d Cir. 1987)). 

The fraud claim in the FAC, while more specific than

the original complaint’s claim, is nevertheless insufficient. 

First, the claim again does not differentiate between defendants. 

Defendants should not be forced to guess as to how their conduct

was allegedly fraudulent. See Associated Gen. Contractors of

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

(1983); Gauvin, 682 F. Supp. at 1071. Second, plaintiff still

fails to provide the details of who made the fraudulent remarks

in question, precisely where and when each were made, and how

they were communicated to plaintiff. See Neubronner v. Milken, 6

F.3d 666, 671 (9th Cir. 1993). (“The complaint must specify such

facts as the times, dates, places and benefits received, and

other details of the alleged fraudulent activity.”) 

Third, many of plaintiff’s allegations fail to cross

the line between possibility and plausibility. See Iqbal, 129 S.

Ct. at 1949. For example, plaintiff claims both that defendants

fraudulently told him he was receiving a fixed interest rate loan

and also lied when they said they would refinance the terms of

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his loan to a lower interest rate if it increased and became

unaffordable. (FAC ¶ 96.) If in fact defendants told plaintiff

he was entering into a fixed-rate loan, it is implausible that

there would have even been a reason to discuss, let alone lie

about, what they would do when the interest rate increased. 

These types of implausible allegations are insufficient to

survive a motion to dismiss. See Iqbal, 129 S. Ct. at 1949. 

Accordingly, the court must grant First California’s motion to

dismiss the FAC’s fraud claim. 

D. California’s Unfair Competition Law Claim

California’s Unfair Competition Law (“UCL”), Cal. Bus.

& Prof. Code §§ 17200-17210, prohibits “any unlawful, unfair, or

fraudulent business act or practice.” Cal-Tech Commc’ns, Inc. v.

L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999). This cause

of action is generally derivative of some other illegal conduct

or fraud committed by a defendant, and “[a] plaintiff must state

with reasonable particularity the facts supporting the statutory

elements of the violation.” Khoury v. Maly’s of Cal., Inc., 14

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

Plaintiff’s claim under the UCL is solely based on the

statutory violations alleged in the FAC. The court has already

indicated it will dismiss plaintiff’s other causes of action

against First California for failure to state a claim. Since

plaintiff has failed to state a claim on any of these grounds,

and because these grounds appear to be the sole basis for

plaintiff’s UCL claim, plaintiff has necessarily failed to state

a claim against First California under the UCL. Accordingly, the

court will grant First California’s motion to dismiss plaintiff’s

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UCL cause of action. 

IT IS THEREFORE ORDERED that First California’s motion

to dismiss the claims in the First Amended Complaint against it

be, and the same hereby is, GRANTED.

Plaintiff has twenty days from the date of this Order

to file an amended complaint, if he can do so consistent with

this Order.

DATED: August 5, 2010

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