Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-00578/USCOURTS-caed-2_09-cv-00578-4/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

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

JESSICA BLANCO,

Plaintiff,

 v.

AMERICAN HOME MORTGAGE

SERVICING, INC., OPTION ONE

MORTGAGE CORPORATION, THE

FUNDING & LENDING NETWORK,

MANDALE JOHNSON, MYRON W.

BUTLER, AHMSI DEFAULT

SERVICES, T.D. SERVICE

COMPANY, and DOES 1 through

20, inclusive,

Defendants. /

NO. CIV. 2:09-578 WBS DAD

MEMORANDUM AND ORDER RE:

MOTION TO DISMISS

----oo0oo----

Plaintiff Jessica Blanco filed this action against

defendants American Home Mortgage Servicing, Inc. (“AHMSI”),

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1 Option One is now known as Sand Canyon Corporation. 

For the purpose of consistency with the briefs, this memorandum

will refer to this entity as “Option One.”

2

Option One Mortgage Corporation (“Option One”)1, The Funding &

Lending Network (“FLN”), Mandale Johnson, Myron W. Butler, AHMSI

Default Services (“Default Services”), and T.D. Service Company

(“TD”), alleging various state and federal claims relating to a

loan they obtained to refinance their home in Woodland,

California. AHMSI, Default Services, and Option One move to

dismiss plaintiff’s Second Amended Complaint (“SAC”) pursuant to

Federal Rule of Civil Procedure 12(b)(6) for failure to state a

claim upon which relief can be granted. 

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

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-

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2 As mentioned in the court’s December 3, 2009 Order, the

court will grant defendants’ request for judicial notice, as it

is of publically recorded documents whose accuracy cannot be

questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689

(9th Cir. 2001).

3 Plaintiff’s Opposition is unclear as to whether

plaintiff wants the court to dismiss her RESPA claim in its

entirety, or solely against Option One, AHMSI, and Default

Services. Out of caution, the court will only dismiss her RESPA

a claim as to the moving defendants. If plaintiff wishes to

dismiss her RESPA claim entirely, she may do so by filing a

voluntary dismissal of the claim.

3

57).2

A. TILA and RESPA Claims

Plaintiff’s SAC once again alleges claims for

violations of TILA and RESPA. In response to AHMSI, Option One

and Default Services’ motion to dismiss, plaintiff indicated that

she does not oppose defendants’ motion to dismiss these causes of

action. (See Pl.’s Opp’n Defs.’ Mot. Dismiss SAC, Docket No. 47

7:9-11, 8:8-10.) Accordingly, the court will dismiss plaintiff’s

TILA and RESPA claims against AHMSI, Default Services, and Option

One.3

B. California Rosenthal Fair Debt Collection Practices Act

Plaintiff has also amended her cause of action for

violation of the Rosenthal Fair Debt Collection Practices Act

(“Rosenthal Act” or “RFDCPA”). This claim, however, continues to

suffer from the same shortfalls this court identified in its

December 3, 2009 Order granting defendants’ motion to dismiss. 

(See Docket No. 43.) Plaintiff does not plead facts necessary to

support the inference that either AHMSI, Default Services, or

Option One is a “debt collector” under the RFDCPA; specifically,

that any one of the three engages in “debt collection,” that the

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deed of trust memorializes a “consumer credit transaction,” and

that the amount owed under the deed of trust is a “consumer debt”

according to the RFDCPA. See Cal. Civ. Code § 1788.2(b)-(f);

Izenberg v. ETS Svcs., LLC, 589 F. Supp. 2d 1193, 1199 (C.D. Cal.

2008) (“Because foreclosure does not constitute debt collection

under the RFDCPA, it does not appear that plaintiff can cure this

deficiency.”); see also Ines v. Countrywide Home Loans, Inc., No.

08-1267, 2009 WL 4791863, at *2 (S.D. Cal. Nov. 3, 2008)

(“Mortgage companies collecting debts are not ‘debt collectors’”)

(quoting Williams v. Countrywide Home Loans, Inc., 504 F. Supp.

2d 176, 190 (S.D. Tex. 2007)). Plaintiff has not shown that

residential mortgage loans fall within the purview of the RFDCPA,

and accordingly plaintiff’s cause of action for unfair debt

collection practices cannot survive a motion to dismiss.

C. Fraud

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

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

The plaintiffs 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

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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)).

While the SAC’s fraud claim pleads a great deal more

facts than the previous iteration of the Complaint, it still

suffers from a number of shortcomings. Plaintiff fails to

identify a single precise misrepresentation made by Option One to

her. Instead, plaintiff simply contends that “Option One

exercised extensive control over the actions of Funding and

Lending and Butler and Johnson . . . in order to conceal the

misrepresentations on [p]laintiff’s loan application.” (SAC ¶

248.) It is completely unclear if Option One ever made any

representations to plaintiff or when such representations were

made. Plaintiff’s fraud claim against Option One is therefore

insufficient as currently plead.

Plaintiff also bases her theory of fraud against AHSMI

on an erroneous theory. Specifically, plaintiff claims that

AHMSI made misrepresentations to plaintiff when it “represented .

. . that AHMSI has the right to collect monies” from her because

AHMSI is not a “person entitled to enforce” the mortgage note

pursuant to California Commercial Code Section 3301. (Id. ¶¶

274, 280.) In that regard, plaintiff contends that defendants

failed to properly endorse the note and physically deliver it,

rendering the transfer of the note invalid. However, “[w]hen a

mortgage is sold, physical transfer of the note is not required.” 

Wood v. Aegis Wholesale Corp., 2009 U.S. Dist. LEXIS 57151, *14

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(E.D. Cal. July 2, 2009) (citing In re Golden Plan of Cal., Inc.,

829 F.2d 705, 708-11 (9th Cir. 1986)). Accordingly, plaintiff

has failed to identify any misrepresentation made by AHMSI or why

AHMSI would know a statement that it had the right to service her

loan was false. Accordingly, the court will dismiss plaintiff’s

fraud claim against Option One and AHMSI.

D. California’s Unfair Competition Law

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 once again solely

based on her previous causes of action and merely recites her

other claims without further explaining why AHMSI, Default

Services, or Option One violated the UCL. Since plaintiff has

failed to state a claim on any of her other claims against these

defendants, and because these grounds appear to be the sole basis

for plaintiff’s UCL claim, she by necessity has again failed to

state a claim against AHMSI, Default Services, or Option One

under the UCL. Accordingly, the court will grant AHMSI, Default

Services, and Option One’s motion to dismiss plaintiff’s UCL

cause of action.

E. Leave to Amend

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“Valid reasons for denying leave to amend include undue

delay, bad faith, prejudice, and futility.” Cal. Architectural

Bldg. Prods. v. Franciscan Ceramics, 818 F.2d 1466, 1472 (9th

Cir. 1988). Furthermore, while leave to amend must be freely

given, the court is not required to allow futile amendments. See

DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir.

1992); Klamath-Lake Pharm. Ass’n v. Klamath Med. Serv. Bureau,

701 F.2d 1276, 1293 (9th Cir. 1983); see also Reddy v. Litton

Indus., Inc., 912 F.2d 291, 296-97 (9th Cir. 1990); Rutman Wine

Co. v. E. & J. Gallo Winery, 829 F.2d 729, 738 (9th Cir. 1987).

The court’s December 3, 2009 Order specifically advised plaintiff

of the pleading defects in her First Amended Complaint, what

plaintiff needed to plead to rectify them, and gave plaintiff the

opportunity to file the SAC. As explained above, plaintiff’s

SAC-while over forty pages long-fails to correct many of these

defects.

With respect to plaintiff’s claims for violations of

TILA, RESPA, and the RFDCPA, the court previously apprised

plaintiffs of the same deficiencies that plague the SAC. Since

the deficiencies have not been corrected, the court can only

conclude that plaintiffs do not intend to allege or are unwilling

or unable to properly plead claims for RFDCPA, TILA, and RESPA

violations. Cf. Garcia ex rel. Marin v. Clovis Unified School

Dist., No. 08-1924, 2009 WL 2982900, at *9 (E.D. Cal. Sept. 14,

2009). To the extent that plaintiff is again attempting to

allege such claims, dismissal without leave to amend is

appropriate.

As to the remaining causes of action against defendants

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Option One, AHMSI, and Default Services, plaintiff is admonished

that failure to cure the defects identified in this Order is

grounds for dismissal without further leave to amend.

IT IS THEREFORE ORDERED that Option One, AHMSI, and

Default Services’ motion to dismiss plaintiff’s RESPA, TILA, and

RFDCPA claims against Option One, AHMSI, and Default Services be,

and the same hereby is, GRANTED WITH PREJUDICE.

IT IS FURTHER ORDERED that Option One, AHMSI, and

Default Services’ motion to dismiss plaintiff’s claims for fraud

and violation of the UCL against Option One, AHMSI, and Default

Services be, and the same hereby is, GRANTED WITHOUT PREJUDICE.

Plaintiff has twenty days from the date of this Order

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

this Order.

DATED: February 25, 2010

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