Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-00863/USCOURTS-caed-2_09-cv-00863-3/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

CONNIE J. WILSON,

Plaintiff,

 v.

JPMORGAN CHASE BANK, NA., as

successor by merger to

Washington Mutual Bank, a/k/a

JPMorgan Chase Bank, N.A., as

an acquirer of certain assets

and liabilities of Washington

Mutual Bank from the FDIC

acting as receiver and LENDER

DOE,

Defendants. /

NO. CIV. 2:09-863 WBS GGH

MEMORANDUM AND ORDER RE:

MOTION TO DISMISS

----oo0oo----

Plaintiff Connie J. Wilson brought this action against

defendant JPMorgan Chase Bank, NA alleging various federal and

state claims arising out of plaintiff’s mortgage transaction. 

Presently before the court is defendant’s motion to dismiss the

Second Amended Complaint (“SAC”) pursuant to Federal Rule of

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Civil Procedure 12(b)(6).

I. Factual and Procedural Background

On October 20, 2005, plaintiff alleges that her now

deceased husband, James B. Wilson, entered into a loan with Long

Beach Mortgage Company (“Long Beach”) to refinance plaintiff’s

property at 10787 Oakton Way, Rancho Cordova, California. (SAC ¶

15) This loan was secured by a Deed of Trust on the property. 

(Id.) The Deed of Trust listed plaintiff and her husband as the

borrower, as joint tenants. (Def.’s Req. for Judicial Notice Ex.

2.) The Deed of Trust also listed Long Beach as trustee and

lender. (Id.) 

Plaintiff alleges that her husband obtained the credit

to refinance their home without her credit information. (SAC ¶

38.) Plaintiff’s husband was allegedly the sole borrower when

the loan was consummated. (Id.) The SAC alleges that Long Beach

required plaintiff to sign the Deed of Trust because plaintiff

was listed as a joint owner of the property and her signature was

necessary to perfect Long Beach’s security interest in the

property. (Id. ¶¶ 17, 39.) Plaintiff allegedly did not execute

a promissory note and only signed the security instrument at the

behest of Long Beach. (Id.)

Plaintiff alleges that Long Beach never provided her

with two copies of a completed Notice of Right to Cancel at the

time of consummation of the loan, in violation of the Truth in

Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667f. (SAC ¶¶ 29-30.) 

Plaintiff further alleges that First American Title Insurance

Company actually provided plaintiff the Notice of Right to Cancel

on October 26, 2005, and instructed plaintiff to back date the

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document to the date of the loan transaction. (Id. ¶ 58.) 

Plaintiff’s husband allegedly began negotiating with

Washington Mutual to modify the loan sometime before July 2008.1

(Id. ¶ 32.) On September 10, 2008, plaintiff sent a Qualified

Written Request (“QWR”) under the Real Estate Settlement

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

and Washington Mutual that included demands to rescind the loan

and disclose the holder of her mortgage note in accordance with

TILA. (Id. ¶ 28.) In this letter, plaintiff also allegedly

demanded that all communications relating to collection of the

outstanding balance of her loan cease, pursuant to the Rosenthal

Fair Debt Collection Practices Act (“RFDCPA”), Cal. Civ. Code §

1788.2. (Id. ¶ 119.) On September 25, 2008, defendant purchased

the assets of Washington Mutual from the Federal Deposit

Insurance Corporation (“FDIC”) Receiver. (Def.’s Req. for

Judicial Notice Ex. 7.) Plaintiff alleges that defendant failed

to respond to her QWR, rescind the loan, or cease contacting her

in an attempt to collect her outstanding payments. (SAC ¶¶ 71,

100, 119.) Plaintiff allegedly attempted to follow up on her

request with Washington Mutual and Long Beach by mail on November

17, 2008, November 21, 2008, and December 19, 2008. (Id. ¶ 119.)

A Substitution of Trustee was recorded in Sacramento

County on December 23, 2008, which listed defendant as the

1 At the time plaintiff was seeking modification of the

loan, Washington Mutual, rather than defendant owned an interest

in the loan. Washington Mutual was subsequently closed by the

Federal Deposit Insurance Corporation (“FDIC”) and defendant

bought Washington Mutual’s assets from the FDIC Receiver on

September 25, 2008 in a Purchase and Assumption Agreement (“P&A

Agreement”). (Def.’s Req. for Judicial Notice Ex. 7.)

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beneficiary of the Deed of Trust and substituted California

Reconveyance Company (“CRC”) as the new trustee. (Def.’s Req.

for Judicial Notice Ex. 4.) After the loan went into default, a

Notice of Default and Election to Sell Under Deed of Trust was

filed in Sacramento Country by CRC on December 23, 2008. (Id.

Ex. 5.) A Notice of Trustee’s Sale was then recorded by CRC in

Sacramento County on March 25, 2009. (Id. Ex. 6.)

In her SAC, plaintiff asserts causes of action against

defendant for violations of the Equal Credit Opportunity Act

(“ECOA”), 15 U.S.C. §§ 1691-1691f, the Fair Housing Act (“FHA”),

42 U.S.C. §§ 3601-3619, TILA, RESPA, RFDCPA, and California’s

Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200-

17210, as well as breach of the covenant of good faith and fair

dealing, slander of credit, and intentional infliction of

emotional distress. Defendant moves to dismiss all causes of

action in Plaintiff’s SAC for failure to state a claim upon which

relief can be granted pursuant to Rule 12(b)(6).

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

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

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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).

In general a court may not consider items outside the

pleadings upon deciding a motion to dismiss, but may consider

items of which it can take judicial notice. Barron v. Reich, 13

F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial

notice of facts “not subject to reasonable dispute” because they

are 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. 

Defendant requests that the court take judicial notice

of a number of publically recorded instruments relating to

plaintiff’s mortgage and the P&A Agreement between defendant and

the FDIC. (See Docket No. 22.) The court will take judicial

notice of the mortgage documents, since they are matters of

public record whose accuracy cannot be questioned. See Lee v.

City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). The

court will also take judicial notice of the P&A Agreement because

it is a governmental source whose accuracy cannot be questioned. 

See Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375

F.3d 861, 866 n.1 (9th Cir. 2004) (taking judicial notice of

agreements to which the government was a party). 

A. Liability Under the P&A Agreement

Defendant contends that it cannot be liable for

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plaintiff’s claims because liability for claims related to

Washington Mutual’s lending practices remained with the FDIC when

defendant purchased Washington Mutual’s assets. (See Def.’s

Supp. Brief (Docket No. 31) at 2:10-21.)2

Under the Federal Deposit Insurance Act, 12 U.S.C. §§

1811-1832(d), the FDIC may accept appointment as a receiver for

any closed insured depository institution. 12 U.S.C. § 1821(c). 

As receiver, the FDIC succeeds to “all rights, titles powers and

privileges of the insured depository institution” and may “take

over the assets of and operate” the bank. Id. §§

1821(d)(2)(A)(i), (B)(i). When appointed as receiver, “the FDIC

. . . ‘steps into the shoes’ of the failed [financial

institution]” and operates as its successor. O’Melveny & Myers

v. FDIC, 512 U.S. 79, 86 (1994). The FDIC may transfer the

failed bank’s assets to another bank, separate the failed bank’s

assets from liabilities, or retain these liabilities through a

P&A Agreement. See, e.g., W. Park Assocs. v. Butterfield Sav. &

Loan Ass’n, 60 F.3d 1452, 1458-59 (9th Cir. 1995); Kennedy v.

Mainland Sav. Ass’n, 41 F.3d 986, 990-91 (5th Cir. 1994); Payne

v. Sec. Sav. & Loan Ass’n, 924 F.2d 109, 111 (7th Cir. 1991). No

liability is transferred from a closed bank to an assuming bank

without an express transfer of liability. See Kennedy, 41 F.3d

at 990-91; Payne, 924 F.2d at 111; Vernon v. Resolution Trust

Corp., 907 F.2d 1101, 1109 (11th Cir. 1990); Village of Oakwood

2 The court requested supplemental briefing from the

parties on whether defendant is the proper successor-in-interest

to plaintiff’s claims against Washington Mutual under the P&A

Agreement at the January 19, 2010 hearing on defendant’s motion

to dismiss. (See Docket No. 20.)

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v. State Bank & Trust Co., 519 F. Supp. 2d 730, 739 (N.D. Ohio

2007), aff’d 539 F.3d 373 (6th Cir. 2008).

On September 25, 2008, approximately two weeks after

plaintiff sent a QWR to Washington Mutual, the Office of Thrift

Supervision (“OTS”) closed Washington Mutual and appointed the

FDIC as receiver for the bank. (See Def.’s Req. for Judicial

Notice Ex. 7.) On the same day the FDIC and Chase signed a P&A

Agreement, which allocated Washington Mutual’s assets and

liabilities among the FDIC in its corporate capacity, the FDIC

acting as receiver for Washington Mutual, and Chase. (Id.) In

the P&A Agreement, Chase explicitly did not assume any liability

related to “borrower claims.” (Id. § 2.5.) Specifically,

section 2.5 of the P&A Agreement states:

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 . . . 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 [Chase].

(Id.)

In Williams v. FDIC, No. Civ. 2:07-2418 WBS GGH, on

limited remand from the Ninth Circuit, this court was asked to

determine whether the FDIC or defendant was the appropriate

successor-in-interest to claims against Washington Mutual for its

credit card business practices under the same P&A Agreement

presently before the court. The court found that the Williams

plaintiff’s claims were “borrower claims” within the meaning of

section 2.5 of the P&A Agreement because they were related to

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related to a “commitment to lend” by Washington Mutual, therefore

leaving liability for the claims with the FDIC. Williams, No.

Civ. 2:07-2418 WBS GGH, 2009 WL 5199237, at *6 (E.D. Cal. Dec.

23, 2009); see also Yeomalakis v. FDIC, 562 F.3d 56, 60 (1st Cir.

2009). 

A number of other district courts have held that the

FDIC retained liability for claims relating to mortgage loans

held by Washington Mutual before September 25, 2008 under the P&A

Agreement. See, e.g., Biggins v. Wells Fargo & Co., No. Civ. 09-

01272-JSW, 2009 WL 2246199, at *12 (N.D. Cal. July 27, 2009);

Grealish v. Wash. Mut. Bank FA, No. Civ. 08-763-TS, 2009 WL

2170044, at *1 (D. Utah July 20, 2009); Cassese v. Wash. Mut.,

Inc., No. Civ. 05-2724-ADS-ARL, 2008 WL 7022845, at *3 (E.D.N.Y.

Dec. 22, 2008). Under the terms of the P&A Agreement, defendant

clearly and explicitly did not assume any liability for claims

related to loans purchased by Washington Mutual from third

parties or claims arising in connection with Washington Mutual’s

lending activities. (See Def.’s Req. Judicial Notice Ex. 7 §

2.5.) Liability for claims related to conduct at the inception

of plaintiff’s loan, which was issued by Long Beach Mortgage

Company before being purchased by Washington Mutual, therefore

would seem fall within this category.

However, plaintiff contends that unlike in Williams,

defendant is liable for her claims because she alleges that

Washington Mutual may have only purchased servicing rights to her

loan from Long Beach. Plaintiff argues if this were the case

section 2.5 of the P&A Agreement would be inapplicable, since

borrower claims relate to loans “which is or was held by

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[Washington Mutual].” (See Pl.’s Supp. Brief 6:3-18; Def.’s Req.

Judicial Notice Ex. 7 § 2.5.) Instead, her claims against

defendant would be allowed to proceed under section 2.1 of the

P&A Agreement, which appears in the section governing

liabilities. In section 2.1 defendant agreed to assume

liabilities relating to “all mortgage servicing rights and

obligations of [Washington Mutual].” (Def.’s Req. Judicial

Notice Ex. 7 § 2.1.) The plain language of the P&A Agreement

indicates that defendant explicitly agreed to assume liabilities

related to Washington Mutual’s mortgage servicing business,

unlike borrower claims. (Id.)

Accordingly, if Washington Mutual only purchased

servicing rights to plaintiff’s loan defendant can be liable for

claims arising out of Washington Mutual’s servicing obligations. 

See Allen v. United Fin. Mortg. Corp., 660 F. Supp. 2d 1089, 1096

fn.7 (N.D. Cal. 2009); Biggins, 2009 WL 2246199, at *12; Punzalan

v. FDIC, 633 F. Supp. 2d 406, 414 (W.D. Tex. 2009) (“Chase Bank

purchased Washington Mutual on the condition that FDIC remain

responsible for any ‘Borrower Claims’ . . . ‘in connection with

Washington Mutual’s lending or loan purchase activities.’ In

exchange . . . Chase Bank promised to assume responsibility for

all other liabilities, specifically including ‘all mortgage

servicing rights and obligations of Washington Mutual.’”

(citations omitted)). If, however, Washington Mutual purchased

the beneficial interest in plaintiff’s loan, defendant may be

considered the holder of the loan under section 2.5 of the P&A

Agreement. In that case, plaintiff’s claims arising out of

conduct by Washington Mutual or Long Beach would be borrower

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claims like the claims in Williams because defendant cannot be

liable for any claims arising out of loans originated from or

held by Washington Mutual prior to the P&A Agreement. See

Williams, 2009 WL 5199237, at *6. 

At the motion to dismiss stage, the court does not have

evidence before it to determine whether defendant owned servicing

rights or the beneficial interest in plaintiff’s loan. Plaintiff

is entitled to alternative pleading under Federal Rule of Civil

Procedure 8(d) and can therefore plead that defendant is either

the servicer, or alternatively, the beneficiary of her loan. See

Cabalo v. EMC Mortg. Corp., No. C-08-5667 MMC, 2009 U.S. Dist.

LEXIS 8283, at *6 (N.D. Cal. Feb. 5, 2009). Insofar as

plaintiff’s TILA claim relies on the allegation that defendant

was an assignee of the beneficial interest of her loan, it is a

borrower claim covered by the P&A Agreement. See infra II.B.2.a. 

At this stage of the proceedings, however, the court cannot

dismiss all of plaintiff’s claims as borrower claims, since

plaintiff has alternatively alleged that defendant solely

serviced her loan. 

Furthermore, unlike in Williams, plaintiff has also

pled independent conduct by defendant after its purchase of

Washington Mutual. All of plaintiff’s claims, besides her TILA

claim, relate to actions taken by defendant after the execution

of the P&A Agreement. This conduct is independently actionable,

as the P&A Agreement only covers liability for actions taken by

Washington Mutual in relation to its lending activities, not

future conduct by defendant. See Williams, 2009 WL 5199237, at

*5; Schulken v. Wash. Mut. Bank, No. C 09-02708 JW, 2009 WL

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4173525, at *4 (N.D. Cal. Nov. 19, 2009). Accordingly, the court

cannot grant defendant’s motion to dismiss on the sole ground

that defendant did not assume liability for plaintiff’s claims.

B. ECOA and FHA Claims

Plaintiff’s first cause of action purports to state a

claim for violations of the ECOA and FHA. The ECOA prohibits a

creditor from discriminating against an applicant for credit “on

the basis of race, color, religion, national origin, sex or

marital status, or age.” 15 U.S.C. § 1681(a)(1). While the

Ninth Circuit has not yet articulated a standard for EOCA

discrimination claims, other circuits use a multi-element test to

determine whether a plaintiff has properly plead a claim for

discrimination under the EOCA. Under this test, plaintiff must

allege that: (1) she is a member of a protected class; (2) she

applied for credit with defendants; (3) she qualified for credit;

and (4) she was denied credit despite being qualified. Chiang v.

Veneman, 385 F.3d 256, 259 (3rd Cir. 2004).

Plaintiff alleges she was discriminated against on the

basis of her marital status when she was required to sign the

Deed of Trust to prefect Long Beach’s security interest in her

home because she jointly owned the property with her husband. 

While the EOCA has been held to prohibit a lender from requiring

a spouse to join in the loan of another spouse unless the latter

does not meet credit requirements of the Act, § 1691d(a) of the

EOCA specifically provides that “[a] request for the signature of

both parties to a marriage for the purpose of creating a valid

lien . . . shall not constitute discrimination under this

subchapter.” 15 U.S.C. § 1691d(a); see also In re McMullan, 196

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B.R. 818, 832 (W.D. Ark. 1996). Accordingly, the allegation that

plaintiff was forced to sign a security instrument to make Long

Beach’s lien on her jointly-owned property valid does not

constitute a violation of the ECOA.

The FHA makes it unlawful “for any person or entity

whose business includes engaging in residential real estaterelated transactions to discriminate against any person in making

available such a transaction, or in the terms or conditions of

such a transaction because of race, color, religion, sex,

handicap, familial status, or national origin.” 42 U.S.C. §

3605(a). The SAC only makes one reference to the FHA, simply

alleging that the FHA prevents discrimination on the basis of

familial status without so much as identifying what acts

defendant took to discriminate against her under the statute. 

(See SAC ¶ 37.) Such vague and conclusory allegations are

insufficient to survive a motion to dismiss, and accordingly the

court will grant defendant’s motion to dismiss plaintiff’s claim

for violations of the ECOA and FHA. See Iqbal, 129 S. Ct. at

1949. 

C. TILA Claims

Plaintiff alleges that defendant violated TILA when it

failed to rescind her loan after she indicated that Long Beach

allegedly did not provide an adequate number of Notice of Right

to Cancel documents to her at closing and later requested her to

back date the Notice of Right to Cancel. (SAC ¶¶ 57-58.) The

SAC additionally alleges that defendant violated § 1641 of TILA

when it did not respond to her request for the name, address, and

telephone number of the holder of the promissory note. (Id. ¶

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52.) Plaintiff requests both rescission of the loan and damages

as the result of these alleged violations.

1. Standing

The SAC continually alleges that plaintiff’s deceased

husband was the sole borrower of the loan, that plaintiff did not

receive any loan proceeds, and that she only signed the Deed of

Trust to “perfect the security instrument.” Assuming that

plaintiff’s allegations are true, plaintiff has no standing to

request rescission or damages under TILA because she was not a

party to the loan contract and therefore is not an “obligor” or

“consumer” with the right to rescind under TILA. See Johnson v.

First Fed. Bank of Cal., Nos. C 08-01796 PVT, C 08-00264 PVT,

2008 WL 2705090, at *5 (N.D. Cal. Jul. 8, 2008) (holding a party

who was not named in the loan papers was not a “consumer” under

TILA and therefore had no standing to bring a TILA claim). 

Plaintiff has cited no authority for the proposition that she can

simultaneously not be a party to the loan and sue defendant under

TILA. Accordingly, the court must grant defendant’s motion to

dismiss plaintiff’s TILA claim. 

2. Timeliness of Rescission Claim

Even if plaintiff were to have standing to bring her

TILA claim, her rescission claim is untimely. In a consumer

credit transaction where the creditor acquires a security

interest in the borrower’s principal dwelling, TILA provides the

borrower with “a three-day cooling-off period within which [he or

she] may, for any reason or for no reason, rescind” the

transaction. McKenna v. First Horizon Home Loan Corp., 475 F.3d

418, 421 (1st Cir. 2007) (citing 15 U.S.C. § 1635). A creditor

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must “clearly and conspicuously disclose” this right to the

borrower along with “appropriate forms for the [borrower] to

exercise his right to rescind.” 15 U.S.C. 1635(a).

If a creditor fails to provide the borrower with the

required notice of the right to rescind, the borrower has three

years from the date of consummation to rescind the transaction. 

Id. § 1635(f); 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.”). The borrower’s right

to rescind, moreover, applies equally against the original

creditor and subsequent assignees. 15 U.S.C. § 1641(c); see

Boles v. Merscorp, Inc., No. 08-1989, 2008 WL 5225866, at *3

(C.D. Cal. Dec. 12, 2008) (“Where the loan has been assigned, the

borrower still maintains the right to ‘rescind against an

assignee to the full extent it would be able to rescind against

the original creditor.’” (quoting Rowland v. Novus Fin. Corp.,

949 F. Supp. 1447, 1458 (D. Haw. 1996))).

To exercise the right to rescind, a borrower must

“notify the creditor of the rescission by mail, telegram or other

means of written communication.” 12 C.F.R. § 226.23(a)(2). 

Notice is deemed effective “when mailed, when filed for

telegraphic transmission or, if sent by other means, when

delivered to the creditor’s designated place of business.” Id.

If a creditor then refuses to cancel the loan, the borrower has

one year from the refusal to file suit for damages pursuant to 15

U.S.C. § 1640. Miguel v. Country Funding Corp., 309 F.3d 1161,

1165 (9th Cir. 2002) (citing 15 U.S.C. § 1640(e)). However, if

the borrower files his or her suit over three years from the date

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of a loan’s consummation, a court is powerless to grant

rescission. Id. at 1164 (“[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)); accord Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412,

(1998) (“[Section] 1635(f) completely extinguishes the right of

rescission at the end of the 3-year period.”); see also 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 15 U.S.C. §

1640(a); Belini v. Wash. Mut. Bank, FA, 412 F.3d 17 (1st Cir.

2005)).

As alleged, plaintiff provided defendant with a valid

notice of rescission within the requisite time period under 15

U.S.C. § 1635(f) and defendant refused to comply. Therefore,

plaintiff could bring a claim for damages pursuant to 15 U.S.C. §

1640. See Buick v. World Sav. Bank, 637 F. Supp. 2d 765, 771-72

(E.D. Cal. 2008) (England, J.) (citing Belini v. Wash. Mut. Bank,

FA, 412 F.3d 17, 25 (1st Cir. 2005)). However, because plaintiff

filed her Complaint over three years from the date on which she

consummated her loan, the court is without jurisdiction to

consider her claim for rescission under TILA. Miguel, 309 F.3d

at 1164. Accordingly, plaintiff’s rescission claim is time

barred and the court must grant defendant’s motion to dismiss

this claim.

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3. Tender

Moreover, plaintiff’s rescission claim fails because

she has not demonstrated an ability to tender payment of the net

proceeds she received from the loan. The Ninth Circuit has held

that rescission under TILA “should be conditioned on repayment of

the amounts advanced by the lender.” Yamamoto v. Bank of N.Y.,

329 F. 3d 1167, 1170 (9th Cir. 2003) (emphasis in original). 

District courts in this circuit have dismissed rescission claims

under TILA at the pleading stage based upon the plaintiff’s

failure to allege an ability to tender loan proceeds. See, e.g.,

Garza v. Am. Home Mortgage, 2009 U.S. Dist. LEXIS 7448, at *15

(E.D. Cal. Jan. 27, 2009) (stating that “rescission is an empty

remedy without [the borrower’s] ability to pay back what she has

received”); Ibarra v. Plaza Home Mortgage, 2009 U.S. Dist. LEXIS

80581, at *22 (S.D. Cal. Sept. 4, 1009); Carnero v. Weaver, 2009

U.S. Dist. LEXIS 62665, at *8 (N.D. Cal. July 20, 2009); Pesayco

v. World Sav., Inc., 2009 U.S. Dist. LEXIS 73299, at *4 (C.D.

Cal. July 29, 2009); Ing Bank v. Korn, 2009 U.S. Dist. LEXIS

73329, at *7 (W.D. Wash. May 22, 2009). Plaintiff has not

alleged any facts indicating that she is able to tender

sufficient funds to repay the loan principal. Without such

facts, plaintiff cannot receive the equitable remedy of

rescission. 

4. Damages Claim

a. Timeliness of Damages Claim

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). Defendant argues that plaintiff’s claim for damages

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under TILA is foreclosed by the statute of limitations because it

was filed more than one year after the alleged TILA violations. 

While plaintiff filed her claim for damages more than a year

after the closing of her loan, the failure to honor plaintiff’s

rescission and disclosure requests are distinct actionable

violations. See Buick, 637 F. Supp. 2d at 771-72 (citing In re

Wright, 133 B.R. 704 (E.D. Pa. 1991) (“The failure of a lender to

properly act on a rescission is a new violation separate and

distinct from the disclosure violation that gave rise to the

right to rescind.”)). As plaintiff filed this action less than a

year after her initial request for rescission and information

about her loan in accordance with 15 U.S.C. § 1641(f)(2), her

damages action is timely. See Miguel, 309 F.3d at 1164; Buick,

637 F. Supp. 2d at 772.

b. Sufficiency of Damages Claim

“Civil liability under TILA applies to creditors.”

Pelayo v. Home Capital Funding, No. 08-CV-2030 IEG (POR), 2009

U.S. Dist. LEXIS 44453, at *12 (S.D. Cal. May 22, 2009). “15

U.S.C. § 1641 provides that any TILA action (including a

rescission claim) which may be brought against a creditor may

also be brought against the assignee of a creditor. However,

under § 1641, loan servicers ‘shall not be treated as an assignee

of [a consumer] obligation for purposes of this section unless

the servicer is or was the owner of the obligation.’” Id.

(emphasis in original); see also Marks v. Ocwen Loan Servicing,

2008 U.S. Dist. LEXIS 12175, at *4-5 (N.D. Cal. Feb. 6, 2008)

(noting that “although TILA provides that assignees of a loan may

be liable for TILA violations, loan servicers are not liable

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under TILA as assignees unless the loan servicer owned the loan

obligation at some point”).

Plaintiff alleges that she “believes that [defendant]

was merely acting as a servicing agent” of her loan but that

defendant’s “true role is unknown and they could be a servicing

agent, lender, or have an interest in the subject loan and are

intentionally keeping their true role a mystery . . . .” (FAC ¶

37.) While it is unclear whether defendant was in fact an

assignee of plaintiff’s loan, construing the facts and all

reasonable inferences in favor of plaintiff, it plausible that

defendant was an assignee of the creditor of the loan outside of

servicing obligations.3

 See Pelayo, 2009 U.S. Dist. LEXIS 44453

at *13; see also Cabalo, 2009 U.S. Dist. LEXIS 8283, at *6

(finding the plaintiff sufficiently pled that defendant mortgage

servicer was liable under TILA under circumstances where “it

[was] not clear who the loan’s holder [was]” and “documents

submitted by defendants [did] not show [an assignment of the

loan] was never made”).

However, as previously noted, if defendant is in fact

an assignee of plaintiff’s creditor, it cannot be liable for

plaintiff’s TILA claim, as such a claim would be a borrower claim

under section 2.5 of the P&A Agreement. See supra II. A. If

defendant is a servicer, it still cannot be liable for the TILA

claim because servicers cannot be liable for damages under TILA. 

In either scenario, plaintiff’s TILA claim must fail and

3 As previously mentioned, the allegation the defendant

is a servicer and/or creditor under TILA is permissible because

alternative allegations are permitted under Federal Rule of Civil

Procedure 8(d).

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accordingly the court will grant defendant’s motion to dismiss

this claim.

D. Real Estate Settlement Procedures Act

 RESPA provides that borrowers must be provided certain

disclosures relating to the mortgage loan settlement process. 

See 12 U.S.C. § 2601. Section 2605 of RESPA relates to the

disclosures and communications required regarding the servicing

of mortgage loans, and provides that loan servicers have a duty

to respond to QWRs from borrowers asking for information relating

to the servicing of their loan. 12 U.S.C. § 2605(e). Under

RESPA lenders of federally related mortgage loans must disclose

whether servicing of a loan may be assigned, sold or transferred

to loan applicants. 12 U.S.C. § 2605(a). Additionally,

borrowers may send QWRs under RESPA to loan servicers for

information relating to the servicing of their loan. 12 U.S.C. §

26055(e)(1). Loan servicers have 60 days after the receipt of a

QWR to respond to the borrower inquiry. 12 U.S.C. § 2605(e)(2). 

Plaintiff alleges that she sent defendant a QWR to

defendant on September 10, 2008, and that defendant never

responded in violation of RESPA. Plaintiff’s RESPA claim must

fail because she explicitly alleges that she was “not a borrower

of the loan.” (SAC ¶ 62.) Under RESPA, a servicer only has the

duty to respond to QWRs sent “from the borrower,” and accordingly

defendant was under no obligation to respond to plaintiff’s QWR. 

See 12 U.S.C. § 2605(e)(1)(A). Accordingly, plaintiff cannot

recover for defendant’s failure to respond to her improper QWR. 

Additionally, a plaintiff must also allege actual harm

to survive a motion to dismiss of a RESPA claim. Section 2605(f)

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imposes liability on servicers that violate RESPA and fail to

make the required disclosures. 12 U.S.C. § 2605(f). Although

this section does not explicitly make a showing of damages part

of the pleading standard, “a number of courts have read the

statute as requiring a showing of pecuniary damages in order to

state a claim.” Allen v. United Financial Mortg. Corp., 2009 WL

2984170, at *5 (N.D. Cal. Sept. 15, 2009). For example, in

Hutchinson v. Del. Sav. Bank FSB, the court stated that “alleging

a breach of RESPA duties alone does not state a claim under

RESPA. Plaintiff must, at a minimum, also allege that the breach

resulted in actual damages.” 410 F. Supp. 2d 374, 383 (D.N.J.

2006). 

This pleading requirement has the effect of limiting

the cause of action to circumstances in which plaintiffs can show

that a failure to respond or give notice has caused them actual

harm. See Singh v. Wash. Mut. Bank, No. 09-2771, 2009 U.S. Dist.

LEXIS 73315, *16, 2009 WL 2588885 (N.D. Cal. Aug. 19, 2009)

(dismissing RESPA claim because, “[i]n particular, plaintiffs

have failed to allege any facts in support of their conclusory

allegation that as a result of defendants’ failure to respond,

defendants are liable for actual damages, costs, and attorney

fees”) (quotation marks and citation omitted). Courts, however,

“have interpreted this requirement liberally.” Yulaeva v.

Greenpoint Mortg. Funding, Inc., No. 09-1504, 2009 WL 2990393, at

*15, (E.D. Cal. Sept. 9, 2009) (Karlton, J.). For example, in

Hutchinson, plaintiffs were able to plead such a loss by claiming

that they had suffered negative credit ratings as a result of

violations of RESPA, 410 F. Supp. 2d at 383, and in Yulaeva,

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plaintiffs pled pecuniary loss by alleging that they were

“required to pay a referral fee that was prohibited under RESPA.” 

No. 09-1504, 2009 WL 2990393, at *15. 

Plaintiff has not offered any facts to support that

defendant’s failure to respond to her QWR resulted in pecuniary

damages. The closest plaintiff gets to alleging any harm is

stating that she “has been harmed because she is unable to name

the real party in interest to this suit . . . .” (SAC ¶ 105.) 

It is unclear how or even if this resulted in any pecuniary

losses by plaintiff. Even under a liberal pleading standard for

harm, plaintiff’s pleading fails. Accordingly, the court must

grant defendant’s motion to dismiss this claim.

E. California Rosenthal Fair Debt Collection Practices Act

Plaintiff’s third cause of action alleges that

defendant violated the RFDCPA. The RFDCPA prohibits a host of

unfair and oppressive methods of collecting debt, but to be

liable under the RFDCPA a defendant must fall under its

definition of “debt collector.” Izenberg v. ETS Svcs., LLC, 589

F. Supp. 2d 1193, 1199 (C.D. Cal. 2008). A “debt collector”

under the RFDCPA is “any person who, in the ordinary course of

business, regularly, on behalf of himself or herself or others,

engages in debt collection.” Cal. Civ. Code § 1788.2(c) (2008). 

Foreclosure pursuant to a deed of trust does not

constitute debt collection under the RFDCPA. See Izenberg, 589

F. Supp. 2d at 1199; see also Rosal, 2009 WL 2136777, at *18

(dismissing RFDCPA claim as to all defendants in foreclosure

case); Ricon v. Recontrust Co., No. 09-937, 2009 WL 2407396, at

*4 (S.D. Cal. Aug. 4, 2009) (dismissing with prejudice

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plaintiff’s unfair debt collection claims in foreclosure case);

Pittman v. Barclays Capital Real Estate, Inc., No. 09-0241, 2009

WL 1108889, at *3 (S.D. Cal. Apr. 24, 2009) (dismissing with

prejudice plaintiff’s Rosenthal Act claim in foreclosure case

because a “residential mortgage loan does not qualify as a ‘debt’

under the statute”); Gallegos v. Recontrust Co., No. 08-2245,

2009 WL 215406, at *3 (S.D. Cal. Jan. 28, 2009) (dismissing

RFDCPA claim in foreclosure case). Since residential mortgage

loans do not fall within the RFDCPA and plaintiff has not

specifically identified any debt collection actions of defendants

that fall outside the normal foreclosure process, the court must

grant defendant’s motion to dismiss plaintiff’s cause of action

for violations of the RFDCPA.

F. Slander of Credit

Plaintiff’s seventh cause of action purports to state a

claim for “slander of credit” at common law. Plaintiff alleges

that defendant “caused to be published with various credit

reporting agencies false statements regarding the [p]laintiff’s

creditworthiness without informing [sic] that such claims were

disputed.” (SAC ¶ 160.)

Plaintiff’s slander of credit claim is preempted by the

Federal Fair Credit and Reporting Act (“FCRA”), 15 U.S.C. §§ 1681

et seq., because it is entirely based on credit reporting. The

FCRA provides:

No requirement or prohibition may be imposed under the

laws of any state

(1) With respect to any matter regulated under . . . (F) Section 623 [15 U.S.C. § 1681s-2],

relating to the responsibilities of persons

who furnish information to consumer reporting

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agencies . . . .

15 U.S.C. § 1681t(b). The FCRA thus preempts all matters

regulated by § 1681s-2, which establishes the duties of

furnishers of credit information and obliges them to provide

accurate information to credit reporting agencies. See 15 U.S.C.

§ 1681s-2; Townsend v. Chase Bank USA, N.A., No. CV 08-00527 AG

(Anx), 2009 WL 426393, at *3 (C.D. Cal. Feb. 15, 2009). Federal

courts in California have consistently held that the FCRA

preempts statutory and common law claims against furnishers of

credit information for failing to properly investigate and report

allegedly erroneous information. See Howard v. Blue Ridge Bank,

371 F. Supp. 2d 1139 (N.D. Cal. 2005); Roybal v. Equifax, 405 F.

Supp. 2d 1177, 1181 (E.D. Cal. 2005); Davis v. Maryland Bank,

N.A., No. C 00-04191, 2002 U.S. Dist. LEXIS 26468 (N.D. Cal.

2002). As plaintiff’s claim is preempted under the FCRA,

defendant’s motion to dismiss the slander of credit claim must be

granted.

G. Intentional and Negligent Infliction of Emotional

Distress

The elements for the tort of intentional infliction of

emotional distress are “(1) extreme and outrageous conduct by the

defendant with the intention of causing, or reckless disregard of

the probability of causing, emotional distress; (2) the

plaintiff’s suffering severe or extreme emotional distress; and

(3) actual and proximate causation of the emotional distress by

the defendant’s outrageous conduct . . . . Conduct to be

outrageous must be so extreme as to exceed all bounds of that

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usually tolerated in a civilized community.” Christensen v. Sup.

Court, 54 Cal.3d 868, 904 (1991) (internal quotations and

citations omitted); see also Cook v. Lindsay Olive Growers, 911

F.2d 233, 239 (9th Cir. 1990). For emotional distress to be

severe, it must be “of such substantial quantity or enduring

quality that no reasonable man in a civilized society should be

expected to endure it.” Fletcher v. Western Nat’l Life Ins. Co.,

10 Cal. App. 3d 376, 397 (1970).

“In the context of debt collection, courts have

recognized that the attempted collection of a debt by its very

nature often causes the debtor to suffer emotional distress.”

Ross v. Creel Printing & Publ’g Co., 100 Cal. App. 4th 736, 745,

(2002) (citing Bundren v. Sup. Court, 145 Cal. App. 3d 784, 789,

(1983)). Plaintiff has failed to allege anything beyond normal

debt collection practices that would rise to the level of

“extreme and outrageous” conduct necessary to state a claim for

intentional infliction of emotional distress. See Pineda v.

Reyes, No. 09-1938, 2009 U.S. Dist. LEXIS 96853, *26-28 (S.D.

Cal. Oct. 20, 2009) (dismissing intentional infliction of

emotional distress claim in wrongful foreclosure suit); Coyotzi

v. Countrywide Fin. Corp., No. CV 09-1036 LJO SMS, 2009 U.S.

Dist. LEXIS 91084, at *27 (E.D. Cal. Sept. 16, 2009) (same). As

plaintiff has failed to allege any actions by defendants outside

of the normal debt collection process, the court will grant

defendant’s motion to dismiss plaintiff’s cause of action for

intentional infliction of emotional distress.

H. California’s UCL

California’s UCL, prohibits “any unlawful, unfair, or

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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). 

To have standing to bring a claim under the UCL, a

plaintiff must have “suffered injury in fact and ha[ve] lost

money or property as a result of unfair competition.” Cal. Bus.

& Prof. Code § 17204.Plaintiff’s UCL claim is inadequate because

it fails to plead that plaintiff has actually suffered injury and

lost money as the result of defendant’s alleged unfair

competition. Plaintiff does not identify any economic losses she

has suffered as the result of the practices identified in her UCL

cause of action. (See SAC ¶¶ 125-136.) Without sufficient

allegations of economic or property losses plaintiff has no

standing to bring suit under the UCL. See Californians For

Disability Rights v. Mervyn’s, LLC, 19 Cal.4th 223, 228 (2006).

Plaintiff’s UCL claim is also appears to be solely

based other statutory violations plead in the SAC. (See SAC ¶

130.) Other than listing her previous causes of action,

plaintiff identifies no specific practices of defendant that she

finds to be “unfair” or “deceptive.” 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,

she by necessity has failed to state a claim against defendant

under the UCL. Accordingly, the court must dismiss plaintiff’s

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UCL claim.

IT IS THEREFORE ORDERED that defendant’s motion to

dismiss be, and the same hereby is, GRANTED.

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: June 25, 2010

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