Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-01557/USCOURTS-casd-3_09-cv-01557-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ANTONIO ESCOBEDO, an individual,,

Plaintiff,

CASE NO. 09cv1557 BTM(BLM)

ORDER GRANTING IN PART AND

DENYING IN PART MOTION TO

DISMISS; ORDER DENYING

MOTION TO STRIKE PUNITIVE

DAMAGES ALLEGATIONS

v.

COUNTRYWIDE HOME LOANS, INC., a

corporation; and DOES 1 through 20

inclusive, 

Defendants.

Defendant Countrywide Home Loans, Inc. (“Defendant” or “Countrywide”), has filed

a motion to dismiss Plaintiff’s Complaint for failure to state a claim. For the reasons

discussed below, Defendant’s motion is GRANTED as to Plaintiff’s first cause of action for

breach of contract and second cause of action for declaratory relief. Defendant’s motion is

DENIED as to Plaintiff’s third, fourth, and fifth causes of action. Defendant has also filed a

motion to strike Plaintiff’s punitive damages allegations. Defendant’s motion to strike is

DENIED.

I. FACTUAL BACKGROUND 

In February 2007, Plaintiff took out a loan that was secured by his home. (Compl. ¶

15.) Plaintiff alleges that on a date unknown, Countrywide began acting as an agent for the

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beneficiary of the loan and became the servicer of the loan. (Compl. ¶ 17.) 

On April 17, 2009, Countrywide and Fannie Mae entered into a Servicer Participation

Agreement (“Agreement”) for the Home Affordable Modification Program under the

Emergency Economic Stabilization Act of 2008. (Ex. 1 to Compl.) The Agreement provided

that Countrywide shall perform the loan modification and other foreclosure prevention

services described in the Financial Instrument (attached to the Agreement) and the program

guidelines and procedures issued by the Treasury. 

Plaintiff alleges that when he attempted a modification of his loan, Countrywide would

not provide him with a modification. (Compl. ¶ 20.) Plaintiff also alleges that after he

stopped making payments, Countrywide began harassing him in an attempt to collect

payments on the loan. (Compl. ¶ 21.) 

Plaintiff asserts causes of action for: (1) breach of written contract; (2) declaratory

relief; (3) violation of California’s Rosenthal Fair Debt Collection Practices Act (“RFDCPA”),

Cal. Civ. Code §1788, et. seq.; (4) invasion of privacy; and (5) unfair business practices in

violation of Cal. Bus. & Prof. Code § 17200.

II. STANDARD

Under Fed. R. Civ. P. 8(a)(2), the plaintiff is required only to set forth a “short and plain

statement” of the claim showing that plaintiff is entitled to relief and giving the defendant fair

notice of what the claim is and the grounds upon which it rests. Conley v. Gibson, 355 U.S.

41, 47 (1957). A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should

be granted only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient

facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696,

699 (9th Cir. 1988). When reviewing a motion to dismiss, the allegations of material fact in

plaintiff’s complaint are taken as true and construed in the light most favorable to the plaintiff.

See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Although

detailed factual allegations are not required, factual allegations ”must be enough to raise a

right to relief above the speculative level.” Bell Atlantic v. Twombly, 550 U.S. 544, 555

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(2007). “A plaintiff’s obligation to prove the ‘grounds’ of his ‘entitle[ment] to relief’ requires

more than labels and conclusions, and a formulaic recitation of the elements of a cause of

action will not do.” Id.

III. DISCUSSION

A. Breach of Contract

Plaintiff attempts to sue on the Agreement as a third-party beneficiary. Countrywide

argues that Plaintiff lacks standing to sue because he is not an intended third-party

beneficiary. The Court agrees with Countrywide.

The Agreement is governed by and must be construed under federal law.

(Agreement, § 11A). In applying federal law regarding third-party beneficiaries, the Ninth

Circuit is guided by the Restatement of Contracts. See Klamath Water Users Protective

Ass’n v. Patterson, 204 F.3d 1206, 1210-11 (9th Cir. 2000). The Restatement on Contracts

explains:

(1) Unless otherwise agreed between promisor and promisee, a beneficiary of

a promise is an intended beneficiary if recognition of a right to performance in

the beneficiary is appropriate to effectuate the intention of the parties and . .

. (b) the circumstances indicate that the promisee intends to give the

beneficiary the benefit of the promised performance.

(2) An incidental beneficiary is a beneficiary who is not an intended beneficiary.

Restatement (Second) of Contracts § 302 (1979) (“Restatement”).

“To sue as a third-party beneficiary of a contract, the third party must show that the

contract reflects the express or implied intention of the parties to the contract to benefit the

third party.” Klamath, 204 F.3d at 1211. “One way to ascertain such intent is to ask whether

the beneficiary would be reasonable in relying on the promise as manifesting an intention to

confer a right on him or her.” Id. (citing Restatement § 302(1)(b) cmt. d.).

The Ninth circuit cautions, “Parties that benefit from a government contract are

generally assumed to be incidental beneficiaries, and may not enforce the contract absent

a clear intent to the contrary. See Restatement § 313(2). ‘Government contracts often

benefit the public, but individual members of the public are treated as incidental beneficiaries

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unless a different intention is manifested.’ Id. cmt. a.” Klamath, 204 F.3d at 1211.

In Klamath, the Ninth Circuit held that although a contract between the United States

and a dam operator operated to the irrigators’ benefit and was “undoubtedly entered into with

the irrigators in mind,” nothing in the contract evinced an intention of the parties to the

contract to grant the irrigators enforceable rights. Id. at 1211-12. The Ninth Circuit

explained, “[T]o allow them intended third-party beneficiary status would open the door to all

users receiving a benefit from the Project achieving similar status, a result not intended by

the Contract.” Id. at 1212.

As in Klamath, the Agreement was entered into in part for the benefit of qualified

borrowers and with these borrowers in mind. However, the language of the contract does

not show that the parties intended to grant qualified borrowers the right to enforce the

Agreement. Indeed, the Agreement specifies that it “shall inure to the benefit of . . . the

parties to the Agreement and their permitted successors-in-interest.” (Agreement, § 11.E.)

(emphasis added). 

A qualified borrower would not be reasonable in relying on the Agreement as

manifesting an intention to confer a right on him or her because the Agreement does not

require that Countrywide modify eligible loans. The Agreement sets forth Home Affordable

Modification Program Guidelines. The Guidelines set forth eligibility requirements and states:

“Participating servicers are required to consider all eligible loans under the program

guidelines unless prohibited by the rules of the applicable PSA and/or other investor

servicing agreements.” (Compl., Ex. 1 at 42) (emphasis added). The Agreement does not

state that Countrywide must modify all mortgages that meet the eligibility requirements.

Qualified borrowers are incidental beneficiaries of the Agreement and do not have

enforceable rights under the contract. Therefore, Plaintiff lacks standing to sue for an alleged

breach of the Agreement. Defendant’s motion is GRANTED as to this claim. 

B. Declaratory Relief

Defendant argues that Plaintiff’s declaratory relief claim is duplicative of the breach

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of contract claim. In his opposition, Plaintiff agrees to forgo this claim in favor of the breach

of contract claim. Therefore, the Court GRANTS Defendant’s motion as to this claim.

C. RFDCPA

Defendant argues that Plaintiff’s RFDCPA claim should be dismissed because Plaintiff

has failed to allege sufficient facts to support such a claim. The Court disagrees.

Although Plaintiff’s Complaint is not very detailed, it sufficiently alleges harassing

conduct that would violate Cal. Civ. Code §1788.11(d), (e) and § 1788.17 (by violating 15

U.S.C. § 1692b(2), (6)). Plaintiff alleges that Countrywide representatives continuously made

telephone calls to Plaintiff, contacting him at his workplace, home phone, and mobile phone.

(Compl. ¶¶ 21-23.) Plaintiff also alleges that although Countrywide was provided with the

name and phone number of Plaintiff’s attorney, Countrywide representatives continued to

contact and harass Plaintiff and also contacted Plaintiff’s employer. (Comp. ¶¶ 24-25.) 

In addition, Plaintiff alleges that Countrywide failed to give him the notice required by

Cal. Civ. Code § 1812.700. (Comp. ¶ 50(d)). There is little else that can be pled with respect

to a failure to give notice.

Plaintiff has alleged sufficient facts to support a claim under the RFDCPA. Therefore,

Defendant’s motion to dismiss is DENIED as to this claim.

D. Invasion of Privacy

Defendant seeks to dismiss Plaintiff’s invasion of privacy claim on the ground that

Plaintiff has not alleged facts establishing (1) a sufficiently serious invasion of his privacy

interest; and (2) damages. 

The essential elements of a claim for invasion of privacy are: (1) the defendant

intentionally intruded upon the solitude or seclusion, private affairs or concerns of the plaintiff;

(2) the intrusion was substantial, and of a kind that would be highly offensive to an ordinarily

reasonable person; and (3) the intrusion caused plaintiff to sustain injury, damage, loss or

harm. Cal. BAJI 7.20. 

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Repeated phone calls may rise to the level of an intrusion of privacy that supports a

cause of action. See Joseph v. J.J. MacIntyre Companies, LLC., 238 F. Supp. 2d 1158,

1169 (N. D. Cal. Dec. 12, 2002) (holding that given the number and pattern of telephone calls

alleged, there was a genuine issue of fact as to whether the plaintiff’s privacy was invaded).

As discussed above, Plaintiff has alleged facts regarding repeated and continuous calls to

his home, work, and cell phone in addition to telephone calls to his employer. These facts

support a plausible claim of a substantial invasion of privacy that would be offensive to a

reasonable person.

As for damages, Plaintiff alleges that as a result of the invasions of privacy, he “was

harmed and caused great mental and physical pain.” (Compl. ¶ 59.) This allegation is

sufficient to satisfy the element of damages. See Miller v. National Broadcasting Co., 187

Cal. App. 3d 1463, 1484-85 (1986) (explaining that where there is a wrongful invasion of

privacy, damages may be recovered for mental anguish alone).

Accordingly, Defendant’s motion to dismiss is DENIED as to Plaintiff’s invasion of

privacy claim.

E. Cal. Bus. & Prof. Code § 17200

Defendant argues that Plaintiff’s § 17200 claim fails because it is premised on

Plaintiff’s other claims, which fail to state a claim. However, Defendant’s motion was denied

as to Plaintiff’s RFDCPA and invasion of privacy claims. Therefore, Plaintiff has stated a §

17200 claim. 

F. Motion to Strike

Defendant moves to strike Plaintiff’s prayer for punitive damages and punitive damage

allegations on the ground that Plaintiff has failed to plead facts establishing that Defendant’s

acts were oppressive, fraudulent, or malicious and has failed to plead facts establishing that

Defendant, as a corporate employer, is liable for any acts of oppression, fraud or malice. 

However, under federal pleading requirements, malice and intent may be averred

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generally. Clark v. Allstate Ins. Co., 106 F. Supp. 2d 1016, 1020 (S. D. Cal. 2000). “[T]he

fact that California courts may impose a heightened pleading requirement on claims for

punitive damages is irrelevant, because such a requirement conflicts with federal procedural

law.” Robinson v. Managed Accounts Receivable Corp., __ F. Supp. 2d __, 2009 WL

2500571 (C.D. Cal. Aug. 4, 2009). Conclusory assertions of intentional and malicious

misconduct are sufficient to support a claim for punitive damages. Clark, 106 F. Supp. 2d

at 1020. 

Plaintiff alleges that Defendants “willfully and intentionally intruded into Plaintiff’s

solitude, seclusion and private affairs by repeatedly and unlawfully attempting to collect a

debt” and that Defendants “acted with oppression or malice.” (Compl. ¶¶ 57. 60.) These

allegations are sufficient under federal pleading standards. Therefore, Defendant’s motion

to strike is DENIED.

IV. CONCLUSION

For the reasons discussed above, Defendant’s motion to dismiss is GRANTED IN

PART and DENIED IN PART. Defendant’s motion is GRANTED as to Plaintiff’s first cause

of action for breach of contract and second cause of action for declaratory relief. 

Defendant’s motion is DENIED as to Plaintiff’s third, fourth, and fifth causes of action.

Defendant’s motion to strike Plaintiff’s punitive damages allegations is DENIED.

IT IS SO ORDERED.

DATED: December 15, 2009

Honorable Barry Ted Moskowitz

United States District Judge

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