Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_05-cv-01519/USCOURTS-caed-1_05-cv-01519-5/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 28:1441 Petition for Removal

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

ESTATE OF CAROL KLIGGE, )

 )

Plaintiff, )

)

v. )

)

FIDELITY MORTGAGE OF )

CALIFORNIA, et al. )

)

Defendants. )

)

____________________________________)

CIV F 05-1519 AWI DLB

ORDER ON MOTIONS TO

DISMISS BY FINANCIAL

ENTITY DEFENDANTS

PURSUANT TO F.R.C.P.

12(b)(6)

[Documents No. 42, 46, 49, 50,

and 52]

This is an action by the estate of Carol Kligge (“Plaintiff”) against a number of financial

institutions for the alleged failure of the institutions to adequately protect Carol Kligge’s

financial interests, against several individuals for fiduciary abuse of a disabled person, and

against certain healthcare business entities for failure to protect or properly supervise. Currently

before the court are motions to dismiss the First Amended Complaint by defendants Alliance

Title Company and their employee, Susan White, Union Bank of California, N.A., Greenpoint

Mortgage, Inc., Fidelity Mortgage of California, Inc., Mortgage Electronic Registration Systems,

Inc., and American Travel Related Services, Inc. (collectively, the “financial entity Defendants”). 

Plaintiff has filed no opposition to the motions to dismiss by the financial entity Defendants. For

the reasons that follow, the court will grant the motions to dismiss.

Federal question jurisdiction exists pursuant to 28 U.S.C., § 1331. Venue is proper in this

court.

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For reasons that are not clear from the complaint, Lyla Hall is not a defendant in

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this case. She is, however, alleged to be a central figure in the conspiracy.

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PROCEDURAL HISTORY AND FACTUAL BACKGROUND

This action was removed to this court from the Superior Court of Stanislaus County on

November 28, 2005. The removal was pursuant to 28 U.S.C., § 1441(b) (Federal Question). In

December of 2005 and January of 2006, several of the financial entity Defendants filed motions

to dismiss the complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. On

January 20, 2006, Plaintiffs filed their First Amended Complaint (“FAC”). The court denied as

moot the motions to dismiss that were pending at the time the FAC was filed. The financial

entity Defendants filed or re-filed their motions to dismiss between February 8, 2006 and

February 21, 2006. No opposition to the motions to dismiss was ever filed. Notices of failure to

oppose were filed by Defendants Alliance Title and American Express Travel Related Services.

The factual background of this case can be succinctly stated for purposes of the motions

now before the court. The FAC alleges that individual defendants Tammy Hall, Brittany Hall,

and Nora Padilla conspired with Lyla L.Hall , the live-in caretaker for decedent Carol Kligge 1

(“Kligge”), to fraudulently obtain power of attorney from Kligge and to use the power of attorney

to remove funds from Kligge’s bank account, to take possession of Kligge’s personal property,

use Kligge’s home to secure loan proceeds, and to use Kligge’s bank accounts to obtain credit

cards. The FAC alleges that two powers of attorney were executed by Lyla Hall; one of which

was notarized by individual defendant Charlotte D. Rupp, and the other was notarized by

individual defendant Sylvia E. Payan (hereinafter, the “Power(s) of Attorney”). Both Powers of

Attorney are alleged to have been executed and notarized without the participation of Kligge and

without adequate witness.

The FAC alleges that the healthcare entity defendants, Visiting Nurses Association of the

Central Valley and Carescope (aka Real Care) negligently supervised their employee Lyla Hall. 

Plaintiff’s fourth claim for relief alleges financial entity Defendants Fidelity Mortgage of

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California (“Fidelity”), Mortgage Electronic Registration Systems, Inc. (“MERS”) and

Greenpoint Mortgage, Inc. (“Greenpoint”) were negligent under the federal Real Estate

Settlement Procedures Act, 12 U.S.C., § 2601 et seq. (“RESPA”) and under the federal Truth In

Lending Act, 15 U.S.C. § 1601 et. seq. (“TILA”). The sixth and seventh claims for relief allege

negligence and breach of contract, respectively, against financial entity Defendant American

Express Travel Related Services (“American Express”), and the eighth claim for relief alleges

negligence against financial entity Defendant Union Bank of California (“UBC”).

The remaining motion to dismiss was filed by Alliance Title Company and their

employee Susan White. As Alliance Title’s memorandum in support of their motion to dismiss

points out, Susan White is mentioned in the list of defendants but no specific acts are alleged

against her. Alliance Title Company is not mentioned anywhere in the FAC.

LEGAL STANDARD

A complaint may be dismissed under Rule 12(b)(6) of the Federal Rules of Civil

Procedure if it appears beyond doubt that the plaintiff can prove no set of facts in support of the

claim that would entitle him to relief. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984) (citing

Conley v. Gibson, 355 U.S. 41, 45-46 (1957)); Balistreri v. Pacifica Police Department, 901 F.2d

696, 699 (9th Cir. 1990). A Rule 12(b)(6) dismissal can be based on the failure to allege a

cognizable legal theory or the failure to allege sufficient facts under a cognizable legal theory. 

Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.1984). In considering a

motion to dismiss, the court must accept as true the allegations of the complaint in question,

Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976), construe the pleading in

the light most favorable to the party opposing the motion, and resolve all doubts in the pleader's

favor. Jenkins v. McKeithen, 395 U.S. 411, 421, reh'g denied, 396 U.S. 869 (1969). In deciding

a Rule 12(b)(6) motion, courts do not "assume the truth of legal conclusions merely because they

are cast in the form of factual allegations." Western Mining Council v. Watt, 643 F.2d 618, 624

(9th Cir.1981). 

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DISCUSSION

The motions now before the court are the motions to dismiss by each of the financial

entity Defendants plus individually named defendant Susan White. Each of the motions will be

discussed briefly below.

I. Alliance Title Company and Susan White

Alliance Title and Susan White contend that the FAC fails to allege any acts by Susan

White that connect her to the alleged conspiracy, or to any duty to protect Kligge from the acts of

others. Alliance Title also contends the FAC fails to allege anything at all with respect to

Alliance Title. The court has examined the FAC and agrees with Alliance Title’s contentions. 

The FAC makes only a generalized statement to the effect that Susan White, in her role as notary,

is responsible in part for damages to Kligge. No specific acts by Susan White are alleged. There

are no allegations in the FAC at all that mention Alliance Title. “To survive a motion to dismiss

for failure to state a claim under Rule 12(b)(6), a complaint generally must satisfy only the

minimal notice pleading requirements of Rule 8(a)(2). Rule 8(a)(2) requires only that the

complaint include ‘a short and plain statement of the claim showing that the pleader is entitled to

relief.’ Fed. R. Civ. P. 8(a)(2).” Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The court

finds the minimal requirements of notice pleading have not been met as to Alliance Title or as to

Susan White. The FAC will therefore be dismissed as to these Defendants.

II. Union Bank of California

Plaintiff’s eighth claim for relief alleges UBC was negligent “when they permitted Lyla

Hall to open and maintain accounts in the name of Carol Kligge with a Power of Attorney that,

on its fact, should have raised concern in any banking transaction. Instead, Lyla Hall and

[individual] Defendants [Tammy] Hall and Brittany [Hall] were permitted easy access to Carol

Kligge’s money and proceeded to deplete her accounts.” FAC at 15:9. In addition, the FAC

generally alleges that UBC “had a fiduciary duty to Carol Kligge, who was a disabled

quadriplegic elderly person with Multiple Sclerosis, to make reasonable inquiry into the

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sufficiency of the power of attorney. UBC breached that duty in that they failed to note that the

Power of Attorney was questionable and failed to make reasonable inquiry into its origin. UBC

was negligent by allowing Lyla Hall and [individual] Defendants [Tammy] Hall and Brittany

[Hall] to disgorge funds from Carol Kligge’s bank account with UBC.” FAC at 10:27-11:5. 

As an initial matter, UBC contends Plaintiff has failed to state a claim upon for which

relief may be granted because Plaintiff failed to allege specifically that Kligge or Hall or anyone

else connected with the case had an account with UBC. The court agrees the claim against UBC

is poorly and ambiguously pled, but the court finds that the general allegation against UCB set

forth at paragraph 52 on p. 11 of the FAC is sufficient to provide notice that Kligge had a bank

account at UBC that the individual Defendants are alleged to have emptied. Whether the

individual Defendants had a separate bank account with UBC that received the funds taken from

Kligge’s account is not resolved by the FAC.

UBC further contends that, notwithstanding the adequacy or inadequacy of the pleading

against UBC, UBC had no fiduciary duty to Kligge as a result of any account she may have had

with the bank and UBC had a right to rely on the authenticity of Kligge’s signature that appeared

on the notarized Power of Attorney. On these points, UBC is correct.

As UBC points out, it is well established that the relationship between a bank and a

depositor is that of debtor and creditor, and that the obligations that arise between the parties are

those that arise as a result of their contractual relationship. Chazen v. Central Bank, 61

Cal.App.4th 532, 537 (1st Dist. 1998). No fiduciary relations ship arises as a result of the bankdepositor relationship and the bank has no duty to supervise account activity. Id. 

Although Plaintiff’s theory of UBC’s liability is not entirely clear from the FAC, it is

clear that the starting point of Plaintiff’s allegation of negligence is UBC’s willingness to accept

without further investigation the Power of Attorney that bore the “X” signature of Kligge and

was fraudulently notarized by either Rupp or Payan. UBC had no duty to investigate further. 

Subdivision (d) of section 1185 of the California Civil Code provides that “[a]n officer who has

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taken an acknowledgment pursuant to this section shall be presumed to have operated in

accordance with the provisions of law.” Where a third party relies on a notarial certificate that is

falsely obtained to the injury of a party, the “falseness of the certificate constitutes the proximate

cause of the injured party’s loss,” and no liability is allocated to the third party relying on the

certificate. Luttrell v. Columbia Cas. Co., 136 Cal.App. 513, 516 (1st Dist. 1934).

To the extent Plaintiff’s eighth claim for relief might be construed as alleging that UBC

had a duty to protect Kligge’s bank account from being emptied by Hall and her co-conspirators,

it well established that no such duty exists. 

Financial Code section 953 provides: “When the depositor of a commercial or

savings account has authorized any person to make withdrawals from the account,

the bank, in the absence of a written notice otherwise, may assume that any check,

receipt, or order of withdrawal drawn by such person in the authorized form or

manner, including checks drawn to his personal order and withdrawal orders

payable to him personally, was drawn for a purpose authorized by the depositor

and within the scope of the authority conferred upon such person.”

Chazen, 61 Cal.App.4th at 538. The reluctance of courts to allocate a duty to banks to

investigate the authenticity of withdrawals from bank accounts that are, on their face, authorized

is a reflection of the understanding that the imposition of such a duty would substantially impede

the flow of commerce. Kane v. Bank of America Nat’l Trust & Savings Ass’n, Inc. 67

Cal.App.4th 1192, 1199 (2nd Dist. 1998). 

In view of the well established absence of any fiduciary duty of banks to their depositors

or duty to act as monitors of the activities of those withdrawing or depositing funds, combined

with the well established right of UBC to rely on the notarization of Kligge’s forged “X” on the

Power of Attorney, the court must conclude the FAC fails to set forth any facts that could support

a claim against UBC upon which relief can be granted. Dismissal of the claim is therefore

warranted.

III. American Express Travel Related Services

American Express is a company that issues credit cards. The FAC alleges that Lyla Hall,

using a fraudulently obtained Power of Attorney opened a consumer credit account with

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American Express in the name of Carol Kligge and that American Express received funds that

were stolen from Kligge. Plaintiff’s sixth claim for relief alleges American Express was

negligent in allowing Lyla Hall to open the account without investigating the Power of Attorney

which bore indicia of inauthenticity. Plaintiff’s seventh claim for relief alleges American

Express breached its contract with Carol Kligge by failing to protect her from the fraud of Lyla

Hall and others.

The allegation that is central to Plaintiff’s claim of negligence is that American Express

had a duty to examine the Power of Attorney that was notarized by Rupp and bore Kligge’s “X”

signature. Plaintiff alleges that the fact the Power of Attorney was signed with an “X” and the

fact that the witness to the signature had the same last name as the attorney in fact should have

indicated to American Express that further investigation was warranted. Plaintiff’s negligence

claim must for fail for the reason discussed earlier; pursuant to Luttrell, American Express had

the right to rely on the certificate of acknowledgment that was affixed to the Power of Attorney. 

Here as well, the relationship between American Express and Kligge was that of debtor and

creditor and no fiduciary relationship was established. Chazen, 61 Cal.App.4th at 537. Neither

did American Express have a duty to monitor the source of funds into the account or the use of

the card by the person or persons authorized to do so by the Power of Attorney. 

Plaintiff’s breach of contract claim is based on alleged advertising by American Express

that promised “superior fraud protection to its customers.” The FAC does not cite the provisions

of a contract between American Express, nor does it allege the account was opened in reliance on

the promise of superior fraud protection. The FAC does not append or incorporate by reference

any contract. 

American Express correctly contends that generalized advertising claims, such as the

advertising claim cited by Plaintiff, do not create a contract between the advertiser and the

customer. Sinai Memorial Chapel v. Dudler, 231 Cal.App.3d 190, 198-199 (1st Dist. 1991). 

Simply put, the FAC implies American Express had a contractual obligation to prevent the

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opening of a credit account in Kligge’s name by use of a forged power of attorney, but the FAC

fails to specify the contractual terms that create such duty. The FAC also fails to set forth any

legal theory that would support the contention that American Express was bound by a contractual

duty as a result of their advertisement. 

The court has reviewed the copy of the “Agreement Between Rewards Plus Gold Card

Member and American Express Centurion Bank” (hereinafter the “Agreement”) that was

submitted as an exhibit to American Express’s motion to dismiss. The court notes the

Agreement sets forth a number of “Protection Plans” that cover such things as loss or damage to

purchases, damage arising from car rentals, loss of luggage, and the like. The court finds nothing

in the Agreement that could arguably be held to give rise to a duty on the part of American

Express to prevent the opening of an account in reliance on a forged or falsely certified power of

attorney. 

Because the FAC provides no basis for the existence of a duty on the part of American

Express to prevent or protect Kligge from the acts of others that resulted in financial harm to her,

dismissal of Plaintiff’s claims against American Express is appropriate.

IV. Greenpoint Mortgage, MERS, and Fidelity Mortgage

Plaintiff’s fourth claim for relief alleges “negligence under RESPA and TILA” against

Greenpoint and Fidelity, who were lending organizations that negotiated refinance loans with

Lyla Hall on behalf of Kligge using the allegedly forged or falsely certified Power of Attorney. 

The FAC does not specify the role of MERS as an actor in the claim for relief other than to state

that MERS “is a beneficiary of the security instrument fraudulently obtained from Plaintiff.”

FAC at ¶ 5. Plaintiff’s primary factual allegation with respect to each of these Defendants is that

they had a duty to investigate the authenticity of the Power of Attorney and thereby to prevent

harm to Kligge.

“RESPA is a consumer protection statute that regulates the real estate settlement process. 

Hardy v. Regions Mortgage, 2006 WL1452666 (11th Cir. 2006) at *2. It is a broad statute that is

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directed at many things that increase the cost of real estate transaction. Durr v. Intercounty Title

Co. of Illinois, 14 F.3d 1183, 1187 (7th Cir. 1994). “RESPA is the principle federal statute

regulating the activities of real estate brokers.” Beyer v. Heritage Realty, Inc., 251 F.3d 1155,

1158 (7th Cir. 2001). Among the issues address by RESPA are requirements for certain

disclosures to real estate loan applicants that the loan may be sold or transferred while the loan is

outstanding, RESPA, § 6, preparation of itemized escrow account statements, § 10, and

prohibitions against kickbacks to third parties for referral of real estate settlement business, § 8. 

The FAC provides no indication as to what provision of RESPA, if any, provides a cause of

action for negligent execution of a real estate refinance loan. As noted above, under notice

pleading, a plaintiff has the duty to allege a legal basis that would entitle him or her to relief. To

simply intone some particular statute is not sufficient; particularly where, as here, there is no

readily apparent provision in the statutory scheme that provides for recovery of damages for the

type of harm alleged. Defendants Greenpoint MERS and Fidelity contend, and this court agrees,

that the FAC fails to allege any facts that would entitle Plaintiff to recover damages under

RESPA, and Plaintiff has not opposed that contention. Dismissal is therefore appropriate.

Similarly, TILA is a consumer protection statute whose purpose is to “provide ‘the

informed use of credit’ by requiring ‘meaningful disclosure of credit terms’ to consumers.

[Citations.]” Virachack v. University Ford, 410 F.3d 579, 585 (9th Cir. 2005). “TILA focuses on

disclosure and does not serve as an umbrella statute for consumer protection in real estate

transactions.” Grimes v. New Century Mortgage Corp., 340 F.3d 1007, 1011 (9 Cir. 2003)

(McKeown, J. dissenting). Here, as with Plaintiff’s claim under RESPA, Plaintiff has merely

intoned the name of a federal statute and has failed in any way to connect the provisions of the

statute with the alleged acts of the Defendants in order to show that Plaintiff is entitled to relief.

To the extent Plaintiff’s fourth claim for relief can be understood as being based on a

theory of negligence, irrespective of the citation to TILA or RESPA, such a claim cannot be

supported by the facts of this case. As discussed above, the financial entity defendants each had

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no fiduciary duty to Kligge and they had a right to rely on the Power of Attorney notwithstanding

the fact it was falsely certified. Thus, all claims that allege negligence based on the entity

Defendant’s failure to discover the fraudulent nature of the Power of Attorney, including

Plaintiff’s fourth claim for relief, fail to allege facts that would entitle Plaintiff to recovery and

are subject to dismissal.

THEREFORE, in accordance with the foregoing discussion, it is HEREBY ORDERED

that the motions to dismiss the First Amended Complaint by defendants Alliance Title, Susan

White, Union Bank of California, American Express Travel Related Services, Greenpoint

Mortgage, Fidelity Mortgage, and MERS are each GRANTED.

IT IS SO ORDERED.

Dated: June 19, 2006 /s/ Anthony W. Ishii 

0m8i78 UNITED STATES DISTRICT JUDGE

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