Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-03516/USCOURTS-caed-2_09-cv-03516-0/pdf.json

Nature of Suit Code: 140
Nature of Suit: Negotiable Instruments
Cause of Action: 15:1601 Truth in Lending

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

OSTEN E. SAUGSTAD, JR,

 Plaintiff,

v.

AMERICAN HOME MORTGAGE 

SERVICING INC.; UMOC LENDING, 

INC.; OPTION ONE MORTGAGE 

CORPORATION; DANIEL BROWN 

MORTGAGE DBA UMOC LENDING, 

INC.; SONJA WINDIFRED GORMAN; 

and DOES 1 through 20, 

inclusive,

 Defendants.

______________________________/

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2:09-CV-03516-JAM-KJM

ORDER GRANTING DEFENDANT‟S

MOTION TO DISMISS

This matter comes before the Court on Defendant American 

Home Mortgage Servicing, Inc.‟s (“Defendant‟s”) Motion to 

Dismiss, (Doc. 14), Plaintiff Osten E. Saugstad, Jr.‟s

(“Plaintiff‟s”) First Amended Complaint (“FAC”) (Doc. 11). The 

motion to dismiss is brought pursuant to Federal Rule of Civil 

Procedure 12(b)(6), for failure to state a claim upon which 

relief can be granted. Plaintiff also moves the Court to strike 

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portions of the FAC, pursuant to Federal Rule of Civil Procedure 

12(f). Plaintiff opposes the motion. (Doc. 28).

1

I. FACTUAL AND PROCEDURAL BACKGROUND

On August 7, 2006, Plaintiff entered into a loan agreement

with UMOC Lending, Inc. (“UMOC”) to refinance property at 42140 

6

th Street, Knights Landing, California (“subject property”). 

This loan was secured by a Deed of Trust (“Deed”), recorded on

August 22, 2006. The Deed listed Premier Trust Deed Services, 

Inc. as Trustee and UMOC as Lender. Plaintiff alleges that he

did not receive copies of the loan documents, did not have an 

opportunity to review the documents, and did not receive an 

explanation as to the meaning of the documents at the time of 

closing. 

On August 22, 2006, defendant Option One Mortgage Corp. 

(“Option One”) prepared an Assignment of Deed of Trust

(“Assignment”) which transferred the beneficial interest in the 

Deed from UMOC to Option One. The Assignment was not recorded 

until May 14, 2007.

On or around June 16, 2008, Option One wrote a letter to 

Plaintiff notifying him that the servicing of his mortgage loan 

on the subject property was being transferred from Option One to 

 

1 This motion was determined to be suitable for decision without 

oral argument. E.D. Cal. L.R. 230(g).

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Defendant, American Home Mortgage Servicing, Inc. (“Defendant”).

Plaintiff contends that he did not receive this letter. 

On August 7, 2009, Plaintiff allegedly sent a Qualified 

Written Request (“QWR”) to Defendant pursuant to the Real Estate 

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

which requested servicing information and documentation from 

Defendant and included a demand to rescind the loan under the 

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

On November 18, 2009, a Notice of Default and Election to 

Sell Under Deed of Trust was recorded, identifying Power Default 

Services, Inc. (“Power”) as the trustee under the Deed on the 

subject property. Plaintiff asserts that he has not received 

notice of the assignment of trustee from Premier to Power.

Plaintiff‟s FAC alleges five state law causes of action as 

to Defendant, some of which rely on federal statutes for 

support. The claims are: (1) violation of the California 

Rosenthal Act; (2) negligence (statutory and common law); (3)

fraud; (4) violation of California Business & Professions Code § 

17200, et seq.; and (5) breach of contract. Defendant filed a 

combined motion to dismiss and motion to strike portions of 

Plaintiff‟s FAC.

In his Opposition to Motion to Dismiss and Motion to Strike 

(“Opposition”), Plaintiff asserts that he has alleged no federal 

claims in the FAC, and therefore this Court should not retain 

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jurisdiction. He then emphasizes that alleged RESPA violations 

are an integral part of his state claims, and opposes 

Defendant‟s request to strike the RESPA allegations from the 

FAC. 

Because it is clear that the RESPA claims are necessary to 

Plaintiff‟s other claims, the Court will retain jurisdiction and 

address these allegations. See Meza v. Matrix Servicing, 2010 WL 

366623, at *2 (E.D. Cal. Jan. 6, 2010) (“When a complaint pleads 

only state causes of action, original federal jurisdiction is 

unavailable unless it appears that some substantial, disputed 

question of federal law is a necessary element of one of the 

well-pleaded state claims, or that one or the other claim is 

„really‟ one of federal law.”) (citing Morongo Band of Mission 

Indians v. Cal. State Bd. Of Equalization, 858 F.2d 1376, 1383 

(9th Cir. 1988)).

II. OPINION

A. Legal Standard

A party may move to dismiss an action for failure to state 

a claim upon which relief can be granted pursuant to Federal 

Rule of Civil Procedure 12(b)(6). In considering 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 (1975), 

overruled on other grounds by Davis v. Scherer, 468 U.S. 183 

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(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). “Notwithstanding 

this deference, it is improper for a court to assume the 

plaintiff can prove fact which he or she has not alleged.” Ozuna 

v. Home Capital Funding, 2009 WL 2496804, at *1 (S.D. Cal. Aug. 

13, 2009).

Assertions that are mere “legal conclusions,” however, are

not entitled to the assumption of truth. Ashcroft v. Iqbal, 129 

S. Ct. 1937, 1950 (2009), citing Bell Atl. Corp. v. Twombly, 550 

U.S. 544, 555 (2007). To survive a motion to dismiss, a 

plaintiff needs to plead “enough facts to state a claim to 

relief that is plausible on its face.” Twombly, 550 U.S. at 

570. Dismissal is appropriate where the plaintiff fails to 

state a claim supportable by a cognizable legal theory. 

Balistreri v. Pacifica Police Dep‟t, 901 F.2d 696, 699 (9th Cir. 

1990). 

Generally, the court may not consider material beyond the 

pleadings in ruling on a motion to dismiss for failure to state 

a claim. Sherman v. Stryker Corp., 2009 WL 2241664, at *2 (C.D. 

Cal. Mar. 30, 2009) (internal citations omitted). There are two 

exceptions: when material is attached to the complaint or relied 

on by the complaint, or when the court takes judicial notice of 

matters of public record, provided the facts are not subject to 

reasonable dispute. Id. Here, Defendant requests judicial notice 

of the Note, Deed of Trust, Assignment of the Deed of Trust, 

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notice of transfer of servicer and alleged QWR sent to Defendant 

by Plaintiff. (Doc. 15.)

Plaintiff objects to Defendant‟s RJN on the grounds that 

Defendant fails to prove “who received [the exhibits] prior to 

filing.” However, Plaintiff does not specify to which exhibits

he is referring. Plaintiff additionally requests judicial notice 

of the Notice of Default and second Assignment of Deed of Trust.

(Doc. 29.) Accordingly, the Court takes judicial notice of both 

parties‟ documents as requested. 

Upon granting a motion to dismiss for failure to state a 

claim, the court has discretion to allow leave to amend the 

complaint pursuant to Federal Rule of Civil Procedure 15(a). 

“Dismissal with prejudice and without leave to amend is not 

appropriate unless it is clear . . . that the complaint could 

not be saved by amendment.” Eminence Capital, L.L.C. v. Aspeon, 

Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). 

B. Claims for Relief

1. Violation of the California Rosenthal Act

Plaintiff alleges that Defendant violated the California 

Rosenthal Fair Debt Collection Practices Act (“RFDCPA”). 

Defendant argues that it is not a “debt collector” under RFDCPA. 

Based on the language of the RFDCPA, courts have declined 

to regard a residential mortgage loan as a „debt‟ under the 

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RFDCPA. See Ines v. Countrywide Home Loans, Inc., 2008 WL 

4791863, at *3 (S.D. Cal. 2008) (stating Plaintiff's mortgage 

debt claim did not fall within the meaning of the RFDCPA); 

Pittman v. Barclays Capital Real Estate, Inc., 2009 WL 1108889, 

at *3 (S.D. Cal. Apr. 24, 2009) (dismissing Plaintiff's 

mortgage-related RDFCPA claim for failing to "invoke statutory 

protections").

Plaintiff has failed to demonstrate that the RFDCPA applies 

to Defendant. A residential mortgage is not a debt under the 

RFDCPA and therefore Defendant, as a loan servicer, is not a 

“debt collector” under the statute. Plaintiff has not stated a 

plausible claim under the RFDCPA and the FAC cannot be saved by 

amendment. Accordingly, Plaintiff‟s claim for violation of 

RFDCPA is dismissed, with prejudice.

2. Negligence 

Plaintiff alleges both statutory and common law negligence.

As the basis for his statutory negligence claim, Plaintiff 

alleges that Defendant was negligent in failing to respond to 

his QWR pursuant to 12 U.S.C. § 2605(e). Defendant argues that 

Plaintiff‟s letter of August 7, 2009 is not a QWR as defined in 

the statute. 

Regardless of whether the QWR was properly written as 

defined by the statute, Plaintiff fails to allege that he 

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suffered any actual damages as a result of failure to respond to 

his QWR. “A claim of a RESPA violation cannot survive a motion 

to dismiss when the plaintiff does not plead facts showing how 

the plaintiff suffered actual harm due to Defendants‟ failure to 

respond to a [QWR].” Fullmer v. JPMorgan Chase Bank, N.A., 2010 

WL 95206, at *6 (E.D. Cal. Jan. 6, 2010). “While courts 

interpret this requirement liberally, the plaintiff must at 

least allege what or how the plaintiff suffered the pecuniary 

loss.” Ash v. Onewest Bank, FSB, 2010 WL 375744, at *6 (E.D. 

Cal. Jan. 26, 2010); Rogers v, Cal. State Mortg. Co., Inc., 2010 

WL 144861, at *11 (E.D. Jan. 11, 2010). Accordingly, Plaintiff‟s 

vague claim that “as a result of Defendants‟ negligence, 

Plaintiff suffered and continues to suffer harm,” (FAC ¶ 95) is 

insufficient to support a negligence claim based on violation of 

RESPA. 

Plaintiff alleges that Defendant, as transferee, was also 

negligent in failing to provide notice of the transfer of 

servicing rights to his loan pursuant to 12 U.S.C. § 2605(c). 

Defendant argues that it provided proper notice to Plaintiff in 

the letter dated June 16, 2008. 

In his Opposition, Plaintiff suggests that he did not

receive this letter. Nonetheless, for the reasons discussed 

above, Plaintiff fails to plead enough facts to support a claim 

that relies on violation of RESPA. Plaintiff fails to allege 

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that he suffered “any actual damages ... as a result of the 

failure” to provide him with notice of the transfer. 12 U.S.C. § 

2605(f)(1). Therefore, the FAC does not satisfy the pleading 

standards of Rule 8(a). See Tasaranta v. Homecomings Financial,

LLC, 2009 WL 3055227, at **3-4 (S.D. Cal. Sept. 21, 2009)

(dismissing RESPA claim alleging failure to provide notice of 

transfer of loan servicer); Suguri v. Wells Fargo Bank, N.A., 

2009 WL 2486546, at *4 (C.D. Cal. Aug. 7, 2009) (“Plaintiff does 

not allege that she suffered damages from the purported 

transfer”). 

In his common law negligence claim, Plaintiff avers that 

Defendant owed him a duty to exercise reasonable skill and care

as the servicing company to the lender. Defendant in turn 

asserts that it owes no duty to Plaintiff.

In order to state a cause of action for negligence, a 

plaintiff must allege: (1) the defendant has a legal duty to use 

due care; (2) the defendant breached such legal duty; (3) the 

defendant‟s breach was the proximate or legal cause of the 

resulting injury; and (4) damage to the plaintiff. Ladd v. 

County of San Mateo, 12 Cal. 4th 913, 917 (1996). The existence 

of a legal duty on the part of the defendant is a question of 

law to be determined by the court. Ky. Fried Chicken of Cal., 

Inc. v. Superior Court, 14 Cal. 4th 814, 819 (1997). 

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In the lending context, “financial institutions owe no duty 

of care to a borrower when the institution‟s involvement in the 

loan transaction does not exceed the scope of its conventional

role as a mere lender of money.” Nymark v. Heart Fed. Sav. & 

Loan Ass‟n, 231 Cal. App. 3d 1089, 1096 (1991). A court in the 

Northern District of California recently held that this general 

rule is applicable to loan servicers. Tsien v. Wells Fargo Home 

Mortg., 2010 WL 2198290, at *2 (N.D. Cal. May 28, 2010). 

Furthermore, another court in this district recently held that 

“loan servicers do not owe a duty to the borrowers of the loans 

they service.” Pok v. American Home Mortg. Servicing, Inc., 2010 

WL 476674, at *4 (E.D. Cal. Feb. 3, 2010) (granting motion to 

dismiss negligence claim against several defendants including 

AHMSI in its role as servicer of Plaintiff‟s loan). Therefore, 

as the servicing company to the lender, Defendant owes no duty 

to Plaintiff. Plaintiff has failed to state a claim for either 

statutory or common law negligence against Defendant, and the 

FAC cannot be saved by further amendment. Accordingly, 

Plaintiff‟s claim for common law negligence is dismissed, with 

prejudice. 

3. Fraud

Plaintiff avers that because UMOC and Option One failed to 

follow the Uniform Commercial Code Article 3 and California 

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Commercial Code § 3301, et seq. requirements for transferring 

ownership of a mortgage note, therefore Defendant AHMSI did not 

have a legal right to service Plaintiff‟s loan. Plaintiff 

further avers that Defendant‟s representations that it had the 

right to service his loan were fraudulent. 

As Defendant argues, California Civil Code § 2924, et seq.,

and not California Commercial Code § 3301, et seq., governs nonjudicial foreclosures. See Pok, 2010 WL 476674, at *7; Peay v. 

Midland Mortg. Co., 2010 WL 476677, at *4 (E.D. Cal. Feb 3, 

2010). Not only does Plaintiff rely on an inapplicable legal 

standard to support his claim, Plaintiff also fails to allege 

fraud with the required particularity to state a plausible claim 

for relief.

A claim of fraud must have the following elements: “(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) (quoting Lazar v. Superior Court, 12 

Cal. 4th 631, 638 (1996) (internal quotation marks omitted)).

“In all averments of fraud or mistake, the circumstances 

constituting fraud or mistake shall be stated with 

particularity. Malice, intent, knowledge and other conditions 

of the mind of a person may be averred generally.” Fed. R. Civ. 

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P. 9(b). The Ninth Circuit has “interpreted Rule 9(b) to mean 

that the pleader must state the time, place and specific content 

of the false representations as well as the identities of the 

parties to the misrepresentation.” Alan Neuman Prods., Inc. v. 

Albright, 862 F.2d 1388, 1393 (9th Cir. 1988). “Moreover, in a 

fraud action against a corporation, a plaintiff must allege the 

names of the persons who made the allegedly fraudulent 

representations, their authority to speak, to whom they spoke, 

what they said or wrote, and when it was said or written.” 

Saldate v. Wilshire Credit Corp., 2010 WL 582074, *at 9 (E.D. 

Cal. Feb. 12, 2010) (Quoting Tarmann v. State Farm Mut. Auto. 

Ins. Co., 2 Cal. App. 4th 153, 157 (1991) (internal quotation 

marks omitted)). 

The FAC fails to satisfy the “who, what, when, where and 

how” requirements as to Defendant. Plaintiff has already amended 

this claim once, and further amendment would be futile. 

Accordingly, Plaintiff‟s claim for fraud is dismissed, with 

prejudice.

4. Violation of Bus. & Prof. Code § 17200, et seq.

The California Business & Professions Code § 17200, et seq

(unfair competition law, “UCL”), prohibits unfair competition.

This statute has a “broad scope that allows for „violations of 

other laws to be treated as unfair competition that is 

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independently actionable‟ while also „sweep[ing] within its 

scope acts and practices not specifically proscribed by any 

other law.‟” Hauk v. JPMorgan Chase Bank USA, 552 F.3d 1114, 

1122 (9th Cir. 2009) (quoting Kasky v. Nike, Inc., 27 Cal. 4th 

939, 949 (2002)). 

While the statute is broad in scope, a plaintiff must still 

plead his claim so as to establish a violation of the “other 

law” or unfair practice in question. See Constantini v. 

Wachovia Mortg. FSB, 2009 WL 1810122 at *3 (E.D. Cal. June 24, 

2009).

Here, Plaintiff alleges unfair competition based on 

allegations in the FAC of Defendant‟s wrongful acts. As 

mentioned above, Plaintiff has failed to state a claim for any 

of these causes of action upon which the wrongful acts are 

based. Accordingly, Plaintiff‟s UCL claim is dismissed, with 

prejudice.

5. Breach of Contract

In California, “[a] cause of action for breach of contract 

requires proof of the following elements: (1) existence of the 

contract; (2) plaintiff's performance or excuse for 

nonperformance; (3) defendant‟s breach; and (4) damages to 

plaintiff as a result of the breach.” CDF Firefighters v. 

Maldonado, 158 Cal. App. 4th 1226, 1239 (2008). 

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Plaintiff alleges that under the brokerage agreement for 

the subject property, Defendant has an ethical duty to act in 

Plaintiff‟s best interest. Plaintiff further alleges that 

Defendant breached this duty by acting “in furtherance of” 

concealing the predatory terms of his loan when it failed to 

provide loan documents prior to or after closing and failed to 

explain the loan documents to Plaintiff. 

Despite these allegations, Plaintiff fails to state a claim 

upon which relief can be granted. A breach of contract claim 

rests upon the actual terms of the contract, but Plaintiff fails 

to allege any breach of the express provisions of a brokerage 

agreement. Moreover, Defendant owes no duty to Plaintiff to 

explain the documents to him. Pok, 2010 WL 476674, at *4. 

Consequently, Plaintiff‟s claim for breach of contract fails and 

cannot be saved by amendment. Accordingly, Plaintiff‟s claim 

for breach of contract is dismissed, with prejudice.

III. ORDER

For the reasons set forth above, Defendant‟s Motion to 

Dismiss is GRANTED, With Prejudice. Accordingly, the motion to 

strike is moot. 

IT IS SO ORDERED.

DATED: July 29, 2010

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