Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_09-cv-01599/USCOURTS-cand-4_09-cv-01599-5/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 15:1601 Truth in Lending

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United States District Court

For the Northern District of California

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1 Although Chase has succeeded to Washington Mutual’s assets

and liabilities, because Plaintiffs name Washington Mutual as a

Defendant, the Court refers to the conduct as that of Washington

Mutual, not Chase. 

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

VERONICA NEWBECK and JOHN J. 

FORD, III,

Plaintiffs,

 v.

WASHINGTON MUTUAL BANK and PLAZA HOME

MORTGAGE, INC.,

Defendants. /

No. C 09-1599 CW

ORDER GRANTING

DEFENDANTS’ MOTIONS

TO DISMISS

(Docket Nos. 37 and

39)

Plaintiffs Veronica Newbeck and John J. Ford, III charge

Defendants Washington Mutual Bank and Plaza Home Mortgage, Inc.

with failing to disclose information in violation of federal and

state law. JP Morgan Chase, N.A., as receiver of Washington

Mutual’s assets and liabilities, and Plaza Home move separately to

dismiss Plaintiffs’ Amended Complaint. (Docket Nos. 37 and 39.) 

Plaintiffs oppose the motions. The motions were decided on the

papers. Having considered all of the papers submitted by the

parties, the Court GRANTS Chase’s1 and Plaza Home’s motions. 

BACKGROUND

Because the Court’s Order of January 19, 2010 (Docket No. 32)

explains the facts of this case in sufficient detail, Plaintiffs’

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allegations will not be repeated here in their entirety. In sum,

Plaintiffs allege that Plaza Home and Washington Mutual engaged in

unlawful conduct in connection with a loan, secured by property at

230 Cordova Street in San Francisco, California. Plaintiffs

maintain that Plaza Home and Washington Mutual perpetrated fraud in

the loan origination process and that they lacked standing to

foreclose on the property.

On January 19, 2010, the Court granted Defendants’ first

motions to dismiss. (Docket No. 32.) Plaintiffs were granted

leave to amend their complaint to cure the deficiencies identified

in the Court’s Order. Plaintiffs filed an amended complaint on

February 2, 2010. 

LEGAL STANDARD

A complaint must contain a “short and plain statement of the

claim showing that the pleader is entitled to relief.” Fed. R.

Civ. P. 8(a). When considering a motion to dismiss under Rule

12(b)(6) for failure to state a claim, dismissal is appropriate

only when the complaint does not give the defendant fair notice of

a legally cognizable claim and the grounds on which it rests. 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In

considering whether the complaint is sufficient to state a claim,

the court will take all material allegations as true and construe

them in the light most favorable to the plaintiff. NL Indus., Inc.

v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). However, this

principle is inapplicable to legal conclusions; “threadbare

recitals of the elements of a cause of action, supported by mere

conclusory statements,” are not taken as true. Ashcroft v. Iqbal,

___ U.S. ___, 129 S. Ct. 1937, 1949-50 (2009) (citing Twombly, 550

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U.S. at 555).

DISCUSSION

Plaintiffs’ opposition does not directly respond to

Defendants’ motions to dismiss. Plaintiffs merely state, “The

arguments have been made. They will not be repeated . . . .” 

Opp’n at 2. They then refer to the argument, already rejected by

the Court, that Plaza Home and Washington Mutual lacked standing to

foreclose on the Cordova Street property.

Plaintiffs do not appear to have amended their complaint in

any material way. For the reasons stated below, the Court

dismisses their claims against Defendants with prejudice.

I. Liability of Chase on Plaintiffs’ Claims

For the first time in this litigation, Chase contends that it

cannot be held liable on Plaintiffs’ claims. Chase asserts that,

when it agreed to purchase and assume Washington Mutual’s assets

and liabilities from the Federal Deposit Insurance Corporation

(FDIC), it did not assume any liability for any claims by borrowers

related to loans made or held by Washington Mutual. Chase’s

agreement with the FDIC provides,

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, whether or not such liability is reduced to

judgment, liquidated or unliquidated, fixed or

contingent, matured or unmatured, disputed or undisputed,

legal or equitable, judicial or extra-judicial, secured

or unsecured, whether asserted affirmatively or

defensively, 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

the Assuming Bank.

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2 Chase asks the Court to take judicial notice of documents

related to the subject loan and its acquisition of the assets and

liabilities of Washington Mutual. Plaintiffs do not oppose this

request. Because the documents contain facts “capable of accurate

and ready determination by resort to sources whose accuracy cannot

reasonably be questioned,” the Court grants Chase’s request. Fed.

R. Evid. 201(b).

4

Chase’s Request for Judicial Notice (RJN),2 Ex. 7 § 2.5. Based on

this provision, courts have held that the FDIC, not Chase, is the

real party in interest concerning borrowers’ claims arising from

loans made or held by Washington Mutual. See, e.g., Yeomalakis v.

FDIC, 562 F.3d 56, 60 (1st Cir. 2009); Hilton v. Wash. Mut. Bank,

2009 WL 3485953, at *2-*3 (N.D. Cal.). Plaintiffs did not respond

to this argument. 

Because Plaintiffs’ claims are related to a loan that was held

by Washington Mutual, Chase’s agreement with the FDIC requires

dismissal of Plaintiffs’ claims against it. Even if Chase were an

appropriate Defendant or Plaintiffs had sued the FDIC, their claims

would nevertheless fail for the reasons detailed below. 

II. TILA Claims

Plaintiffs assert that Plaza Home and Washington Mutual

violated TILA by failing to disclose information regarding the

loan’s interest rate and the potential for negative amortization. 

Plaintiffs seek rescission of the loan and statutory damages. 

As noted in the Court’s prior Order, because Plaintiffs’

property has already been sold, they no longer have a right to

rescission. 15 U.S.C. § 1635(f). Even if they had such a right, a

debtor seeking rescission must “tender the property to the creditor

. . . or its reasonable value.” Id. § 1635(b). Plaintiffs have

not plead that they are able to do so. Thus, Plaintiffs are not

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entitled to the rescission of their loan. 

Plaintiffs’ claim for damages is untimely. The subject loan

was obtained on December 17, 2006. Under the relevant statute of

limitations, Plaintiffs must have filed suit for damages by

December 17, 2007. 15 U.S.C. § 1640(e). In their amended

complaint, Plaintiffs appear to seek equitable tolling of the

limitations period for damages. See Am. Compl. at 30:23-25

(stating that the statute of limitations on their claim for damages

begins to “run when the violation occurs, or when the borrower

discovers that a violation has occurred . . . .”) (emphasis in

original). Plaintiffs do not, however, plead facts to show that

equitable tolling is warranted. They do not aver that they were

prevented from discovering, in the exercise of reasonable

diligence, the information necessary to bring these damages claims

within the one-year limitations period. See, e.g., Meyer v.

Ameriquest Mortgage Co., 342 F.3d 899, 902 (9th Cir. 2003); Lingad

v. Indymac Fed. Bank, 682 F. Supp. 2d 1142, 1147 (E.D. Cal. 2010)

(rejecting equitable tolling at pleading stage when “plaintiff

fails to allege any facts demonstrating that the TILA violations

alleged could not have been discovered by due diligence”) (citing

Meyer). Indeed, their amended pleading is devoid of any averments

concerning the discovery of the alleged non-disclosures. As a

result, Plaintiffs are not entitled to equitable tolling. 

Accordingly, Plaintiffs’ claims for rescission and damages

under TILA are dismissed with prejudice. Any right to rescission,

assuming one existed, expired upon the sale of Plaintiffs’

property. Plaintiffs were required to file a damages claim by

December 17, 2007, one year from the date the loan documents were

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3 Although Plaintiffs also label Plaza Home’s and Washington

Mutual’s conduct as “unfair,” their allegations only refer to

fraudulent conduct. See, e.g., Am. Compl. ¶ 106 (stating that

Plaza Home and Washington Mutual engaged in marketing in a “false

or deceptive manner”); id. ¶ 110 (alleging that Plaza Home failed

to disclose information). The Court therefore understands

Plaintiffs to plead the fraud prong of the UCL, not the unfair

prong. Even if Plaintiffs intended to plead the unfair prong, they

have not alleged facts to support such a claim. To allege an

unfair practice under the UCL, a plaintiff must plead that “(1) the

consumer injury is substantial, (2) the injury is not outweighed by

any countervailing benefits to consumers or competition, and

(3) the injury is one that consumers themselves could not

reasonably have avoided.” Morgan v. AT&T Wireless Svcs., Inc., 177

Cal. App. 4th 1235, 1254-55 (2009) (citation omitted). Plaintiffs

do not make such allegations. 

6

signed. 

III. Claim under California Business and Professions Code § 17200

California’s Unfair Competition Law (UCL) prohibits any

“unlawful, unfair or fraudulent business act or practice.” Cal.

Bus. & Prof. Code § 17200. The UCL incorporates other laws and

treats violations of those laws as unlawful business practices

independently actionable under state law. Chabner v. United Omaha

Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000). Violation of

almost any federal, state or local law may serve as the basis for a

UCL claim. Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-

39 (1994). In addition, a business practice may be “unfair or

fraudulent in violation of the UCL even if the practice does not

violate any law.” Olszewski v. Scripps Health, 30 Cal. 4th 798,

827 (2003). 

Plaintiffs continue to base their UCL claim on Plaza Home’s

and Washington Mutual’s alleged violations of TILA and California

Financial Code section 22302 and on their alleged “unfair and

fraudulent”3 business practices. In its January 19 Order, the

Court concluded that the Home Owners’ Loan Act of 1933 and

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regulations promulgated by the Office of Thrift Supervision preempt

Plaintiffs’ UCL claim to the extent that it is based on alleged

violations of TILA and “unfair and fraudulent” business practices

related to non-disclosure and the terms of the loan. Because

Plaintiffs’ UCL claim, insofar as it is based on this theory, was

already dismissed with prejudice, the Court does not consider it

here. 

Plaintiffs also base their UCL claim on a violation of

California Financial Code section 22302, which prohibits

unconscionable loan contracts. The Court previously dismissed this

claim, but granted Plaintiffs leave to amend to clarify whether

they complained of an inability to review the loan documents or the

substantive terms of the loan. Plaintiffs have not amended their

vague allegations concerning this theory. Because their complaint

lacks factual allegations that show procedural or substantive

unconscionability, they cannot maintain their UCL claim on a

violation of California Financial Code section 22302. 

Accordingly, Plaintiffs’ UCL claim is dismissed with

prejudice. 

IV. Fraud Claim

Plaintiffs allege that Plaza Home’s and Washington Mutual’s

failure to disclose information constituted fraud under California

law. To state a claim for fraud, a plaintiff must plead

“‘(a) misrepresentation; (b) knowledge of falsity (or

scienter); (c) intent to defraud, i.e., to induce reliance;

(d) justifiable reliance; and (e) resulting damage.’” In re

Napster, Inc. Copyright Litig., 479 F.3d 1078, 1096 (9th Cir. 2007)

(quoting Small v. Fritz Cos., Inc., 30 Cal. 4th 167, 173 (2003));

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see generally Cal. Civ. Code §§ 1709-10. In relevant part, deceit

is defined as the “suppression of a fact, by one who is bound to

disclose it, or who gives information of other facts which are

likely to mislead for want of communication of that fact.” Cal.

Civ. Code § 1710. 

“In all averments of fraud or mistake, the circumstances

constituting fraud or mistake shall be stated with particularity.” 

Fed. R. Civ. Proc. 9(b). The allegations must be “specific enough

to give defendants notice of the particular misconduct which is

alleged to constitute the fraud charged so that they can defend

against the charge and not just deny that they have done anything

wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). 

Statements of the time, place and nature of the alleged fraudulent

activities are sufficient, id. at 735, provided the plaintiff sets

forth “what is false or misleading about a statement, and why it is

false.” In re GlenFed, Inc., Secs. Litig., 42 F.3d 1541, 1548 (9th

Cir. 1994). Scienter may be averred generally, simply by saying

that it existed. Id. at 1547; see Fed. R. Civ. Proc. 9(b)

(“Malice, intent, knowledge, and other condition of mind of a

person may be averred generally.”). Allegations of fraud based on

information and belief usually do not satisfy the particularity

requirements of Rule 9(b); however, as to matters peculiarly within

the opposing party’s knowledge, allegations based on information

and belief may satisfy Rule 9(b) if they also state the facts upon

which the belief is founded. Wool v. Tandem Computers, Inc., 818

F.2d 1433, 1439 (9th Cir. 1987).

In its January 19 Order, the Court dismissed with leave to

amend Plaintiffs’ fraud claim because they failed to satisfy the

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heightened pleading requirement of Rule 9(b). Plaintiffs do not

appear to have amended their allegations concerning fraud. They

still do not identify “‘the who, what, when, where, and how’” of

the alleged fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097,

1106 (9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627

(9th Cir. 1997)). Nor do they identify any of Plaza Home’s and

Washington Mutual’s employees who allegedly perpetrated the fraud. 

And, as noted above, they do not even allege Washington Mutual’s

role in the origination of the loan. 

As the Court stated in its prior Order, Plaintiffs cannot base

their fraud claim solely on language in their loan documents and

conclusory allegations that these statements were deceptive. On

their face, these statements disclose the loan’s terms. For

instance, the documents state the potential for negative

amortization. Selden Decl., Exs. D-E at 1. Plaintiffs have not

plead how a fraud was perpetrated, despite the language contained

in the disclosure documents. 

Plaintiffs’ fraud claim is therefore dismissed with prejudice. 

Plaintiffs have not plead fraud with particularity, nor have they

alleged Washington Mutual’s role in the alleged fraud. 

V. Request to “Set Aside Foreclosure Sale”

Plaintiffs reassert their request that the Court set aside

Washington Mutual’s foreclosure sale of their property. As noted

above, they repeat their argument concerning Washington Mutual’s

standing to foreclose on the property, which the Court rejected in

its January 19 Order. 

A plaintiff seeking to set aside a foreclosure sale must first

allege tender of the amount of the secured indebtedness. Abdallah

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v. United Sav. Bank, 43 Cal. App. 4th 1101, 1109 (1996) (citing

FPCI RE-HAB 01 v. E & G Investments, Ltd., 207 Cal. App. 3d 1018,

1021-22 (1989)); Smith v. Wachovia, 2009 WL 1948829, at *3 (N.D.

Cal.). Without pleading tender or the ability to offer tender, a

plaintiff cannot state a cause of action to set aside a foreclosure

sale. Karlsen v. Am. Sav. & Loan Ass’n, 15 Cal. App. 3d 112, 117

(1971) (citing Copsey v. Sacramento Bank, 133 Cal. 659, 662

(1901)); Smith, 2009 WL 1948829, at *3 (citing Karlsen). 

Plaintiffs have not alleged facts that warrant setting aside

the foreclosure sale. Even if they had, Plaintiffs do not allege

tender or the ability to offer tender. Plaintiffs’ claim to set

aside the foreclosure sale is dismissed with prejudice. 

VI. Claim for Declaratory Relief

The Declaratory Judgment Act (DJA) permits a federal court to

“declare the rights and other legal relations” of parties to “a

case of actual controversy.” 28 U.S.C. § 2201; see Wickland Oil

Terminals v. Asarco, Inc., 792 F.2d 887, 893 (9th Cir. 1986). The

“actual controversy” requirement of the Declaratory Judgment Act is

the same as the “case or controversy” requirement of Article III of

the United States Constitution. Am. States Ins. Co. v. Kearns, 15

F.3d 142, 143 (9th Cir. 1993). 

Plaintiffs’ declaratory judgment claim fails because they have

not alleged facts showing that there is an actual case or

controversy. The foreclosure sale has already been completed, and

this operates as a final adjudication of the rights among the

parties. Accordingly, the Court dismisses Plaintiffs’ declaratory

judgment claim with prejudice. 

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4 Although the amended complaint filed in the public record

does not contain Ms. Newbeck’s signature, it appears on the copy

lodged with the Court. 

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VII. Mr. Ford’s Standing in this Action

Plaza Home renews its argument that, because Mr. Ford was not

a party to the mortgage, he lacks standing to bring the claims

asserted in this action. Plaintiffs’ amended complaint pleads that

Mr. Ford has standing to bring the asserted claims as “a co-owner

in the property and a signatory to the deed of trust.” Am. Compl.

¶ 15. Further, some loan documents bear Mr. Ford’s signature and

the deed of trust names Mr. Ford as a “borrower.” See, e.g., RJN,

Ex. 1. However, Mr. Ford did not sign the amended complaint,4 so

it is not clear that he intends to join this lawsuit. 

The Court need not resolve this issue because, as noted above,

all claims asserted in the amended complaint are dismissed with

prejudice. 

CONCLUSION

For the foregoing reasons, the Court GRANTS Defendants’

Motions to Dismiss. (Docket Nos. 37 and 39.) Because Plaintiffs

had an opportunity to amend their complaint and did not cure the

defects identified by the Court, their claims are dismissed with

prejudice. Hearns v. San Bernardino Police Dep’t, 530 F.3d 1124,

1130-31 (9th Cir. 2008). The Clerk shall enter judgment and close

the file. All parties shall bear their own costs. 

IT IS SO ORDERED.

Dated: August 13, 2010 

CLAUDIA WILKEN

United States District Judge

Case 4:09-cv-01599-CW Document 47 Filed 08/13/10 Page 11 of 12
UNITED STATES DISTRICT COURT

FOR THE 

NORTHERN DISTRICT OF CALIFORNIA

VERONICA NEWBECK, et al.,

Plaintiffs,

 v.

WASHINGTON MUTUAL BANK, et al.,

Defendants. /

Case Number: CV09-01599 CW 

CERTIFICATE OF SERVICE

I, the undersigned, hereby certify that I am an employee in the Office of the Clerk, U.S. District

Court, Northern District of California.

That on August 13, 2010, I SERVED a true and correct copy of the attached, by placing said

copy in a postage paid envelope addressed to the person hereinafter listed, by depositing said

envelope in the U.S. Mail, or by placing said copy into an inter-office delivery receptacle located

in the Clerk's office.

Veronica Newbeck

230 Cordova Street

San Francisco, CA 94112

Dated: August 13, 2010

Richard W. Wieking, Clerk

By: MP, Deputy Clerk

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