Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-01943/USCOURTS-caed-2_09-cv-01943-0/pdf.json

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

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 Because oral argument will not be of material assistance, 1

the Court orders this matter submitted on the briefs. E.D. Cal.

Local Rule 78-230(h). 

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

ROBERT A. SORENSON,

No. 2:09-cv-01943-MCE-KJM

Plaintiff,

v. MEMORANDUM AND ORDER

COUNTRYWIDE HOME LOANS, INC.;

MORTGAGE ELECTRONIC

REGISTRATIONS SYSTEMS, INC.;

GALINA CHEREDAYKO and DOES 1-

20 inclusive, 

Defendants.

----oo0oo----

Presently before the Court is a Motion by Defendants

Countrywide Home Loans, Inc. (“CHL”), Mortgage Electronic

Registration Systems, Inc. (“MERS”), and Galina Cheredayko

(“Cheredayko”) (collectively “Defendants”) to Dismiss the First

Amended Complaint of Plaintiff Robert A. Sorenson (“Plaintiff”)

for failure to state a claim upon which relief may be granted

pursuant to Federal Rule of Civil Procedure 12(b)(6). 

1

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 The factual assertions in this section are based on the 2

allegations in Plaintiff’s Complaint unless otherwise specified.

2

Defendants also move to strike portions of Plaintiff’s Complaint. 

For the reasons set forth below, Defendants’ Motion to Dismiss is

granted.

BACKGROUND2

On April 26, 2005, Cheredayko approached Plaintiff

representing herself as a loan officer for CHL and soliciting him

to purchase a residence. Cheredayko told Plaintiff that she

could get him the “best deal” and the “best interest rates” on

the market, and that if the loan ever became unaffordable she

would simpy refinance it into a more affordable loan.

Plaintiff states that he was not given any copies of the

loan documents prior to closing, nor did he receive statutorily

required copies of a proper notice of cancellation. He alleges

that the notary did not explain any of the loan documents to him

and that he was given only a few minutes to sign. Plaintiff

officially closed on the property on July 26, 2005. The Deed of

Trust identified CHL as the lender, and MERS as nominee for the

Lender and Lender’s succesor and assigns, and the beneficiary. 

On April 17, 2009, pursuant to the Real Estate Settlement

Procedures Act, Plaintiff sent a Qualified Written Request

(“QWR”) to CHL. The QWR included a demand to rescind the loans

under TILA. Plaintiff claims that CHL has yet to properly

respond.

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3

Plaintiff now alleges several causes of action in connection

with his mortgage loan including: violation of the Truth in

Lending Act (“TILA”); violation of California’s Rosenthal Fair

Debt Collection Practices Act (“RFDCPA”); negligence; violation

of the Real Estate Settlement Procedures Acts (“RESPA”); breach

of fiduciary duty; fraud; violation of California’s Uniform

Commercial Code (“UCL”); breach of contract; and breach of the

implied covenant of good faith and fair dealing.

STANDARD

A. Motion to Dismiss

On a motion to dismiss for failure to state a claim under

Rule 12(b)(6), all allegations of material fact must be accepted

as true and construed in the light most favorable to the

nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,

337-38 (9th Cir. 1996). Rule 8(a)(2) requires only “a short and

plain statement of the claim showing that the pleader is entitled

to relief” in order to “give the defendant fair notice of what

the...claim is and the grounds upon which it rests.” Bell Atl.

Corp. v. Twombly, 127 S. Ct. 1955, 1964 (2007) (quoting Conley v.

Gibson, 355 U.S. 41, 47 (1957)). While a complaint attacked by a

Rule 12(b)(6) motion to dismiss does not need detailed factual

allegations, a plaintiff's obligation to provide the “grounds” of

his “entitlement to relief” requires more than labels and

conclusions, and a formulaic recitation of the elements of a

cause of action will not do. Id. at 1964-65 (internal citations

and quotations omitted). 

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4

Factual allegations must be enough to raise a right to relief

above the speculative level. Id. at 1965 (citing 5 C. Wright &

A. Miller, Federal Practice and Procedure § 1216, pp. 235-36 (3d

ed. 2004) (“The pleading must contain something more...than...a

statement of facts that merely creates a suspicion [of] a legally

cognizable right of action”)). 

“Rule 8(a)(2)...requires a ‘showing,’ rather than a blanket

assertion of entitlement to relief. Without some factual

allegation in the complaint, it is hard to see how a claimant

could satisfy the requirements of providing not only ‘fair

notice’ of the nature of the claim, but also ‘grounds’ on which

the claim rests.” Twombly, 550 U.S. 556 n.3. A pleading must

contain “only enough facts to state a claim to relief that is

plausible on its face.” Id. at 570. If the “plaintiffs...have

not nudged their claims across the line from conceivable to

plausible, their complaint must be dismissed.” Id. Nevertheless,

“[a] well-pleaded complaint may proceed even if it strikes a

savvy judge that actual proof of those facts is improbable, and

‘that a recovery is very remote and unlikely.’” Id. at 556.

When a claim for fraud is raised, Federal Rule of Civil

Procedure 9(b) provides that “a party must state with

particularity the circumstances constituting fraud.” “A pleading

is sufficient under Rule 9(b) if it identifies the circumstances

constituting fraud so that the defendant can prepare an adequate

answer from the allegations.” Neubronner v. Milken, 6 F.3d 666,

671-672 (9th Cir. 1993) (internal quotations and citations

omitted). 

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“The complaint must specify such facts as the times, dates,

places, benefits received, and other details of the alleged

fraudulent activity.” Id. at 672.

A court granting a motion to dismiss a complaint must then

decide whether to grant leave to amend. A court should “freely

give” leave to amend when there is no “undue delay, bad faith[,]

dilatory motive on the part of the movant,...undue prejudice to

the opposing party by virtue of...the amendment, [or] futility of

the amendment....” Fed. R. Civ. P. 15(a); Foman v. Davis, 371

U.S. 178, 182 (1962). Generally, leave to amend is denied only

when it is clear the deficiencies of the complaint cannot be

cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957

F.2d 655, 658 (9th Cir. 1992).

B. Motion to Strike

The Court may strike from a pleading “an insufficient

defense or any redundant, immaterial, impertinent, or scandalous

matter.” Fed. R. Civ. P. 12(f). Motions to strike are a drastic

remedy and generally disfavored. 5C Wright & A. Miller, Federal

Practice and Procedure § 1380 (3d ed. 2004). Immaterial matter

is that which has no essential or important relationship to the

claim for relief or the defenses being pled. Fantasy, Inc. v.

Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993), rev’d on other

grounds, 510 U.S. 517, 114 S. Ct. 1023, 127 L. Ed. 2d 455 (1994)

(internal citations and quotations omitted). A matter is

impertinent if the statements do not pertain, and are not

necessary, to the issues in question. Id. 

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6

“Scandalous” matters “cast a cruelly derogatory light on a party

or other person.” In re 2TheMart.com, Inc. Sec. Litig., 114 F.

Supp. 2d 955, 965 (C.D. Cal. 2000); see, e.g., Alvarado-Morales

v. Digital Equip. Corp., 843 F.2d 613 (1st Cir. 1988) (striking

the terms “brainwashing” and “torture” in a tort case in the

employment context).

ANALYSIS

A. TILA Claim as Asserted Against CHL

The purpose of TILA is “to assure a meaningful disclosure of

credit terms so that the consumer will be able to compare more

readily the various credit terms available to him and avoid the

uninformed use of credit...” 15 U.S.C. § 1601(a). It requires

the lender to provide several disclosures to the consumer

regarding their debt, including providing notice of the right to

rescind. 

Plaintiff alleges that CHL failed to provide Plaintiff with

the mandatory TILA disclosure statements and notice of right to

rescind. CHL argues that Plaintiff’s claim for TILA violations

is time-barred because civil penalties under TILA are subject to

a one-year statute of limitations.

Specifically the statute of limitations for damages under

TILA, codified at 15 U.S.C. § 1640(e), states that, “Any action

under this section may be brought in any United States district

court, or in any other court of competent jurisdiction, within

one year from the date of occurrence of the violation.” 

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7

The “date of occurrence” is the date the transaction is

consummated, which in a mortgage loan case is when the Plaintiff

closed on the loan. See Walker v. Washington Mutual Bank FA, 63

F. App’x. 316, 317 (9th Cir. 2003). Plaintiff’s loan closed on

July 26, 2005, triggering a TILA statute of limitations period

that expired July 26, 2006. Plaintiffs, however, did not file

suit until July 16, 2009, nearly three years after the prescribed

period. 

Furthermore Plaintiff seeks to rescind his loan. Pursuant

to TILA provisions codified at 15 U.S.C. § 1635(a), a consumer

may elect to cancel their residential mortgage loan within three

days of either the consummation of the transaction or delivery of

required disclosures and rescission forms, whichever is later. 

If the required disclosures are not provided, then the right to

cancel extends three years after the date of the loan. 

Plaintiff’s loan closed on July 26, 2005, therefore his right to

rescind expired on July 26, 2008. Once again, Plaintiff’s claim

is time-barred. 

In most cases, an expiration of the statute of limitations

would mandate dismissal of the claim. To save his claim

Plaintiff argues that equitable tolling should apply to suspend

the statute of limitations. 

The Ninth Circuit has held that “the doctrine of equitable

tolling may, in appropriate circumstances, suspend the

limitations period until the borrower discovers or had reasonable

opportunity to discover the fraud or nondisclosures that form the

basis of the TILA action.” King v. State of California, 784 F.2d

910, 915 (9th Cir. 1986). 

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8

In determining justifiable application of the equitable tolling

doctrine, a court “focuses on excusable delay by the plaintiff.” 

Johnson v. Henderson, 314 F.3d 409, 414 (9th Cir. 2002). 

Excusable delay by the plaintiff is defined as whether a

reasonable plaintiff would not have known of the existence for a

possible claim within the limitations period. Lukovsky v. City &

County of San Francisco, 535 F.3d 1044, 1051 (9th Cir. 2008). To

establish excusable delay, the plaintiff must show “fraudulent

conduct by the defendant resulting in concealment of the

operative facts, failure of the plaintiff to discover the

operative facts that are the basis of its cause of action within

the limitations period, and due diligence by the plaintiff until

discovery of those facts.” Federal Election Com’n v. Williams,

104 F.3d 237, 240-41 (9th Cir. 1996).

Here, the only explanation that Plaintiff provides to invoke

this equitable protection is he was not given the loan documents

prior to closing and that he believes the facts surrounding his

loan transaction were purposefully hidden from him. However

Plaintiff has not plead any level of due diligence on his own

part to seek out the necessary disclosures or to inquire about

his right to rescind. The touchstone of the “excusable delay”

inquiry is that Plaintiff sought to discover operative facts but

was prevented from doing so by Defendants. If Plaintiff is going

to seek equitable treatment from this Court he must invest the

requisite effort necessary to justify suspending the statute of

limitations. 

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9

Equitable tolling will not be applied, and thus the statute

of limitations period has run. Defendants’ Motion to Dismiss

Plaintiff’s TILA claim is granted.

B. California’s RFDCPA As Asserted Against CHL and MERS

The California’s Rosenthal Fair Debt Collection Practices

Act (“RFDCPA”) was enacted “to prohibit debt collectors from

engaging in unfair or deceptive acts or practices in the

collection of consumer debts, and to require debtors to act

fairly in entering into and honoring such debts.” Cal. Civ. Code

§ 1788.1. Plaintiff alleges that Defendants CHL and MERS

violated the RFDCPA by “collecting on a debt not owed to the

Defendants, making false reports to credit reporting agencies,

falsely stating the amount of a debt, increasing the amount of

debt by including amounts that are not permitted by law or

contract, and using unfair and unconscionable means to collect a

debt.” 

However, based on the language of the statute, courts have

declined to regard a residential mortgage loan as a ‘debt’ under

the RFDCPA. See Cal. Civ. Code § 1788.2(e)-(f); Castaneda v.

Saxon Mortg. Services, Inc., No. 2:09cv01124, 2009 WL 4640673, at

*3 (E.D. Cal. Dec. 3, 2009) (holding that a foreclosure pursuant

to a deed of trust does not constitute a debt collection under the

RFDCPA); Ines v. Countrywide Home Loans, Inc., No. 08CV1267, 2008

WL 4791863, at *3 (S.D. Cal. 2008) (stating plaintiff’s mortgage

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

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10

Pittman v. Barclays Capital Real Estate, Inc., No. 09CV0241, 2009

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

plaintiff’s mortgage-related RDFCPA claim for failing to “invoke

statutory protections”). 

The behavior Plaintiff complains of arises out of or exists

in connection to his residential loan mortgage. As the courts

have repeatedly held, the collection of this debt does not fall

under the purview of the RFDCPA. 

 Defendants’ Motion to Dismiss Plaintiff’s RFDCPA claim is

granted. 

C. Negligence As Asserted Against All Defendants

Plaintiff alleges that the Defendants “owed a general duty

to the Plaintiff to perform acts in such a manner as to not cause

Plaintiff harm.” Plaintiff alleges that CHL and MERS breached

that duty when they “failed to maintain the original Mortgage

Note, failed to properly create original documents,[and] failed

to make the required disclosures to the Plaintiff.” Plaintiff

alleges Cheredayko and CHL breached a duty when “they used their

knowledge and skill to direct Plaintiff into two loans for which

Plaintiff was not qualified.”

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). 

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The existence of a legal duty on the part of the defendant is a

question of law to be determined by the court. Kentucky Fried

Chicken of California, Inc. v. Superior Court, 14 Cal. 4th 814,

819 (1997); Isaacs v. Huntington Memorial Hospital, 38 Cal. 3d

112, 124 (1985). When not provided by statute, the existence of

such a duty depends upon the foreseeability of the risk and a

weighing of policy considerations for and against the imposition

of liability. Jacoves v. United Merchandising Corp., 9 Cal. App.

4th 88, 105 (1992).

“[A]s a general rule, a financial institution owes 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, 1095-96 (1991) (affirming

summary judgment in favor of defendant lending institution

because defendant owed no duty to plaintiff in conducting its

loan processing procedures); see Wagner v. Benson, 101 Cal. App.

3d 27, 35 (1980) (“Liability to a borrower for negligence arises

only when the lender ‘actively participates’ in the financed

enterprise ‘beyond the domain of the usual money lender.’”). 

CHL, as lender, Cheredayko, as an employee of the lender,

and MERS, as nominee of the lender, owed no duty of care to

Plaintiff. Plaintiff has not plead any action beyond the domain

of a usual money lender which would create such a duty, or any

special relationship giving rise to a duty between Plaintiff and

the lender. 

Defendants’ Motion to Dismiss Plaintiff’s negligence claim

is therefore granted. 

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D. RESPA As Asserted Against CHL

Plaintiff alleges that on April 17, 2009 he sent CHL a QWR

demanding to rescind his loan as permitted by TILA. Plaintiff

contends CHL violated the RESPA, 12 U.S.C. §2605(e)(2), by

failing to properly respond to his QWR. 

RESPA requires mortgage loan servicers who receive a QWR for

information relating to the servicing of their loan to provide a

written response within 20 days acknowledging receipt of the

correspondence. 12 U.S.C. § 2605(e)(1)(A). For the purposes of

the Act, a QWR is defined as “a written correspondence [] that...

includes a statement of the reasons for the belief of the

borrower, to the extent applicable, that the account is in error

or provides sufficient detail to the servicer regarding other

information sought by the borrower.” 12 U.S.C. § 2605(e)(1)(B). 

Although Plaintiff describes his letter as a QWR, he fails

to allege any facts which qualify it as such. Plaintiff has not

alleged that he was seeking information about his account or that

he was attempting to correct an error. Plaintiff states only

that his QWR included a demand to rescind the loan. However, a

letter demanding rescission is simply that, a rescission letter. 

It does not amount to a QWR invoking the protection of RESPA.

Therefore, Plaintiff fails to state a claim for violation of

RESPA. Defendants’ Motion to Dismiss Plaintiff’s RESPA claim is

granted.

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E. Breach of Fiduciary Duty as Asserted Against Cheredayko

and CHL

The elements of a cause of action for breach of fiduciary

duty are 1) the existence of a fiduciary duty, 2) the breach of

that duty; and 3) damage proximately caused by the breach. Under

California law, “[a]s a general rule, a financial institution

owes 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 Federal Savings and Loan Assn., 231 Cal. App. 3d 1089, 1096

(1991); see also Price v. Wells Fargo Bank, 213 Cal. App. 3d 465,

476 (1989). Unless there is a finding of a joint venture or

special circumstances, a lender does not owe a borrower a

fiduciary duty. Resolution Trust Corp. v. BVS Development Inc.,

42 F.3d 1206, 1214 (9th Cir. 1994). 

Plaintiff alleges he hired Cheredayko and CHL to be his

agents for the purpose of obtaining a loan. He states that he

agreed to pay Cheredayko and CHL a commission from the proceeds. 

Based upon this alleged arrangement, Plaintiff asserts that

Cheredayko and CHL owed him a fiduciary duty.

However, as Plaintiff’s own Complaint explains, Cheredayko

at all times represented herself as a loan officer for CHL. 

Central to the fiduciary relationship is the knowing agreement by

the fiduciary to subordinate its interest to act on behalf of and

for the benefit of another. Committee on Children’s Television,

Inc. v. General Foods Corp. 35 Cal. 3d 197, 221 (1983). 

///

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Rather than knowingly agreeing to act on behalf of Plaintiff,

Cheredayko clearly informed Plaintiff that her employer, and

therefore her principal, was the lending institution CHL. CHL,

as a commercial lender, was entitled to pursue its own economic

interest in the loan transaction. See Kruse v. Bank of America,

202 Cal. App. 3d 38, 67 (1988). 

Therefore, Defendants’ Motion to Dismiss Plaintiff’s claim

for breach of fiduciary duty is granted. 

F. Fraud as Asserted Against All Defendants

In California the required elements of fraud are

“a) misrepresentation, b) knowledge of falsity, 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) (citation omitted). A claim for fraud requires a

heightened pleading standard in which 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., Securities Litigation, 42 F.3d 1541, 1548 (9th

Cir. 1994). 

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Here, that standard has not been met. Plaintiff alleges

that Cherdayko and CHL made false representations to Plaintiff

regarding interest rates, financing options, availability of

refinancing, and Plaintiff’s qualification for the loan.

Plaintiff alleges that CHL misrepresented that it had the right

to collect money on the debt, and that MERS misrepresented that

it was a qualified beneficiary. However Plaintiff’s Complaint

does not specifically allege what was false or misleading about

these statements and why they are false, therefore falling short

of the necessary pleading standard. Simply alleging that

Defendants “misrepresented” themselves is insufficient. 

Defendants’ Motion to Dismiss Plaintiff’s fraud claim is

granted. 

G. California’s UCL As Asserted Against All Defendants

California’s Business and Professions Code § 17200 et seq.,

more commonly known as California’s Unfair Competition Law

(“UCL”) defines unfair competition as “any unlawful, unfair or

fraudulent business act or practice.” “Unlawful” practices are

practices “forbidden by law, be it civil or criminal, federal,

state, or municipal, statutory, regulation, or court-made.” 

Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-39 (1994)

(citing People v. McKale, 25 Cal. 3d 626, 632 (1979)). To state

a cause of action based on an “unlawful” business act or practice

under the UCL, a plaintiff must allege facts sufficient to show a

violation of some underlying law. McKale, 25 Cal.3d at 635. 

///

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A business act or practice is “unfair” when the conduct

“threatens an incipient violation of an antitrust law, or

violates the policy or spirit of one of those laws because its

effects are comparable to a violation of the law, or that

otherwise significantly threatens or harms competition.” 

Cel-Tech Communications, Inc. v. L.A. Cellular Tel. Co., 20 Cal.

4th 163, 187 (1999). To sufficiently plead an action based on an

“unfair” business act or practice, a plaintiff must allege facts

showing the “unfair” nature of the conduct and that the harm

caused by the conduct outweighs any benefits that the conduct may

have. Motors, Inc. v. Times Mirror Co., 102 Cal. App. 3d 735,

740 (1980). 

A “fraudulent” business act or practice is one in which

members of the public are likely to be deceived. Hall v. Time,

Inc., 158 Cal. App. 4th 847, 849 (2008); Olsen, supra, 48 Cal.

App. 4th at 618 (“does not refer to the common law tort of fraud

but only requires a showing [that] members of the public ‘are

likely to be deceived’”). Thus, in order to state a cause of

action based on a “fraudulent” business act or practice, the

plaintiff must allege that consumers are likely to be deceived by

the defendant’s conduct. Committee on Children’s Television,

Inc. v. General Foods Corp., 35 Cal. 3d 197, 212 (1983). 

Furthermore, a plaintiff alleging unfair business practices

under § 17200 “must state with reasonable particularity the facts

supporting the statutory elements of the violation. Khoury v.

Maly’s of California, Inc., 14 Cal. App. 4th 612, 619 (1993).

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In alleging violation of the UCL, Plaintiff incorporates by

reference all prior causes of actions, however none of those

claims have been sufficiently plead to survive a motion to

dismiss. Plaintiff therefore lacks a predicate “unlawful” action

to underlie his UCL claim. 

Similarly he fails to allege with reasonable particularity

“unfair” or “fraudulent” behavior by Defendants. Plaintiff

asserts that “unlawful, unfair, and/or fraudulent business

practices” have occurred but he does not identify which specific

behaviors he believes are punishable under the UCL. To the

extent to which he may be referring to all alleged wrongful

conduct listed in the Complaint, Plaintiff still fails to state

why such behavior is “unfair” or “fraudulent” as defined by the

statute.

Due to Plaintiff’s failure to sufficiently plead unlawful,

unfair or fraudulent behaviors, Defendants’ Motion to Dismiss

Plaintiff’s UCL claim is granted.

H. Breach of Contract As Asserted Against Cheredayko and

CHL

Under California law, to state a claim for breach of

contract, the plaintiff must plead: 1) the existence of the

contract; 2) plaintiff’s performance or excuse for nonperformance

of the contract; 3) defendant’s breach of the contract; and

4) resulting damages. Armstrong Petrol. Corp. V. Tri Valley Oil

& Gas Co., 116 Cal. App. 4th 1375, 1391 n. 6 (2004). 

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Plaintiff alleges the contract was breached when Defendants

failed to provide an affordable loan, failed to obtain the

interest rates promised, failed to submit an accurate loan

application, failed to supervise, failed to provide loan

documents prior to closing, and failed to explain such documents

to Plaintiff.

However, despite these many complaints Plaintiff never

alleges where in his mortgage loan contract, or any contract,

these promises were explicitly memorialized. A breach of

contract claim rests upon the actual terms of the contract,

however Plaintiff fails to allege any breach of the express

provisions of the loan agreement. Consequently, Plaintiff’s

claim for breach of contract fails. Defendants’ Motion to

Dismiss Plaintiff’s breach of contract claim is granted.

I. Breach of Covenant of Good Faith and Fair Dealing as

Asserted Against Cheredayko and Countrywide

The implied covenant of good faith and fair dealing rests

upon the existence of some specific contractual obligation. Foley

v. Interactive Data Corp., 7 Cal. 3d 654, 683-684 (1988). The

covenant of good faith is read into contracts in order to protect

the express covenants or promises of the contract, not to protect

some general public policy interest not directly tied to the

contract’s purpose. Id. at 690. “In essence, the covenant is

implied as a supplement to the express contractual covenants, to

prevent a contracting party from engaging in conduct which

frustrates the other party’s rights to the benefits of the contract.”

 Love v. Fire Ins. Exchange, 221 Cal. App. 3d 1136, 1153 (1998). 

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Under California law, recovery for breach of the covenant

“is available only in limited circumstances, generally involving

a special relationship between the contracting parties.” Bionghi

v. Metro. Water Dist., 70 Cal. App. 4th 1358, 1370 (1999). 

California courts have rejected the argument that the doctrine,

which traditionally extends only to unique fiduciary like

relationships, should encompass normal commercial banking

transactions. Mitsui Mfrs. Bank v. Superior Court, 212 Cal. App.

3d 726, 729 (1989). 

Plaintiff alleges that Cheredayko and CHL breached the

covenant of good faith and fair dealing by “failing to pay at

least as much regard to Plaintiff’s interests as to Defendants’

interests,” “failing to disclose to Plaintiff the true nature of

the loan,” and “failing to give Plaintiff the requisite notice

and disclosures.”

Regardless whether these allegations are valid, redress is

not available under the good faith doctrine. There is not a

“unique fiduciary relationship” between parties such that

application of the doctrine is warranted. Instead, the alleged

breach arises out of a normal commercial transaction, a mortgage

loan, and the California courts have declined to extend the

doctrine to such transactions.

Accordingly, Defendants’ Motion to Dismiss Plaintiff’s claim

for breach of the covenant of good faith and fair dealing is

granted. 

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CONCLUSION

For the reasons set forth above, Defendants’ Motion to

Dismiss Plaintiff’s Complaint (Docket No. 15) is GRANTED with

leave to amend. Defendants’ Motions to Strike (Docket Nos. 16

and 18) are DENIED as moot. 

Plaintiff may file an amended complaint not later than

twenty (20) days after the date this Memorandum and Order is

filed electronically. If no amended complaint is filed within

said twenty (20)-day period, without further notice, Plaintiff’s

remaining claims will be dismissed without leave to amend.

IT IS SO ORDERED.

Dated: January 11, 2010

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

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