Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-01810/USCOURTS-caed-2_09-cv-01810-3/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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1 While Lehman Brothers is named in the caption of

plaintiff’s amended complaint, they are not complained against in

any of plaintiff’s causes of action. 

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

SCOTT W. WOODS,

Plaintiff,

 v.

GREENPOINT MORTGAGE FUNDING,

INC.; GMAC MORTGAGE; AURORA

LENDING SERVICES, LLC; LEHMAN

BROTHERS; US BANK; and Does 1

through 50, inclusive, 

Defendants. /

NO. CIV. 2:09-1810 WBS KJM

MEMORANDUM AND ORDER RE:

MOTIONS TO DISMISS

----oo0oo----

Plaintiff Scott W. Woods filed this action against

Greenpoint Mortgage Funding, Inc. (“Greenpoint”), GMAC Mortgage

(“GMAC”), Aurora Lending Services, LLC (“Aurora”), Lehman

Brothers,1

 and U.S. Bank National Association as trustee for

Greenpoint Mortgage Mortgage Funding Trust Mortgage Pass-Through

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Certificates, Series 2006-AR7 (“US Bank”), alleging various state

and federal claims relating to a loan he obtained to refinance

his home in Folsom, California. Greenpoint moves to dismiss

plaintiff’s First Amended Complaint (“FAC”) pursuant to Federal

Rule of Civil Procedure 12(b)(6) for failure to state a claim

upon which relief can be granted. GMAC, Aurora, and US Bank also

move to dismiss plaintiff’s FAC pursuant to Rule 12(b)(6). 

Plaintiff did not timely oppose the motions, and instead filed a

Notice of Opposition on April 9, 2010--eleven days late and four

days after the court took defendants’ motions under submission

without oral argument pursuant to Local Rule 230(c). (Docket No.

37.) 

I. Factual and Procedural Background

In 2006, plaintiff obtained a loan to refinance his

home in Folsom, California. (FAC ¶ 5.) The loan is an

adjustable-rate loan in the amount of $1,100,000. (Id.) 

Greenpoint is listed as the Lender on the promissory note. (Id.

¶ 9.) On August 18, 2008, plaintiff entered into a loan

modification with GMAC, who allegedly represented to be the

“Lender” under the loan. (Id. ¶ 35.) The loan modification

allegedly provided for a reduction in the interest rate for five

years. (Id.) 

In the course of attempting to determine who the owner

of the Note is, plaintiff alleges that in May 2009 GMAC informed

him that Aurora is the owner. (Id. ¶ 36.) Aurora allegedly has

no record of the loan, or of plaintiff, his address, or social

security number. (Id.) Plaintiff allegedly sent Greenpoint and

GMAC a Qualified Written Request (“QWR”) pursuant to the Real

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Estate Settlement Procedures Act of 1974 (“RESPA”), 12 U.S.C. §§

2601-2617, on May 27, 2009. (Id. ¶ 37.) GMAC responded again

that Aurora is the owner, and that GMAC is the loan servicer. 

(Id. ¶ 41.) Greenpoint represented to plaintiff that it sold the

loan to Lehman Brothers in August 2006 and transferred the loan

servicing to GMAC in October 2006. (Id. ¶ 45.) Plaintiff also

alleges that he validly rescinded the loan under the Truth in

Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667f, on May 28, 2009,

by giving notice to Greenpoint, GMAC, and Aurora. (Id. ¶¶ 23-

29.) Aurora responded to plaintiff’s Notice of Cancellation on

June 4, 2009, by allegedly stating it was unable to locate

plaintiff’s property in their records. (Id. ¶ 46.) 

Plaintiff’s counsel allegedly sent a letter to

Greenpoint, GMAC, and Aurora on June 15, 2009, to definitively

determine the owner of the Note. (Id. ¶ 48.) GMAC responded on

June 23, 2009, and allegedly stated that GMAC is the sub-servicer

and Aurora is the master servicer of the loan. (Id. ¶ 49.) GMAC

allegedly informed plaintiff that his loan is held in a pool of

loans for which U.S. Bank acts as trustee. (Id.) On June 27,

2009, Woods allegedly sent U.S. Bank notice of his rescission of

the loan. (Id. ¶ 24.) Greenpoint responded on September 16,

2009, allegedly stating and providing documentation that the

loan’s beneficial interest was transferred from Greenpoint to

Aurora on August 16, 2009 and the servicing was transferred to

GMAC on October 9, 2006. (Id. ¶ 50.) 

Plaintiff alleges that GMAC and Aurora are the

servicers of his loan, and that they have failed to disclose the

owner of his loan. (Id. ¶¶ 32, 51.) Plaintiff also alleges that

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defendants understated the interest rate on his loan, failed to

make required disclosures, and improperly retained and misapplied

funds collected from plaintiff. 

On the basis of the allegations above, plaintiff

asserts five causes of action against five defendants. 

Greenpoint’s Motion to Dismiss only challenges plaintiff’s first

cause of action, as it is the only cause of action that complains

against Greenpoint. GMAC, Aurora, and US Bank’s Motion to

Dismiss addresses each of plaintiff’s claims. 

II. Discussion

On 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 (1974), overruled on other grounds by Davis v.

Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322

(1972). To survive a motion to dismiss, a plaintiff needs to

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

plausible on its face.” Bell Atl. Corp. v. Twombly, 127 S. Ct.

1955, 1974 (2007). This “plausibility standard,” however, “asks

for more than a sheer possibility that a defendant has acted

unlawfully,” and where a complaint pleads facts that are “merely

consistent with” a defendant’s liability, it “stops short of the

line between possibility and plausibility.” Ashcroft v. Iqbal,

129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at

556-57).

In general a court may not consider items outside the

pleadings upon deciding a motion to dismiss, but may consider

items of which it can take judicial notice. Barron v. Reich, 13

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F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial

notice of facts “not subject to reasonable dispute” because they

are either “(1) generally known within the territorial

jurisdiction of the trial court or (2) capable of accurate and

ready determination by resort to sources whose accuracy cannot

reasonably be questioned.” Fed. R. Evid. 201. 

Defendants have each submitted a Request for Judicial

Notice (“RJN”). Greenpoint’s RJN contains four documents: (1) a

copy of the Deed of Trust, recorded in the Official Records of

Sacramento County on June 30, 2006; (2) a copy of the Note, which

is identical to the copy provided by plaintiff in Exhibit G to

the FAC; (3) a copy of the Notice of Right to Cancel, which is

identical to plaintiff’s exhibit C; (4) a copy of the letter

dated June 23, 2009, from counsel for GMAC to plaintiff’s

counsel, which is identical to plaintiff’s Exhibit K. The court

will take judicial notice of exhibits 1, 2, and 4 in defendant’s

RJN, as they are matters of public record or whose accuracy

cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d

668, 689 (9th Cir. 2001). Because plaintiff alleges that he

never received this copy of the Notice of Right to Cancel nor

signed it (FAC ¶¶ 17-18), the court will decline to take judicial

notice of Greenpoint’s third exhibit. See Olivera v. Am. Home

Mortg. Servicing, Inc., No. 09-3616, 2010 WL 334848, at *4 (N.D.

Cal. Jan. 22, 2010) (declining to take judicial notice of alleged

Notice of Right to Cancel proffered by defendants where plaintiff

challenged its authenticity); see also Morris v. Bank of Am., No.

09-2849, 2010 WL 761318, at *4 (N.D. Cal. Mar. 3, 2010) (same). 

Defendants GMAC, Aurora, and US Bank’s RJN contains two

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documents: (1) a copy of the Deed of Trust; and (2) a copy of the

Notice of Right to Cancel, which is identical to plaintiff’s

exhibit C. The court will grant judicial notice of (1) and deny

judicial notice of (2) for the same reasons explained above. 

A. Truth in Lending Act Claim

Plaintiff’s first cause of action complains against

Greenpoint, GMAC, Aurora, and US Bank. Plaintiff alleges that

Greenpoint violated TILA by failing at the origination of the

loan to make the “material disclosures,” to disclose the finance

charge, and to deliver two copies of the notice of the right to

rescind as required by TILA. (FAC ¶¶ 13-17.) Rather, plaintiff

alleges that he received only one defective copy of the notice of

right to cancel from Greenpoint. (Id. ¶ 17.) Plaintiff also

alleges that Greenpoint, GMAC, US Bank, and Aurora violated TILA

when they did not implement plaintiff’s rescission of the loan

within twenty days as required by TILA, and when they failed to

return any money received by them from plaintiff as part of the

loan transaction. (Id. ¶¶ 28-29.) Plaintiff requests both a

declaration that the Deed of Trust is now void as a result of

plaintiff’s prior rescission and damages as the result of these

alleged violations.

1. Greenpoint’s Motion to Dismiss

Greenpoint presents three reasons why plaintiff’s first

cause of action should be dismissed against it. First,

Greenpoint argues that plaintiff’s rescission claim is timebarred under TILA. (Greenpoint Mem. in Supp. of Mot. to Dismiss

(Docket No. 25), at 4.) Yet plaintiff does not seek rescission

of the loan; indeed, plaintiff alleges that he rescinded the loan

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by letter on May 28, 2009, (FAC Ex. D (Notice of Cancellation))

and seeks declaratory relief that the security interest is void

and damages for defendants’ failure to comply with the Notice of

Cancellation. As Greenpoint acknowledges, plaintiff has three

years from the date of consummation of the transaction to

rescind, which plaintiff has allegedly done. See 15 U.S.C. §

1635(f). Greenpoint’s first argument, therefore, must fail.

Second, Greenpoint argues that plaintiff’s first cause

of action must be dismissed because a TILA damages claim is

subject to a one-year statue of limitations. 15 U.S.C. §

1640(e). Plaintiff seeks both damages and declaratory relief for

the alleged TILA violation. In his Opposition, plaintiff argues

that the damages claims in his first cause of action should

survive as a defense by recoupment or set-off. (Mem. in Opp’n to

Def.’s Mot. to Dismiss (Docket No. 37), at 5.) In support of

this argument, plaintiff cites 15 U.S.C. § 1640(e), which

provides that the one-year statute of limitations does not apply

where a borrower “assert[s] a violation of this subchapter in an

action to collect the debt which was brought more than one year

from the date of the occurrence of the violation as a matter of

defense by recoupment or set-off in such action . . . .” 

Plaintiff has not alleged, however, that defendants have

initiated any court proceedings against plaintiff to collect on

plaintiff’s debt. Rather, plaintiff has filed suit against

defendants. When a debtor files suit against her creditor, “the

claim by the debtor is affirmative rather than defensive.” Ortiz

v. Accredited Home Lenders, Inc., 639 F. Supp. 2d 1159, 1164-65

(S.D. Cal. 2009) (citation omitted) (also noting that a nonCase 2:09-cv-01810-WBS -CKD Document 42 Filed 04/28/10 Page 7 of 22
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judicial foreclosure is not an “action” as contemplated by TILA). 

Plaintiff’s claim for damages under TILA, therefore, is not

subject to a waiver of the one year statute of limitations. As

plaintiff filed his complaint more than one year after the

origination of his loan and has provided no facts that would

support equitable tolling of the statute of limitations, his

claim for damages related to TILA violations at the origination

of his loan must be dismissed. 

While plaintiff filed his claim for damages more than a

year after the closing of his loan, the failure to honor

plaintiff’s rescission request or request for information is a

separate actionable violation of TILA. See Buick v. World Sav.

Bank, 637 F. Supp. 2d 765, 771-72 (E.D. Cal. 2008) (England, J.)

(citing In re Wright, 133 B.R. 704 (E.D. Pa. 1991) (“The failure

of a lender to properly act on a rescission is a new violation

separate and distinct from the disclosure violation that gave

rise to the right to rescind.”)). As alleged, plaintiff provided

Greenpoint with a valid notice of rescission within the requisite

time period under 15 U.S.C. § 1635(f) and Greenpoint refused to

comply. If a creditor receives a timely Notice of Cancellation

and then refuses to cancel the loan, the borrower has one year

from the refusal to file suit for damages pursuant to 15 U.S.C. §

1640. Miguel v. Country Funding Corp., 309 F.3d 1161, 1165 (9th

Cir. 2002) (citing 15 U.S.C. § 1640(e)). Because plaintiff

brought this action for damages pursuant to 15 U.S.C. § 1640

within one year of having his Notice of Cancellation refused, it

is timely. See Buick, 637 F. Supp. 2d at 771-72 (citing Belini

v. Wash. Mut. Bank, FA, 412 F.3d 17, 25 (1st Cir. 2005)). 

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Third, Greenpoint argues that plaintiff has never

offered to tender the funds necessary to validly rescind the

loan. Under TILA, the security interest in the Note becomes void

upon rescission and the creditor must return any money or

property given by the borrower under the transaction within

twenty days. 15 U.S.C. § 1635(b); see 12 C.F.R. § 226.23(d). 

“Upon the performance of the creditor’s obligations,” the

borrower must tender the property or its reasonable value to

creditor. 15 U.S.C. § 1635(b). A notice of rescission, however,

does not always automatically rescind the Note. If a defendant

acquiesces to the notice then the transaction automatically

rescinds, thereby triggering the sequence of events outlined in §

1635(b). If a defendant contests the notice, however, then “it

cannot be that the security interest vanishes immediately upon

the giving of notice.” Yamamoto v. Bank of N.Y., 329 F. 3d 1167,

1172 (9th Cir. 2003) (“In a contested case, [rescission] happens

when the right to rescind is determined in the borrower’s

favor.”). 

Section 1635 gives courts the power to modify the

rescission procedure. 15 U.S.C. § 1635(b). The Ninth Circuit

has held that in certain circumstances rescission under TILA

“should be conditioned on repayment of the amounts advanced by

the lender,” Yamamoto, 329 F. 3d at 1170 (citing LaGrone v.

Johnson, 534 F.2d 1360 (9th Cir. 1976) (requiring tender where

TILA violations were not egregious and equities favor creditor

that would be left in unsecured position in borrower’s

intervening bankruptcy)), and that judges may alter the sequence

of rescission events under 15 U.S.C. § 1635(b). See Yamamoto,

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329 F.3d at 1171 (“[W]hether a decree of rescission should be

conditional depends upon ‘the equities present in a particular

case, as well as consideration of the legislative policy of full

disclosure that underlies [TILA] and the remedial-penal nature of

the private enforcement provisions of the Act.’”) (quoting Palmer

v. Wilson, 502 F.2d 860, 862 (9th Cir. 1974)); see also In re

Hubbel, No. 09-3424, 2010 WL 1222777, at *4 (N.D. Cal. Mar. 24,

2010) (discussing Yamamoto). 

District courts in this circuit have dismissed

rescission claims under TILA at the pleading stage based upon the

plaintiff’s failure to allege an ability to tender loan proceeds. 

See, e.g., Garza v. Am. Home Mortgage, No. 1:08-1477, 2009 U.S.

Dist. LEXIS 7448, at *15 (E.D. Cal. Jan. 27, 2009) (stating that

“rescission is an empty remedy without [the borrower’s] ability

to pay back what she has received”); Ibarra v. Plaza Home

Mortgage, No. 09-1707, 2009 U.S. Dist. LEXIS 80581, at *22 (S.D.

Cal. Sept. 4, 1009); Carnero v. Weaver, No. 09-1995, 2009 U.S.

Dist. LEXIS 62665, at *8 (N.D. Cal. July 20, 2009); Pesayco v.

World Sav., Inc., No. 09-3926, 2009 U.S. Dist. LEXIS 73299, at *4

(C.D. Cal. July 29, 2009); Ing Bank v. Korn, No. 09-124Z, 2009

U.S. Dist. LEXIS 73329, at *7 (W.D. Wash. May 22, 2009). 

Plaintiff’s Notice of Cancellation stated that plaintiff would

“tender to you any and all monies or properties you have given to

borrower, or their reasonable value” upon completion of the

creditor’s obligations under 15 U.S.C. § 1635(b). (FAC Ex. D.) 

Plaintiff has not, however, pled his ability to tender the loan

proceeds, and his bald assertion that he will tender over one

million dollars does not cross “the line between possibility and

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plausibility.” Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550

U.S. at 556-57). 

Like many other courts in the Ninth Circuit, this court

will not entertain plaintiff’s claims for relief under TILA as a

result of defendants’ failure to honor his rescission unless

plaintiff alleges the ability to complete his part of the

rescission process and tender either the property itself or its

reasonable value as required by section 1635. Taking all facts

plead in the most favorable light to plaintiff, he has pled that

he mailed a timely Notice of Cancellation to defendants and has

offered to tender, but has not alleged any facts indicating that

he has or is able to tender sufficient funds to repay the loan

principal. To the contrary, the facts that the court does have

indicate that plaintiff has thus far been unable to tender the

amount of the loan or unwilling to return the property to the

creditor. (FAC Ex. K.) Without facts indicating plaintiff’s

ability to tender, he cannot seek relief from the court for

defendant’s alleged failure to honor his rescission. 

Greenpoint’s motion to dismiss will therefore be granted with

leave to amend.

2. GMAC, Aurora, and US Bank’s Motion to Dismiss

Plaintiff alleges that GMAC, Aurora, and US Bank failed

to implement his notice of rescission under TILA, and alleges

that each of them are assignees of his loan. Section 1641 of

TILA specifically makes assignees of creditors civilly liable

under TILA. 15 U.S.C. § 1641. As alleged assignees, GMAC,

Aurora, and US Bank have the same defenses available to them as

Greenpoint. For the reasons stated above, GMAC, Aurora, and US

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Bank’s motion to dismiss plaintiff’s first cause of action will

also be granted. 

B. Real Estate Settlement Procedures Act and TILA Claim

The Real Estate Settlement Procedures Act of 1974

(“RESPA”), 12 U.S.C. §§ 2601-2617, provides that borrowers must

be provided certain disclosures relating to the mortgage loan

settlement process. See 12 U.S.C. § 2601 (2006). Section 2605

relates to the disclosures and communications required regarding

the servicing of mortgage loans, and provides that loan servicers

have a duty to respond to qualified written requests (“QWRs”)

from borrowers asking for information relating to the servicing

of their loan. See 12 U.S.C. § 2605(e). Loan servicers have

sixty days after the receipt of a QWR to respond to the borrower

inquiry. 12 U.S.C. § 2605(e)(2). 

Plaintiff’s second cause of action complains against

GMAC and Aurora as loan servicers for failing to provide required

disclosures, misapplying funds belonging to plaintiff, failing to

provide a full accounting, and failing to disclose ownership of

the Note and loan. Plaintiff alleges that, inter alia, he mailed

GMAC and Greenpoint a QWR on May 27, 2009, which included a

demand to disclose the ownership of the Note as required by TILA. 

(FAC ¶ 38.) GMAC allegedly told plaintiff that Aurora owns the

loan and that GMAC is the servicer, Greenpoint told plaintiff

that the loan was sold to Lehman Brothers and that GMAC is the

servicer, and Aurora has stated in phone conversations with

plaintiff that it has no record of the loan. (Id. ¶¶ 41, 45-47;

Id. Ex. F-I.) Counsel for GMAC later allegedly informed

plaintiff that GMAC is the loan’s sub-servicer, Aurora is the

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master servicer, and that the loan is held in a pool of loans for

which US Bank acts as trustee. (Id. ¶ 49; Id. Ex. K.) Because

GMAC has allegedly provided plaintiff with conflicting

information regarding the ownership of his Note, plaintiff

charges that it has not properly responded to his QWR or provided

him with the identification of the present owner of the Note. 

(Id. ¶¶ 39-51.) 

GMAC and Aurora argue that plaintiff’s TILA cause of

action must fail because it is time-barred by the one-year

statute of limitations for damages claims under TILA. 

Plaintiff’s second cause of action alleges that GMAC and Aurora

violated TILA, 15 U.S.C. § 1641(f)(2), which provides that a loan

servicer “shall provide the obligor, to the best knowledge of the

servicer, with the name, address, and telephone number of the

owner of the obligation or the master servicer of the

obligation.” (See FAC ¶ 52.) As previously stated, the failure

to honor plaintiff’s request for information is a distinct,

actionable violation under TILA. See Buick, 637 F. Supp. 2d at

771-72. 

However, “[c]ivil liability under TILA applies to

creditors.” Pelayo v. Home Capital Funding, No. 08-CV-2030, 2009

U.S. Dist. LEXIS 44453, at *12 (S.D. Cal. May 22, 2009). “15

U.S.C. § 1641 provides that any TILA action (including a

rescission claim) which may be brought against a creditor may

also be brought against the assignee of a creditor. However,

under § 1641, loan servicers ‘shall not be treated as an assignee

of [a consumer] obligation for purposes of this section unless

the servicer is or was the owner of the obligation.’” Id.

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2 The allegation the defendant is a servicer and/or

creditor under TILA is permissible because alternative

allegations are permitted under Federal Rule of Civil Procedure

8(d).

14

(emphasis in original); see also Marks v. Ocwen Loan Servicing,

2008 U.S. Dist. LEXIS 12175, at *4-5 (N.D. Cal. Feb. 6, 2008)

(noting that “although TILA provides that assignees of a loan may

be liable for TILA violations, loan servicers are not liable

under TILA as assignees unless the loan servicer owned the loan

obligation at some point”). Plaintiff alleges that GMAC and

Aurora are servicers, yet also alleges that he does not know who

owns the Note or how the beneficial interest in the loan has

transferred over time. While it is unclear whether defendants

were in fact an assignee of plaintiff’s loan, construing the

facts and all reasonable inferences in favor of plaintiff, it

plausible that defendants were an assignee of the creditor of the

loan outside of servicing obligations.2

 See Pelayo, 2009 U.S.

Dist. LEXIS 44453 at *13; see also Cabalo v. EMC Mortg. Corp.,

No. 08-5667, 2009 U.S. Dist. LEXIS 8283, at *6 (N.D. Cal. Feb. 5,

2009)(finding the plaintiff sufficiently pled that defendant

mortgage servicer was liable under TILA under circumstances where

“it [was] not clear who the loan’s holder [was]” and “documents

submitted by defendants [did] not show [an assignment of the

loan] was never made”). 

GMAC also argues that plaintiff’s RESPA cause of action

must fail because he fails to allege how it failed to respond to

his QWR request and he has not identified any code section of

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3 Plaintiff alleges that he sent a QWR to Greenpoint and

GMAC, and does not allege that he sent a QWR to Aurora. Because

plaintiff does not allege any other specific RESPA violations

other than the failure to respond to the QWR, the court will

interpret this claim as alleged solely against GMAC. 

4 RESPA defines “servicing” as: “[R]eceiving any

scheduled periodic payments from a borrower pursuant to the terms

of any loan . . . and making the payments of principal and

interest and such other payments with respect to the amounts

received from the borrower as may be required pursuant to the

terms of the loan.” 12 U.S.C. § 2605(i)(3). 

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RESPA that GMAC allegedly violated.3

 RESPA obliges servicers to

respond to QWRs for information “relating to the servicing of”

the loan within sixty days. 12 U.S.C. § 2605(e)(1)(A),

(e)(2)(C). Plaintiff specifically alleges that he requested TILA

disclosures pursuant to 15 U.S.C. § 1641(f)(2). Information

regarding oh whose behalf the servicer is accepting loan payments

seems to clearly be related to the servicing of plaintiff’s loan

and a proper subject of a QWR under RESPA.4 Plaintiff admits

that GMAC responded to his written requests, but alleges that the

varied responses and documentary evidence show that the

defendants are providing him with false and misleading

information. (FAC ¶¶ 39-40, 43, 51, 57.) Viewing the FAC in the

light most favorable to the plaintiff, plaintiff has stated a

valid RESPA cause of action against GMAC. 

Plaintiffs must also allege actual harm to survive a

motion to dismiss. Section 2605(f) imposes liability on

servicers that violate RESPA and fail to make the required

disclosures. 12 U.S.C. § 2605(f). Although this section does

not explicitly make a showing of damages part of the pleading

standard, “a number of courts have read the statute as requiring

a showing of pecuniary damages in order to state a claim.” Allen

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v. United Financial Mortg. Corp., 2009 WL 2984170, at *5 (N.D.

Cal. Sept. 15, 2009). For example, in Hutchinson v. Del. Sav.

Bank FSB, the court stated that “alleging a breach of RESPA

duties alone does not state a claim under RESPA. Plaintiff must,

at a minimum, also allege that the breach resulted in actual

damages.” 410 F. Supp. 2d 374, 383 (D.N.J. 2006). Courts,

however, “have interpreted this requirement liberally.” Yulaeva

v. Greenpoint Mortg. Funding, Inc., No. 09-1504, 2009 WL 2990393,

at *15, (E.D. Cal. Sept. 9, 2009)(Karlton, J.). 

Plaintiff alleges that he has made over $100,000 in

mortgage payments to GMAC and that he relied on GMAC’s assertion

that it owned the loan by entering into a loan modification

arrangement with GMAC. (FAC ¶¶ 35, 72.) Plaintiff has been unable

to determine who owns his loan, where his mortgage payments to

GMAC have gone, and how they have been applied or misapplied to

paying off his loan balance. By failing to give plaintiff a

straight answer to these simple questions, GMAC has harmed

plaintiff by preventing him from rescinding the loan and having

his mortgage payments returned to him. Plaintiff has therefore

stated a valid RESPA cause of action. 

C. Fraud

In California, the essential elements of a claim for

fraud are “(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). Under the heightened

pleading requirements for claims of fraud under Federal Rule of

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Civil Procedure 9(b), “a party must state with particularity the

circumstances constituting the fraud.” Fed. R. Civ. P. 9(b). 

The plaintiffs must include the “who, what, when, where, and how”

of the fraud. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1006

(9th Cir. 2003) (citation omitted). “The plaintiff must set

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

is false.” Decker v. Glenfed, Inc., 42 F.3d 1541, 1548 (9th Cir.

1994). Additionally, “[w]here multiple defendants are asked to

respond to allegations of fraud, the complaint must inform each

defendant of his alleged participation in the fraud.” Ricon v.

Reconstrust Co., No. 09cv937, 2009 WL 2407396, at *3 (S.D. Cal.

Aug. 4, 2009) (quoting DiVittorio v. Equidyne Extractive Indus.,

822 F.2d 1242, 1247 (2d Cir. 1987)).

Plaintiffs’ fraud allegation reincorporates his earlier

allegations, which include references to the exhibits of letters

sent by plaintiff and from defendants regarding the holder of the

Note and owner of the loan. (See FAC Ex. D-L). These exhibits

clearly provide the date, address, and identifying information

about the defendants and the alleged statements made by them with

enough specificity to put GMAC and Aurora sufficiently on notice

as to the statements that plaintiff alleges are false and

misleading. Plaintiff alleges that GMAC and Aurora’s letters and

statements to him regarding the owner of the loan are false and

misleading in part because they are clearly in conflict, (FAC ¶

64) which is sufficient to survive a motion to dismiss at this

time.

Likewise, plaintiff has established the remaining

elements of fraud sufficiently. Plaintiff alleges that he had

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relied on GMAC’s prior assertions that it owned the loan when he

entered into a loan modification agreement with GMAC, and that he

has been harmed by this fraud as he has been unable to rescind

the loan and have his principal payments returned to him. This

properly alleges both intent to induce reliance and the “cause

and effect relationship between the fraud and damages sought”

necessary to survive a motion to dismiss. Small v. Fritz

Companies, 30 Cal. 4th 167, 202 (2003) (citations omitted). 

Plaintiff’s allegations that each defendant has denied ownership

of the loan and passed him off to another party is sufficient to

plead scienter. It is clear that at least some, if not all, of

the information allegedly told to plaintiff by the defendants is

false. As a result, plaintiff has been prevented from

determining who owns his loan, how his mortgage payments have

been credited to his loan balances, or rescinding the loan. GMAC

and Aurora’s motion to dismiss plaintiff’s third cause of action

will therefore be denied. 

D. Negligent and Reckless Misrepresentation

To prove a cause of action for negligence, plaintiff

must show “(1) a legal duty to use reasonable care; (2) breach of

that duty, and (3) proximate [or legal] cause between the breach

and (4) the plaintiff[s’] injur[ies].” Mendoza v. City of Los

Angeles, 66 Cal. App. 4th 1333, 1339 (Ct. App. 1998) (citation

omitted). “The existence of a legal duty to use reasonable care

in a particular factual situation is a question of law for the

court to decide.” Vasquez v. Residential Invs., Inc., 118 Cal.

App. 4th 269, 278 (2004). 

Plaintiff’s fourth cause of action for negligent and

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reckless misrepresentation states only that GMAC and Aurora did

not have reason to believe that their statements to plaintiff

were true, and that plaintiff relied on these representations to

his detriment. (FAC ¶¶ 68-70.) Even incorporating the prior

allegations by reference, this sparse pleading clearly fails to

allege the necessary elements for negligence. Specifically,

plaintiff fails to allege how Aurora and GMAC owed him a duty of

care and that they breached that duty, how plaintiff was injured,

and that his injuries are causally related to defendants’

representations. This is compounded by the fact that, to the

extent that plaintiff alleges that GMAC and Aurora are loan

servicers, they do not owe a duty to the borrowers of the loans

they service. See Watts v. Decision One Mortg. Co., No. 09-43

2009 U.S. Dist. LEXIS 59694 (S.D. Cal. July 13, 2009); Marks v.

Ocwen Loan Servicing, No. 07-2133, 2009 WL 975792, at *7 (N.D.

Cal. Apr. 10, 2009) (“[A] loan servicer does not owe a fiduciary

duty to a borrower beyond the duties set forth in the loan

contract.”) 

The court will therefore dismiss this cause of action

with leave to amend.

E. Conversion

Defendants also seek dismissal of plaintiff’s

conversion claim. “Conversion is any act of dominion wrongfully

exerted over another’s personal property in denial of or

inconsistent with his rights therein,” which includes assuming

“control or ownership over the property,” or applying the

property to one’s own use. Messerall v. Fulwider, 199 Cal. App.

3d 1324, 1329 (1988) (citing Igauye v. Howard, 114 Cal. App. 2d

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122, 126 (1952)). The basic elements of a conversion claim are

(1) the plaintiff’s ownership or right to possession of personal

property; (2) the defendant’s disposition of the property in a

manner that is inconsistent with the plaintiff’s property rights;

and (3) resulting damages. Fremont Indemnity Co. v. Fremont Gen.

Corp., 148 Cal. App. 4th 97, 119 (2007) (citing Burlesci v.

Petersen, 68 Cal. App. 4th 1062, 1066 (1998)). Legal title to

property is not necessary for an action for damages in

conversion; a plaintiff must only show that she was “entitled to

immediate possession at the time of conversion.” Messerall v.

Fulwider, 199 Cal. App. 3d 1324, 1329 (1988) (citing Bastanchury

v. Times-Mirror Co., 68 Cal. App. 2d 217, 236 (1945)). 

 Defendants argue that plaintiff has failed to allege

facts that plausibly show that either GMAC or Aurora “exercised

dominion over plaintiff’s personal property in a manner

inconsistent with the plaintiff’s rights at the time.” Somsanith

v. Bank of America, N.A., No. 09-1791, 2009 WL 3756693, at *4

(E.D. Cal. Nov. 6, 2009) (Shubb, J.) Unlike in Somsanith,

plaintiff here alleges that GMAC and Aurora collected payments

from plaintiff and failed to apply them to his loan. While GMAC

may have had the right as plaintiff’s servicer to receive

payments from plaintiff, and while Aurora may have had the right

as plaintiff’s senior servicer or owner of the loan to receive

payments from GMAC, neither had the right to allegedly convert

plaintiff’s funds for their own gain. Plaintiff alleges that

GMAC and Aurora provided conflicting information with respect to

Aurora’s involvement in the loan and with respect to alleged

payments made by GMAC to Aurora. (FAC ¶¶ 73-74.) This is

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sufficient to plead that one or both of defendants improperly

converted plaintiff’s mortgage payments, and plaintiff has

therefore adequately pled a cause of action for conversion. 

F. Sanctions

James A. Nations ignored Local Rule 230(c) and failed

to timely file his opposition to defendants’ motions to dismiss. 

Instead of informing the court of his inability to meet the

opposition deadline, he did nothing. Counsel’s failure to comply

with Local Rule 230(c) and timely file any response to

Greenpoint’s or Aurora, US Bank, and GMAC’s motions to dismiss is

inexcusable and has seriously inconvenienced both opposing

counsel and the court. Specifically, it has disrupted the

orderly process of litigation by forcing the court to spend hours

attempting to figure out what arguments plaintiff would have made

had plaintiff bothered to file an opposition. The court then

received plaintiff’s untimely opposition after it had already

completed drafting a final order on the defendants’ motions. 

This untimely submission forced the court to not only start all

over in evaluating defendants’ motions, but to further delay the

issuance of the order so that defendants could submit a reply and

respond to plaintiff’s arguments. 

Local Rule 110 authorizes the court to impose sanctions

for “[f]ailure of counsel or of a party to comply with these

Rules.” The court will therefore sanction plaintiff’s counsel,

James A. Nations, $250.00 payable to the Clerk of the Court

within ten days from the date of this Order, unless he shows good

cause for his failure to comply with the Local Rules.

IT IS THEREFORE ORDERED that Greenpoint’s Motion to

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Dismiss be, and the same hereby is, GRANTED.

IT IS FURTHER ORDERED that GMAC, Aurora, and US Bank’s

Motion to Dismiss is DENIED with respect to plaintiff’s second,

third, and fifth causes of action.

IT IS FURTHER ORDERED that GMAC, Aurora, and US Bank’s

Motion to Dismiss is GRANTED in all other respects.

IT IS FURTHER ORDERED that within ten days of the date

of this Order James A. Nations shall either (1) pay sanctions of

$250.00 to the Clerk of the Court, or (2) submit a statement of

good cause explaining his failure to comply with Local Rule

230(c).

Plaintiff has thirty days from the date of this Order

to file an amended complaint, to the extent he can do so

consistent with this Order.

DATED: April 27, 2010

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