Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_08-cv-02245/USCOURTS-casd-3_08-cv-02245-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 28:1441 Petition for Removal

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DENISE GALLEGOS AND ADRIANA

ALVAREZ,

Plaintiffs,

CASE NO. 08cv2245 WQH (LSP)

ORDER

vs.

RECONTRUST COMPANY;

COUNTRYWIDE HOME LOANS, INC.;

and DOES 1-50, inclusive,

Defendants.

HAYES, Judge:

The matter before the Court is the Motion to Dismiss Complaint or, in the Alternative,

for a More Definite Statement (Doc. #4).

Background

On November 4, 2008, Plaintiffs initiated this action by filing a Complaint in the

Superior Court of California, County of San Diego. Not. of Removal, p. 2. On December 8,

2008, Defendants Recontrust Company (“Recontrust”) and Countrywide Home Loans, Inc.

(“Countrywide”) removed the Complaint to this Court (Doc. #1). The Complaint alleges that

Plaintiffs own real property in Oceanside, CA (the “Property”). The Complaint alleges that

Plaintiffs have a residential loan for the Property secured by a Deed of Trust. The Complaint

alleges that Recontrust is the appointed trustee to the Deed of Trust. The Complaint alleges

that Defendants Countrywide and Does 1-50 “are proceeding toward a Trustee’s sale of” the

Property. The Complaint alleges that Countrywide is not the “holder of the note identified in

Case 3:08-cv-02245-WQH-LSP Document 7 Filed 01/29/09 Page 1 of 6
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the [Deed of Trust].” Complaint, ¶ 7. The Complaint alleges:

Country has no present right to initiate foreclosure under the [Deed of Trust]

identified in the Notice of Sale . . . , nor does it have the right to direct the

Recontrust Company to foreclose and sell the subject real property owned by

Plaintiffs. Defendant Recontrust Company has been put on notice of Plaintiffs’

claim in this regard, and demand has been made of Recontrust Company to

suspend any foreclosure sale unless and until it has obtained proof that

Countrywide actually has in its possession the original note properly endorsed

to it or assigned to it as of a date preceding the notice of default recorded by

Recontrust Company. Defendant Recontrust Company has failed and refused

to suspend the sale of the property or to provide proof of the basis of the right

of Countrywide to initiate foreclosure under the [Deed of Trust].

Id., ¶ 8. The Complaint alleges that Plaintiffs demanded written proof of Defendants’ right to

proceed in foreclosure, and that no such proof has been offered. The Complaint alleges that

Defendants have “engaged in a pattern and practice of utilizing the non-judicial foreclosure

procedures of this State to foreclose on properties when they do not, in fact, have the right to

do so,” and have used the United States mail in furtherance of their conspiracy. Id., ¶¶ 9, 13.

The Complaint alleges that in pursuing non-judicial foreclosure, Defendants falsely

represented that they had a right to payment under Plaintiffs’ residential loan, which was

secured by the Deed of Trust. 

The Complaint alleges causes of action for “Unfair Debt Collection Practices;”

“Predatory Lending Practices;” and “RICO.” Complaint, p. 4-6. In support of the cause of

action for Unfair Debt Collection Practices, the Complaint alleges that Defendants “have acted

as a debt collector,” and “have violated provisions of California’s Rosenthal Fair Debt

Collection Practices Act, including but not limited to Civil Code § 1788(e) and (f),”

(“RFDCPA”), “the Federal Fair Debt Collections Act, 15 U.S.C., Title 41, Subchap. V, §§

1692, et seq.” (“FDCPA”), “and the Real Estate Settlement Procedures Act . . . , 12 U.S.C. §§

2601-2617" (“RESPA”). Id., ¶¶ 19-21. In support of the cause of action for Predatory

Lending Practices, the Complaint alleges that “[a]ssuming arguendo that Defendant,

Countrywide does have the right . . . to initiate foreclosure . . . then Defendant, Countrywide

is subject to defenses that would have been available against Countrywide the initial Lender

identified in the” Deed of Trust. Id., ¶ 23. The Complaint alleges that Countrywide “has

engaged in predatory lending practices with respect to Plaintiffs . . . the specifics of which are

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unknown,” in violation of the Home Ownership and Equity Protection Act, 15 U.S.C. §§ 1637

(“HOEPA”), the Truth in Lending, 15 U.S.C. § 1601 (“TILA”), Regulation Z, 12 C.F.R. 226,

and the Federal Trade Commission Act, 15 U.S.C. §§ 41-58 (“FTC Act”). Id., ¶ 24. In support

of the cause of action for RICO, the Complaint alleges that “Defendants and each of them were

participating in and have participated in a scheme of racketeering as that term is defined in the

Federal Racketeer Influenced and Corrupt Organizations (“RICO”), 18 U.S.C. §§ 1961, et

seq.” Id., ¶ 27. 

On December 11, 2008, Recontrust and Countrywide filed the Motion to Dismiss for

failure to state a claim, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.

Plaintiffs have not filed an opposition to the Motion to Dismiss.

Standard of Review

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests

the legal sufficiency of the pleadings. See De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir.

1978). A complaint may be dismissed for failure to state a claim under Rule 12(b)(6) where

the factual allegations do not raise the right to relief above the speculative level. See Bell

Atlantic v. Twombly, 127 S. Ct. 1955, 1965 (2007). Conversely, a complaint may not be

dismissed for failure to state a claim where the allegations plausibly show that the pleader is

entitled to relief. See id. (citing Fed R. Civ. P. 8(a)(2)). In ruling on a motion pursuant to Rule

12(b)(6), a court must construe the pleadings in the light most favorable to the plaintiff, and

must accept as true all material allegations in the complaint, as well as any reasonable

inferences to be drawn therefrom. See Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003);

see also Chang v. Chen, 80 F.3d 1293 (9th Cir. 1996).

Analysis

A. Defendants’ Right to Initiate the Foreclosure Process

Defendants contend that “ReconTrust has the statutory right, as trustee under Plaintiffs’

Deed of Trust, to initiate the foreclosure process on behalf of their lender and the owners of

the note.” Mot. to Dismiss, p. 6. Defendants contend that California law does not require

production of the original note to proceed with a non-judicial foreclosure. Defendants

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therefore contend that “Plaintiffs’ allegation that Defendants have no right to foreclose on their

property is incorrect.” Id. 

Pursuant to section 2924(a)(1) of the California Civil Code, the trustee of a Deed of

Trust has the right to initiate the foreclosure process. Cal. Civ. Code § 2924(a). Production

of the original note is not required to proceed with a non-judicial foreclosure. Id. Viewing the

allegations in the light most favorable to Plaintiffs, the Complaint does not establish that

Defendants lack the right to initiate the foreclosure process. 

B. Cause of Action for Unfair Debt Collection Practices

Defendants contend that the Complaint fails to state a claim under the RFDCPA or the

FDCPA because the Complaint does not allege that Defendants engaged in any harassment or

abuse; that the Defendants used false or misleading representations; or that Defendants

engaged in any unfair practices. Recontrust contends that the Complaint fails to state a claim

under the RESPA because “Plaintiffs do not allege any improper kickbacks in violation of 12

U.S.C. § 2607,” and “[t]o the extent that Plaintiffs claim disclosure-related violations, the

claims must be dismissed because there is no private right of action under the disclosure rules

of RESPA.” Mot. to Dismiss, p. 7. 

To be liable for a violation of the FDCPA or the RFDCPA, the defendant must - as a

threshold requirement - be a “debt collector” within the meaning of the Acts. Heintz v.

Jenkins, 514 U.S. 291, 294 (1995); Cal. Civ. Code § 1788.2(c). The “activity of foreclosing

on [a] property pursuant to a deed of trust is not the collection of a debt within the meaning of

the” FDCPA. Hulse v. Ocwen Fed. Bank, FSB, 195 F. Supp. 2d 1188, 1204 (D. Or. 2002)

(holding that the plaintiff improperly brought a claim challenging the lawfulness of foreclosure

proceedings pursuant to a deed of trust under the FDCPA). This action challenges the

lawfulness of foreclosure proceedings on the Property pursuant to the Deed of Trust, which

is not the collection of a debt within the meaning of the RFDCPA or the FDCPA.

Furthermore, aside from the conclusory allegation that “Defendants and each of them . . . have

acted as a debt collector,” Complaint, ¶ 20, the Court finds that the Complaint does not allege

facts to support the allegation that Defendants are debt collectors within the meaning of the

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RFDCPA or the FDCPA. 

The Complaint does not identify the provisions of the RESPA that Defendants violated.

The Complaint does not allege improper kickbacks in violation of 12 U.S.C. 2607, or that

Recontrust was a “loan servicer” as required for a violation of 12 U.S.C. section 2605. To the

extent the Plaintiffs are attempting to assert disclosure-related violations, there is no private

right of action under the disclosure rules of the RESPA. Bloom v. Martin, 865 F. Supp. 1377,

1384-85 (N.D. Cal. 1994). The Court concludes that the Complaint fails to state a claim under

the RESPA. 

C. Cause of Action for Predatory Lending Practices

Defendants contend that the Complaint fails to state an actionable wrongdoing under

the HOEPA, TILA, Regulation Z or the FTC Act because Plaintiffs have not adequately

alleged that Defendants engaged in any deceptive practices. 

In support of the cause of action for Predatory Lending Practices, the Complaint alleges

that Countrywide “has engaged in predatory lending practices” in violation of the HOEPA,

TILE, Regulation Z and the FTC Act, “the specifics of which are unknown.” Complaint, ¶ 24.

The Complaint alleges that Countrywide committed unspecified acts which violated

unspecified provisions of federal law. These “conclusory allegations of law and unwarranted

inferences are not sufficient to defeat a motion to dismiss.” Associated Gen. Contrs. of

America v. Metro Water Dist., 159 F.3d 1178, 1181 (1998). The Court concludes that the

Complaint fails to state a claim for predatory lending practices because the Complaint’s

allegations are speculative. 

D. Cause of Action for RICO

Defendants contend that the cause of action for RICO fails because “Plaintiffs’

Complaint does not contain the required allegations.” Mot. to Dismiss, p. 8. Defendants

contend that the Complaint does not allege that Plaintiffs’ loan constitutes an “unlawful debt;”

or that Defendants engaged in “any indictable acts punishable by a year or more in prison, let

alone the two or more criminal acts required to show a ‘pattern of racketeering activity’ under

18 U.S.C. §§ 1961(5) and 1962.” Id., p. 8. 

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To state a RICO claim, the plaintiff must allege the existence of an “enterprise” and the

connected “pattern of racketeering activity.” 18 U.S.C. § 1962; United States v. Turkette, 452

U.S. 576, 582 (1981). “The Ninth Circuit has held that allegations of predicate acts under

RICO must comply with Rule 9(b)’s specificity requirements.” U.S. Concord, Inc. v. Harris

Graphics Corp., 757 F. Supp. 1053, 1061 (N.D. Cal. 1991) (citing Schreiber Distributing Co.

v. Serv-Well Furniture Co., 806 F.2d 1393, 1400-01) (9th Cir. 1986). A RICO plaintiff must

allege the time, place and manner of each act of fraud, and the role of each defendant in the

fraud. Lancaster Community Hospital v. Antelope Valley Hospital Dist., 940 F.2d 397, 405

(9th Cir. 1991). Aside from the conclusory allegation that “Defendants and each of them were

participating in and have participated in a scheme of racketeering as that term is defined in

[RICO] 18 U.S.C. §§ 1961, et seq,” Plaintiffs fail to allege with any specificity the existence

of a RICO enterprise, or the conduct of a pattern of racketeering. The Court concludes that the

Complaint fails to state a claim under RICO. 

Conclusion

The Motion to Dismiss (Doc. # 4) is GRANTED. The above-captioned action is 

DISMISSED. 

DATED: January 29, 2009

WILLIAM Q. HAYES

United States District Judge

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