Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-01585/USCOURTS-caed-2_09-cv-01585-1/pdf.json

Parties Involved:
American Home Mortgage Servicing, Inc.
Defendant
Parveen A. Lal
Plaintiff
Jodi L. Wright
Plaintiff

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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

PARVEEN A. LAL and JODI L. No. 2:09-cv-01585-MCE-DAD

WRIGHT,

Plaintiffs,

v. MEMORANDUM AND ORDER

AMERICAN HOME SERVICING, INC.

and LENDER DOE, 

Defendants.

----oo0oo----

Presently before the Court is a Motion by Defendant American

Home Mortgage Servicing, Inc. (“Defendant”) to Dismiss portions

of the First Amended Complaint of Plaintiffs Parveen A. Lal and

Jodi L. Wright (“Plaintiffs”) for failure to state a claim upon

which relief may be granted pursuant to Federal Rule of Civil

Procedure 12(b)(6). For the reasons set forth below, 1

Defendant’s Motion to Dismiss is granted.

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 The factual assertions in this section are based on the 2

allegations in Plaintiffs’ Complaint unless otherwise specified.

2

BACKGROUND2

Around June 28, 2006, Plaintiffs entered into a mortgage

loan for $821,750 with Paramount Equity Mortgage (“Paramount”). 

The loan was initially serviced by Paramount, but was later

serviced by Defendant American Home Mortgage Servicing, Inc. The

mortgage note has since allegedly been sold to an unknown holder. 

On March 10, 2009, Plaintiffs sent a letter to Defendant stating

that they were not provided notice of the right to cancel under

TILA, and that pursuant to TILA they were rescinding their loan. 

Plaintiffs additionally requested that the Defendant indicate its

relationship to the loan and identify the true owner of the

mortgage note. Plaintiffs also directed Defendant to stop trying

to collect on the loan and to cease all future collection

communications. According to Plaintiffs, Defendant has failed to

respond to the letter or comply with its terms. 

Plaintiffs now allege a litany of state and federal law

violations in connection with the foreclosure. This is the

second motion to dismiss between these parties. The first was

denied in part and granted in part with leave to amend. 

Plaintiffs thereafter filed a First Amended Complaint.

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3

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). 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”)). 

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4

“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). “The complaint must specify such facts as the times,

dates, places, benefits received, and other details of the

alleged fraudulent activity.” Id. at 672.

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5

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).

ANALYSIS

A. Rescission under TILA

Under TILA, a plaintiff must allege ability to tender the

amount owed on the loan as a prerequisite to rescission. This

Court granted Defendant’s prior motion to dismiss Plaintiffs’

rescission claim on the grounds that Plaintiffs failed to allege

tender. Having filed an amended complaint, Plaintiffs now assert

that they are “prepared to tender from a refinance, funds from

savings, and assistance by family members once the amount to

tender is known, considering damages, and after [Defendant] stops

reporting the loan negatively.”

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6

Defendant argues that this offer of tender is insufficient

in that it is conditionally premised on securing refinancing, and

also does not offer the entire amount but only the amount

“offset” by damages. Plaintiffs retort that Defendant has

impeded on their ability to fully refinance at this time due to

their continued negative reporting on their credit.

The Ninth Circuit has not provided a clear rule on the

tender requirement. The purpose of rescission under TILA is to

return both parties to the status quo ante. Yamamoto v. Bank of

New York, 329 F.3d 1167, 1172 (9th Cir. 2003). The exact wording

of the statute mandates “return of money or property following

rescission”, 15 U.S.C. § 1635(b) (emphasis added), however the

Ninth Circuit has held that the district court has discretion to

“modify the sequence of rescission events” and require the

borrower to allege of tender prior to rescission. Yamamoto, 329

F.3d at 1170 (relying on 1980 TILA amendment allowing courts to

modify TILA procedures). 

In Yamamoto it was evident that the borrower would not be

able to repay the funds. Therefore, the court refused to require

parties to go through the rescission process when it was clear

that the borrower would not be able to fulfill her requirements

at the end. The Ninth Circuit held that “a court may impose

conditions on rescission that assure the borrower meets her

obligations once the creditor has performed its obligations.” 

Yamamoto, 329 F.3d at 1173. However, importantly, the Ninth

Circuit specifically declined to rule on the “possibility that

borrowers could refinance or sell the property between the time a

court grants rescission and when the pay back is required.” Id.

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7

Considering the facts and circumstances present, this Court

finds that Plaintiffs have not sufficiently alleged tender in

this case. Plaintiffs’ complaint specifically states that the

“ability to tender will require refinance.” Plaintiffs go on to

explain that Defendant’s negative credit reporting is what has

prevented their ability to refinance, and that once they are

successful in this action, and their credit report is corrected,

they will have the credit necessary to secure refinancing. This

sequence of events is far too tenuous to assure this Court that

the borrowers will be able to meet their obligations. Moreover,

Plaintiffs only offer tender “once the amount to tender is known,

considering damages, and after [Defendant] stops reporting the

loan negatively.” This appears to be a threat rather than a

tender offer. Should Plaintiffs fail on all other claims except

rescission, they would still need to tender the entire amount

owed, without a discount for damages, and despite negative

reporting from Defendant. This complete tender has not been

offered by the Plaintiffs. Without such tender, Plaintiffs may

not seek to rescind the loan. 

Therefore Defendant’s Motion to Dismiss Plaintiffs’

rescission claim is granted. 

B. Real Estate Settlement Procedures Act (“RESPA”)

RESPA, 12 U.S.C. § 2605(e), requires that loan servicers

timely respond to qualified written requests (“QWR”s) from

borrowers. 

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8

Defendant did not respond to Plaintiffs’ QWR and, as a

result, Plaintiffs claim they are entitled to both statutory and

actual damages. Plaintiffs allege they were harmed by not

“[being] unable to name the real party in interest to this suit.” 

Plaintiffs also incorporate all preceding sections of their

Complaint into their RESPA claim, including the allegation that

Plaintiffs were harmed by having to bring suit at all.

In regards to actual damages, this Court previously held

that the “incorporated damage” of having to file suit was

sufficient actual damage for a RESPA claim. Since the initial

order in this case, the Court has revised its position and agrees

with Defendant’s contention that the loss alleged must be related

to the RESPA violation itself. RESPA, as codified at 12 U.S.C.

§ 2605(f)(1)(A), authorizes “actual damages to the borrower as a

result of the failure [to comply with RESPA requirements].”

(emphasis added). Therefore, allegations made under a separate

cause of action are insufficient to sustain a RESPA claim for

actual damages as they are not a direct result of the failure to

comply. Nor does simply having to file suit suffice as a harm

warranting actual damages. If such were the case, every RESPA

suit would inherently have a claim for damages built in. 

Additionally, the Court rejects, as a matter of law,

Plaintiffs’ argument that they were harmed by not being able to

name the real party of interest in this suit. Under RESPA, a

borrower may not recover actual damages for nonpecuniary losses. 

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9

See Allen v. United Fin. Mortg. Corp., No. 09-2507, 2009 WL

2984170, at *5 (N.D.Cal. Sept. 15, 2009); Shepard v. Am. Home

Mortg. Corp., No. 2:09-1916, 2009 WL 4505925, at *3; Fulmer v.

JPMorgan Chase Bank, No. 2:09-cv-1037, 2010 WL 95206, at *6 (E.D.

Cal. Jan. 6, 2010). Consequently, Plaintiffs have failed to

sufficiently plead a claim for actual damages. 

To recover statutory damages, Plaintiffs must plead some

pattern or practice of noncompliance with RESPA. 12 U.S.C.

§ 2605(f)(1)(b). Here, Plaintiffs flatly claim a pattern of

noncompliance but state no facts other than the assurance that at

trial they will present other customers who also did not receive

QWR responses from Defendant. 

However, simply stating a legal conclusion with the promise

to later produce facts is tantamount to simply stating a bare

legal conclusion. This is insufficient under the Rule 12(b)(6)

pleading standard. A plaintiff cannot rely simply on stock legal

conclusions, but must allege facts that are sufficient to “raise

a right to relief above the speculative level.” See Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 555 (2007). A court is not

required to accept as true a legal conclusion couched as a

factual allegation. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949

(2009). Here, Plaintiffs’ Complaint lacks the requisite facts

necessary to sustain a claim for statutory damages 

Therefore, Defendant’s Motion to Dismiss Plaintiffs’ RESPA

claim is granted as to both actual and statutory damages.

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 See also Nool v. Homeq Servicing, No. 1:09-CV-0885 OWW 3

DLB, 2009 U.S. Dist. LEXIS 80640, at *10-11 (E.D. Cal. Sept. 3

2009); Olivier v. NDEX West, LLC, No. 1:09-CV-00099 OWW GSA, 2009

U.S. Dist. LEXIS 74051, at *8 (E.D. Cal. Aug. 10, 2009); Cordova

v. America's Servicing Co., No. C 08-05728 SI, 2009 U.S. Dist.

LEXIS 58934, at *5 (N.D. Cal. June 24, 2009). 

10

C. Rosenthal Fair Debt Collection Practices Act

Plaintiffs’ Complaint alleges that Defendants engaged in

abusive debt collection practices in violation of California’s

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

In its previous Motion to Dismiss Order, this Court held that

while loan servicers cannot be held liable under the federal Fair

Debt Collection Practices Act (“FDCPA”), they can be held liable

under California’s RFDCPA. However, the Court has reconsidered

its position. This Court finds that the RFDCPA does in fact

mirror in the FDCPA, their intentions were the same and

exclusive, and, as such, a loan servicer is not a debt collector

under these acts.3

The law is well settled that FDCPA's definition of debt

collector “does not include the consumer's creditors, a mortgage

servicing company, or any assignee of the debt.” Perry v. Stewart

Title Co., 756 F. 2d 1197, 1208 (5th Cir. 1985) citing S. Rep. No.

95-382, 95th Cong., 1st Sess. 3; see also Angulo v. Countrywide

Home Loans, Inc., No. 1:09-cv-877-AWI-SMS, 2009 WL 3427179, at *5

(E.D. Cal. October 26, 20009); Nera v. Am. Home Mortg. Servicing,

Inc., No. C-09-2025 RMW, 2009 WL 2423109, at *4 (N.D.Cal. Aug. 5,

2009); Pineda v. Saxon Mortg. Servs., 2008 WL 5187813, at *3

(C.D.Cal. Dec. 10, 2008). Accordingly, as servicer of the loan,

Defendant may not be held liable under RFDCPA.

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Defendant’s Motion to Dismiss Plaintiffs’ RFDCPA claim is

therefore granted.

D. Slander [Libel] of Credit

Plaintiffs contend that Defendant caused false information

to be published with various credit agencies regarding the

Plaintiffs’ creditworthiness, without informing those agencies

that the claims were disputed. Defendant argues that Plaintiffs

did default on their loan payments, therefore any communication

by Defendant regrading that fact would be true. 

Regardless of the disputed “truth” of Defendant’s credit

reporting, Plaintiffs’ complaint fails to do much more than state

the elements of slander. It does not identify the parties to

whom the statements were made, or what damage to Plaintiffs’

credit directly resulted from Defendant’s statement. While

detailed factual allegations are not necessary, Plaintiffs’

Complaint must provide more than labels and conclusions. 

Twombly, 550 U.S. at 555-56. 

Therefore Defendant’s Motion to Dismiss Plaintiffs’ slander

of credit claim is granted. 

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CONCLUSION

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

Dismiss (Docket No. 19) is GRANTED. 

Leave to amend is granted only as to the claims for slander

of credit, violation of RFDCPA, and actual damages under RESPA. 

This is the second time a Motion to Dismiss has been granted as

to the remaining claims. Thus amendment will not cure the

defects noted by the Court. 

Plaintiffs may file an amended complaint as to the claims

for slander of credit, violation of RFDCPA, and actual damages

under RESPA 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, Plaintiffs’ remaining claims for slander of

credit, RFDCPA, and actual damages under RESPA will also be

dismissed without leave to amend.

IT IS SO ORDERED.

Dated: January 15, 2010

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

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