Zhang v. Countrywide Home Loans, Inc.
| Decision Date | 13 April 2012 |
| Docket Number | Case No. 11-cv-03475 (NC) |
| Parties | KITTY YINLING ZHANG, Plaintiff, v. COUNTRYWIDE HOME LOANS, INC. and others, Defendants. |
| Court | U.S. District Court — Northern District of California |
In this action for claims arising out of a residential foreclosure, defendants move to dismiss all twelve claims in Zhang's amended complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). As Zhang fails to state a claim under RESPA, TILA, and the FDCPA, and because the deficiencies of these claims cannot be cured by amendment, these claims are DISMISSED WITH PREJUDICE. Because the Court declines to exercise supplemental jurisdiction over the remaining claims, all of which are brought under California law, these claims are DISMISSED WITHOUT PREJUDICE.
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Plaintiff Zhang, appearing pro se, is the owner of real property located in San Leandro, California ("the property"). Am. Compl. ¶ 1, Dkt. No. 26.
On May 11, 2004, Zhang obtained a $257,000 adjustable-rate loan from Professional Mortgage Corporation to refinance the existing mortgage on the property ("the loan"). Req. for Judicial Notice, Ex. A ¶ 1, Dkt. No. 29. The terms of the loan are contained in the adjustable rate note for the loan ("the note"). Id. The initial interest rate for the loan was 4.5%, but this rate would be adjusted annually starting on June 1, 2007, based on a variable index. Id. ¶ 4. The loan was secured by a deed of trust that encumbered the property. Zhang ultimately became unable to make payments on the loan, and defendants initiated a nonjudicial foreclosure on the property.
The defendants in this action are (1) Countrywide Home Loans, a servicer of the loan that had a conduit/agent relationship with Professional Mortgage, which was the lender of the loan but is not a defendant in this action because it is out of business; (2) Bank of America, which became a servicer of the loan after it acquired Countrywide; (3) Recontrust Company, which was the trustee under the deed of trust; and (4) Mortgage Electronic Registration Systems ("MERS"), which was the beneficiary under the deed of trust. Am. Compl. ¶¶ 1-6. Zhang claims that all defendants acted "in concert" and were agents or employees of each other. Id. ¶ 10.
The Court dismissed Zhang's initial complaint with leave to amend on September 30, 2011, for failure to file an opposition to defendants' motion to dismiss under Rule 12(b)(6). Dkt. No. 21. Zhang filed an amended complaint on November 1, 2011. Dkt. No. 26.
All parties consented to the jurisdiction of a magistrate judge under 28 U.S.C. § 636(c). Dkt. Nos. 11, 14, 43.
First, Zhang claims that defendants negligently misrepresented their authority to foreclose on the loan in violation of California Civil Code § 2924. Second, Zhang claims that defendants misrepresented material aspects of the loan in violation of the following federal and state laws:(1) the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2605; (2) the Truth In Lending Act (TILA), 15 U.S.C. § 1601; (3) the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692; (4) the Rosenthal Fair Debt Collection Practices Act, CAL. CIV. CODE §§ 1788-1788.3; and (5) California's Unfair Competition Law, CAL. BUS. & PROF. CODE §§ 17200-17210. Finally, Zhang brings two claims against defendants for unjust enrichment and fraud. As remedies for these alleged violations, Zhang seeks an injunction to prevent defendants from foreclosing on the property, rescission of the mortgage transaction, actual and statutory damages, and attorneys' fees.
Defendants bring two motions to dismiss under Rule 12(b)(6). The first was filed by defendants Countrywide Home Loans, Bank of America, and Recontrust Company. Dkt. No. 29. The second was filed by defendant Mortgage Electronic Registrations Systems. Dkt. No. 36.
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a plaintiff must plead his claim with sufficient specificity to "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 545, 555 (2007). Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citation and internal quotation marks omitted). A court is not required to accept as true conclusory allegations, unreasonable inferences, or unwarranted deductions of fact. Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). If a complaint lacks facial plausibility, a court must grant leave to amend unless it is clear that the complaint's deficiencies cannot be cured by amendment. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).
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Defendants request that the Court take judicial notice of the following documents: (1) the adjustable rate note concerning the loan; (2) a recorded deed of trust concerning the property; (3) a recorded notice of default with respect to the property; and (4) a recorded notice of trustee's sale with respect to the property dated February 17, 2009. Req. for Judicial Notice, Dkt No. 29.
Zhang requests judicial notice of the following documents: (1) a debt validation notice sent by Recontrust to Zhang; (2) a recorded substitution of trustee form; (3) a non-recorded notice of trustee's sale dated May 19, 2009; (4) a recorded notice of trustee's sale dated September 29, 2011; (5) a recorded notice of assignment of the deed of trust dated July 30, 2010; (6) a letter from Countrywide to Zhang sent on June 14, 2004; (7) a letter from Recontrust to Zhang sent on August 17, 2009; and (8) a copy of a Qualified Written Request (QWR) that Zhang sent to Bank of America on December 28, 2010. Req. for Judicial Notice, Dkt. No. 41.
The Court may consider all of these documents under Federal Rule of Civil Procedure 10(c), as their contents are alleged in the operative complaint and their authenticity was not disputed by the parties. Fed. R. Civ. P. 10(c) (); see also In re Stac Elec. Sec. Litig., 89 F.3d 1399, 1405 n.4 (9th Cir.1996) ().
Zhang alleges that defendants violated RESPA, 12 U.S.C. § 2605, in two ways: first, by failing to make adequate disclosures, and second, by failing to respond properly to Zhang's Qualified Written Request (QWR).
Defendants argue that Zhang alleges no facts to support her claim for inadequate disclosures, and that Zhang's QWR does not concern a servicing error as required by RESPA.
The Court finds that Zhang fails to state a claim for a violation of 12 U.S.C. § 2605 under either of her theories.
The purpose of RESPA, 12 U.S.C. §§ 2601-2617, is to protect consumers from abusive practices in the real estate settlement process. 12 U.S.C. § 2601. By enacting RESPA, Congress sought to "increase the supply of information available to mortgage consumers about the cost of home loans in advance of settlement, and to eliminate abusive practices such as kickbacks, referral fees, and unearned fees." Schuetz v. Banc One Mortg. Corp., 292 F.3d 1004, 1008 (9th Cir. 2002).
The Bureau of Consumer Financial Protection is authorized to implement RESPA by prescribing rules and regulations and making interpretations of RESPA. 12 U.S.C. § 2617(a). These rules and regulations are contained in Regulation X, 24 C.F.R. §§ 3500.1-3500.23.
RESPA applies to "federally related mortgage loans," which are made by or sold to certain federal agencies, or are made by creditors who invest more than $1,000,000 in real estate loans per year. 12 U.S.C. § 2602(1).
RESPA requires a creditor to provide to any loan applicant a booklet prepared by the Bureau and a good faith estimate of the amount of settlement costs the applicant may incur. 12 U.S.C. § 2604(c)-(e).
RESPA requires a servicer to provide to any loan applicant information with respect to the transferability and transfers of the loan. 12 U.S.C. § 2605(a)-(d).
Failure to make disclosures under § 2605 may entitle the borrower to damages and attorneys' fees and costs. 12 U.S.C. § 2605(f).
A borrower's claim for violations under § 2605 must be brought within three years of "the date of occurrence of the violation." 12 U.S.C. § 2614.
RESPA requires a servicer of federally related mortgage loans to respond to borrower inquiries "for information relating to the servicing of such loan[s]." 12 U.S.C. § 2605(e)(1)(A). The inquiries must be in the form of a "qualified written request," which is comprised of (1) a written correspondence, (2) that identifies the name and account of the borrower, and (3) states the reasons why the borrower believes 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). A servicer must acknowledge receipt of a QWR within twenty days of receiving it, and must provide to the borrower within sixty days of receiving the QWR a written explanation of the reasons why the account is or is not in...
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