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Maragarita A. Kostka and Mario J. Kostka v. U.S. Bank National Association

November 1, 2011


The opinion of the court was delivered by: David Alan Ezra United States District Judge


WITHOUT PREJUDICE Pursuant to Local Rule 7.2(d), the Court finds this matter suitable for disposition without a hearing. After reviewing Defendants' Motion and the supporting and opposing memoranda, the Court hereby GRANTS Defendants' Motion to Dismiss, DISMISSES Plaintiffs' claims for TILA Rescission and Recoupment, and DISMISSES WITHOUT PREJUDICE all remaining claims.


On March 4, 2011, Plaintiffs Margarita A. Kostka and Mario J. Kostka ("Plaintiffs") filed a Complaint in this Court against Defendants U.S. Bank National Association, as Trustee for the BNC Mortgage Loan Trust 2006-2 ("US Bank"), BNC Mortgage Inc. ("BNC"), and Wells Fargo Home Mortgage Inc., doing business as America's Servicing Company ("Wells Fargo") (collectively, "Defendants"). ("Compl.," Doc. # 1.) The claims in Plaintiffs' Complaint relate to the mortgage and note entered into for the purchase of real property located at 81-1071 Keopuka Heights Road, Kealakekua, Hawaii 96750 ("Subject Property"). (Id. ¶ 7.) The mortgage, which was recorded in the Bureau of Conveyances on August 15, 2006, lists BNC as the originating lender on the loan.*fn1 (Doc. # 12-3.)

In their Complaint, Plaintiffs allege that when they financed the purchase of the Subject Property, Defendants failed to provide Plaintiffs with the following: (1) initial loan disclosures, (2) a signed and dated good faith estimate, (3) a signed and dated initial and final truth in lending disclosures, (4) a signed and dated servicing transfer disclosure, (5) an adjustable rate booklet within the time required by law, (6) a signed and dated final HUD-1 settlement statement, (7) Gramm, Leach, Bailey Act disclosures concerning Plaintiffs' right of privacy as to further disclosures of confidential or personal financial information, and (8) disclosures of their rights under the Fair and Accurate Credit Transactions Act. (Compl. ¶¶ 8, 17, 21--26.) Plaintiffs claim that due to the lack of disclosures, Plaintiffs did not understand the true terms of the loan being proposed. (Id. ¶ 19.) Plaintiffs further allege that US Bank and/or BNC and/or its employees and agents overstated Plaintiffs' income in the loan application and failed to properly qualify Plaintiffs for an affordable loan. (Id. ¶¶ 15, 27.) Additionally, Plaintiffs assert that Defendants failed to provide Plaintiffs with a reasonable opportunity to obtain a modification of their note and mortgage. (Id. ¶ 41.)

Based on those contentions, Plaintiffs allege the following causes of action in their Complaint:

* Count I: Violation of Statutory Duties. (Id. ¶¶ 49--52.)

* Count II: Fraud. (Id. ¶¶ 53--59.)

* Count III: Mistake. (Id. ¶¶ 60--61.)

* Count IV: Unconscionability. (Id. ¶¶ 62--65.)

* Count V: Unfair and Deceptive Acts or Practices. (Id. ¶¶ 66--69.)

* Count VI: Breach of Fiduciary Duties. (Id. ¶¶ 70--74.)

* Count VII: Failure to Act in Good Faith. (Id. ¶¶ 75--80.)

* Count VIII: Injunctive Relief. (Id. ¶¶ 81--84.)

* Count IX: Recoupment. (Id. ¶¶ 85--86.)

* Count X: Unjust Enrichment. (Id. ¶¶ 87--88.)

* Count XI: Negligent and/or Intentional Infliction of Emotional Distress. (Id. ¶¶ 89--93.)

On August 4, 2011, Defendants filed the instant Motion to Dismiss Plaintiffs' Complaint ("Motion"). (Doc. # 12.) On September 12, 2011, Plaintiffs filed a Memorandum in Opposition to the Motion. (Doc. # 23.) On September 19, 2011, Defendants filed a Reply in support of its Motion. (Doc. # 25.)


I. Federal Rule of Civil Procedure 12(b)(6)

Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Rule"), a motion to dismiss will be granted where the plaintiff fails to state a claim upon which relief can be granted. Review is limited to the contents of the complaint and matters properly subject to judicial notice. See Colony Cove Properties, LLC v. City of Carson, 640 F.3d 948, 955 (9th Cir. 2011). A complaint may be dismissed as a matter of law for one of two reasons: "(1) lack of a cognizable legal theory, or (2) insufficient facts under a cognizable legal claim." Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984) (citation omitted). Allegations of fact in the complaint must be taken as true and construed in the light most favorable to the plaintiff. See Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005).

A complaint need not include detailed facts to survive a Rule 12(b)(6) motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555--56 (2007). In providing grounds for relief, however, a plaintiff must do more than recite the formulaic elements of a cause of action. See id. at 556--57; see also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988) ("[C]onclusory allegations without more are insufficient to defeat a motion to dismiss for failure to state a claim.") (citation omitted). "The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions," and courts "are not bound to accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations and citations omitted). Thus, "bare assertions amounting to nothing more than a formulaic recitation of the elements" of a claim "are not entitled to an assumption of truth." Moss v. U.S. Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) ("[T]he non-conclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.") (internal quotations and citations omitted).

A court looks at whether the facts in the complaint sufficiently state a "plausible" ground for relief. See Twombly, 550 U.S. at 570. A plaintiff must include enough facts to raise a reasonable expectation that discovery will reveal evidence and may not just provide a speculation of a right to relief. Id. at 586. When a complaint fails to adequately state a claim, such deficiency should be "exposed at the point of minimum expenditure of time and money by the parties and the court." Id. at 558 (citation omitted). If a court dismisses the complaint or portions thereof, it must consider whether to grant leave to amend. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2000) (finding that leave to amend should be granted "if it appears at all possible that the plaintiff can correct the defect") (internal quotations and citations omitted).

II. Federal Rule of Civil Procedure 8

Federal Rule of Civil Procedure 8 mandates that a complaint include a "short and plain statement of the claim," Fed. R. Civ. P. 8(a)(2), and that each allegation "be simple, concise, and direct." Fed. R. Civ. P. 8(d)(1). A complaint that is so confusing that its "'true substance, if any, is well disguised'" may be dismissed sua sponte for failure to satisfy Rule 8. Hearns v. San Bernardino Police Dep't, 530 F.3d 1124, 1131 (9th Cir. 2008) (quoting Gillibeau v. City of Richmond, 417 F.2d 426, 431 (9th Cir. 1969); see also McHenry v. Renne, 84 F.3d 1172, 1180 (9th Cir. 1996) ("Something labeled a complaint but written . . . , prolix in evidentiary detail, yet without simplicity, conciseness and clarity as to whom plaintiffs are suing for what wrongs, fails to perform the essential functions of a complaint."); Nevijel v. N. Coast Life Ins. Co., 651 F.2d 671, 673 (9th Cir. 1981) ("A complaint which fails to comply with [Rule 8] may be dismissed with prejudice[.]").

Put slightly differently, a complaint may be dismissed for failure to comply with Rule 8 where it fails to provide the defendants fair notice of the wrongs they have allegedly committed.SeeMcHenry, 84 F.3d at 1178--80 (affirming dismissal of complaint where "one cannot determine from the complaint who is being sued, for what relief, and on what theory, with enough detail to guide discovery"); cf.Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1105 n.4 (9th Cir. 2008) (finding dismissal under Rule 8 was in error where "the complaint provide[d] fair notice of the wrongs allegedly committed by defendants and [did] not qualify as overly verbose, confusing, or rambling"). Rule 8 requires more than "the-defendant-unlawfully-harmed-me accusation[s]." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (internal quotations omitted). Further, "[a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do." Id. (internal quotations omitted). "Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." Id. (internal quotations omitted). "The propriety of dismissal for failure to comply with Rule 8 does not depend on whether the complaint is wholly without merit." McHenry, 84 F.3d at 1179.

The court may "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Iqbal, 129 S. Ct. at 1950. Legal conclusions must be supported by factual allegations. Id. "When there are well-pleaded factual allegations, a court should assume their veracity and ...

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