ORDER
JAMES MOODY, District Judge
Pending before the Court is defendant's pro se Motion to Reduce Sentence. For the reasons stated below, the motion is denied (#54).
Defendant was sentenced by this Court on August 4, 2006 to a term of ten years which was the mandatory minimum statutory sentence pursuant to 21 U.S.C. § 841.
Defendant contends that his sentence should be modified pursuant to The Fair Sentencing Act of 2010, Pub.L. No 111-220 (the "Act"), which was signed into law by the President on August 3, 2010. The Act amends 21 U.S.C. § 841 by increasing the amount of crack cocaine required to mandate a ten year mandatory minimum sentence.
Defendant contends that because the amount of crack cocaine he possessed is lower than the amount now required to mandate a five year minimum penalty, his sentence should be modified.
18 U.S.C. § 3582 allows modification of sentences for defendants who have been sentenced based on a sentencing range that has subsequently been lowered. However, 18 U.S.C. § 3582 only allows a modification, if the new sentencing ranges are made retroactive. See Dillon v. United States, 560 U.S. ___, 130 S.Ct. 2683, 2688, 177 L.Ed.2d 271, 2010 WL 2400109 (2010) ("When the Commission makes a Guidelines amendment retroactive, 18 U.S.C. § 3582(c)(2) authorizes a district court to reduce an otherwise final sentence that is based on the amended provision").
Here, the Act does not apply because it was not made retroactive and defendant committed the offense prior to the Act's effective date of August 3, 2010. See United States v. Brown, 2010 WL 3958760 (8th Cir. 2010) (The Fair Sentencing Act of 2010 does not apply retroactively).
IT IS SO ORDERED THIS 22nd day of November, 2010.
<> performance or excuse for nonperformance of the contract; 3) defendant's breach of the contract; and 4) resulting damages."
Armstrong Petrol. Corp. v. Tri Valley Oil Gas Co.,
116 Cal. App. 4th 1375, 1391 n. 6 (2004). On a motion to dismiss, the court need not accept allegations as true if they are contradicted by documents before the court.
Sprewell v. Golden State Warriors,
266 F.3d 979, 988 (9th Cir. 2001). "[W]hen a written instrument is attached to the pleading and properly incorporated therein by reference, the court may examine the exhibit and treat the pleader's allegations of its legal effect as surplusage."
Burnett v. Chimney Sweep,
123 Cal. App. 4th 1057, 1064 (2004) (quoting
Lumbermens Mut. Cas. Co. v. Vaughn,
199 Cal. App. 3d 171, 178 (1988).)
Plaintiffs' allegation of breach by non-conversion of the Subject Loan fails because plaintiffs do not assert any facts or evidence explaining what the alleged breach entailed. Indeed, plaintiffs do not allege what changes in the loan were meant to take place after the conversion, but ultimately did not. As such, it is unclear what Horizon was supposedly obligated to do or what comprised the alleged breach. See Schnelke v. JPMorgan Chase Bank, No. 2:09-cv-03119, 2010 WL 2546100, *3 (E.D. Cal. Jun. 23, 2010) (dismissing contract claim where plaintiff failed to allege where in his mortgage loan contract, or any contract, certain terms were memorialized); see also Logan v. Resmae Mortg. Corp., 2009 WL 5206716, *4 (E.D. Cal. Dec. 24, 2009) (finding that the plaintiff's assertion of vague promises by the defendant were not sufficient to show the existence of a contract).
Further, plaintiffs' non-conversion allegation is contradicted by both the terms of the contract and allegations of the complaint. According to plaintiffs' exhibits, the Subject Loan became a 30-year — i.e., "permanent" — loan at the end of the construction period. (See Matlock Decl., Ex. D) ("On the day after the Construction Period ends, the loan evidenced by this Note will be a permanent mortgage loan."). Further, in their complaint, plaintiffs themselves allege that the Subject Loan remained in place beyond the end of the construction period, and plaintiffs continued making payments on it until they defaulted in April 2008. (Compl. ¶ 44.)
Plaintiffs' assertion that Horizon breached the contract by charging interest is also contradicted by the plain terms of the contract. Specifically, by paragraph 2.A of the Allonge which is captioned "Interest During the Construction Period," provides in pertinent part: "Borrower will pay interest only . . . at the rate of prime + 0% during the Construction Period of the loan . . . Borrower will make monthly interest payments by the 15th of each month for the amount billed by the Note Holder." (Matlock Decl., Ex D) (emphasis added.) Further, plaintiffs make no factual allegations to support an oral or written modification of this agreement. Accordingly, looking to the four corners of the contract, plaintiffs agreed to interest charges during the construction loan period.
In their Opposition, plaintiffs do not address or defend their claims that defendant Horizon wrongly charged interest during the construction period, despite Horizon's argument that the Allonge states interest would be charged during the construction period.
For these reasons, Horizon's motion to dismiss plaintiffs' breach of contract claim is GRANTED with leave to amend.
F. Breach of Implied Covenant of Good Faith and Fair Dealing
Plaintiffs' twelfth claim for relief asserts that defendants breached the implied covenant of good faith and fair dealing based on the same assertions listed under their breach of contract claim. (Compl. ¶¶ 143-44.)
"To establish a breach of an implied covenant of good faith and fair dealing, a plaintiff must establish the existence of a contractual obligation, along with conduct that frustrates the other party's rights to benefit from the contract." Fortaleza v. PNC Fin. Servs. Group, Inc., 642 F. Supp. 2d 1012, 1021-22 (N.D. Cal. 2009). Further, "a breach of the implied covenant of good faith and fair dealing involves something beyond breach of the contractual duty itself." Careau Co. v. Security Pacific Business Credit, Inc., 222 Cal. App. 3d 1371, 1394 (1990). The "implied covenant of good faith and fair dealing is limited to assuring compliance with the express terms of the contract, and cannot be extended to create obligations not contemplated by the contract." Pasadena Live, LLC v. City of Pasadena, 114 Cal. App. 4th 1089, 1093-1094 (2004).
To the extent this court has concluded that plaintiffs cannot show how defendant Horizon failed in any way to perform pursuant to the terms of the contract, and plaintiffs' loan documents indicate that interest was to be charged during the construction period, Horizon's motion to dismiss plaintiffs' claim for breach of the implied covenant of good faith and fair dealing is GRANTED with leave to amend.
G. Breach of Fiduciary Duty, Negligent Lending, and Constructive Fraud
In counts seven, eight, and nine, plaintiffs assert claims against Horizon for breach of fiduciary duty (Count 7), constructive fraud (Count 8) and negligent lending (Count 9). (Id. ¶¶ 150-178.) Specifically, plaintiffs allege that they "perceived their relationship with Jabout as very close and relied on Jabout's financial advice implicitly." (Opp.'n at 9.) Plaintiffs allege that Horizon's fiduciary duty arose because "[t]he relationship of a lender to a borrower is quasi-fiduciary when a lender (Defendant Horizon) takes on an advisory role through its agent (Defendant Jabout), and borrowers reasonably expect a lender not to wrongly apply payments, wrongly charge late fees, or falsely calculate monthly principal and interest amounts due." (Id. at 10.) Horizon moves to dismiss plaintiffs' seventh, eighth, and ninth claims on the basis that these claims can lie only against parties in relationships that give rise to special duties. (MTD at 15.)
1. Fiduciary Duty
To state a claim for breach of fiduciary duty, a plaintiff must show: (1) the existence of a fiduciary relationship; (2) the breach of that relationship; and (3) damage proximately caused by the breach. Roberts v. Lomanto, 112 Cal. App. 4th 1553, 1562 (2003). However, "[a]bsent special circumstances . . . a loan transaction is [an] at arms-length [transaction] and there is no fiduciary relationship between the borrower and lender." Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006). "A commercial lender is entitled to pursue its economic interest in a loan transaction. This right is inconsistent with the obligations of a fiduciary, which require that the fiduciary knowingly agree to subordinate its interests to act on behalf of and for the benefit of another." Gonzalez v. First Franklin Loan Services, No. 1:09-CV-00941 AWI-GSA, 2010 WL 144862, *13 (E.D. Cal. Jan. 11, 2010). A lender, however, may be held vicariously liable for breach of fiduciary duty when a broker, who is an agent of the lender, breaches a fiduciary duty owed to the borrower. Id.
Plaintiffs claim that their "very close," "year-long" friendship with defendant Jabout created a special circumstance which caused Jabout's involvement in the loan transaction to exceeded the scope of the conventional role as a mere broker. (Compl. ¶ 17; Opp.'n at 9-10.) Further, plaintiffs allege that this special circumstance extends to Horizon as a result of an agency relationship that existed between Horizon and defendant Jabout. (Opp.'n at 9-10.) However, as explained supra, plaintiffs allege no facts to show how Horizon authorized Jabout to represent and/or bind it, which is necessary to set forth an agency relationship. CCP § 2295; Children's Institute, Inc., 177 Cal. App. 4th at 403-04. Plaintiffs, therefore, have not demonstrated that Horizon owed plaintiffs a fiduciary duty which could give rise to a claim for breach of that duty. Accordingly, Horizon's motion to dismiss plaintiffs' breach of fiduciary duty claim GRANTED with leave to amend.
Because plaintiffs' agency allegations are insufficient, the court does not reach the merits of plaintiffs' argument that a fiduciary duty was owed by defendant Jabout or any of the other defendants.
2. Negligence and Constructive Fraud
Claims for negligence and constructive fraud also require a duty of care element. "[T]he threshold element of a cause of action for negligence is the existence of a duty to use due care toward an interest of another." Glenn K. Jackson, Inc. v. Roe, 273 F.3d 1192, 1196-1197 (9th Cir. 2001) (applying California law) (quotations and citations omitted) (emphasis added). Additionally, "[c]onstructive fraud is . . . applicable only to a fiduciary or confidential relationship." Assilzadeh v. California Federal Bank, 82 Cal. App. 4th 399, 415 (2000) (emphasis added).
Inasmuch as no fiduciary duty exists between a lender and a borrower and the court finds that plaintiffs have not sufficiently plead an agency relationship between Horizon and any of the other alleged duty-holding defendants, Horizon's motion to dismiss plaintiffs' claims for negligence and constructive fraud are GRANTED with leave to amend.
H. California Civil Code § 1916.7 Claim
Plaintiffs allege the "[S]ubject [L]oan is an adjustable rate loan within the meaning of CC [California Civil Code] § 1916.7." (Compl. ¶ 220.) Further, plaintiffs claim they "did not receive a disclosure notice in the form prescribed by CC § 1916.7(c)." (Id. ¶ 221.) Horizon asserts that the disclosures required by Section 1916.7 appear to be preempted in many circumstances by the federal Alternative Mortgage Transactions Parity Act of 1982 ("AMTPA"). (MTD at 16-17.)
The AMTPA provides in part that "[a]n alternative mortgage transaction may be made by a housing creditor in accordance with this section, notwithstanding any State constitution, law, or regulation." 12 U.S.C. § 3803. "[T]he term `alternative mortgage transaction' means a loan or credit sale secured by an interest in residential real property . . . in which the interest rate or finance charge may be adjusted or renegotiated." 12 U.S.C. § 3802(1)(A).
The Ninth Circuit has stated that AMTPA does not provide for complete preemption, but only of those state law terms that conflict with AMTPA's terms. Ansley v. Ameriquest Mortg. Co., 340 F.3d 858, 864 (9th Cir. 2003); Quicken Loans, Inc. v. Wood, 449 F.3d 944, 950 (9th Cir. 2006); accord National Home Equity Mortgage Association v. Face, 239 F.3d 633 (4th Cir. 2001); Black v. Financial Freedom Senior Funding Corp., 92 Cal. App. 4th 917, 930 (Cal. App. 2001), cert. denied, 536 U.S. 959 (2002) ("the phrase `any state constitution, law, or regulation' can be interpreted as implicitly limited to those that prohibit or impede alternative mortgage transactions or that conflict with [AMTPA's] federal regulations.").
The language of the statute provides that conflicting state laws governing alternative mortgage transactions are preempted where those transactions comply with relevant Office of Thrift Supervision regulations. Hafiz v. Greenpoint Mortg. Funding, Inc., 652 F. Supp. 2d 1039, 1048 (N.D. Cal. 2009) (citing 12 C.F.R. 560.35, 560.210, 226.19(b), 226.20(c)).) "Regulations have been issued with respect to [] four aspects of mortgage financing: Late charges; Prepayments; Adjustments to home loans; and Disclosures for variable rate transactions." Ansley, 340 F.3d at 863, n. 1 (citing 12 C.F.R. §§ 560.33-560.35, 560.210, 560.220) (emphasis added).) Accordingly, alternative, conflicting, or more rigorous state law disclosure requirements would conflict with AMTPA regulations. See Hafiz, 652 F. Supp. 2d at 1048.
The Office of Thrift Supervision is a United States federal agency under the Department of the Treasury which creates regulations relating to AMTPA.
Here, plaintiffs have not asserted any facts regarding how the Section 1916.7 disclosure provisions harmonize with the relevant provisions of AMTPA, nor have plaintiffs responded to defendants' assertion that Section 1916.7 is preempted. Consequently, Horizon's motion to dismiss plaintiffs' Section 1917.6 claim is GRANTED with leave to amend.
I. Unjust Enrichment
Plaintiffs tenth claim for relief asserts that "Horizon and its agents, and Loanguy.com" were unjustly enriched by plaintiffs' monthly loan payments, fees, and interest because the contract was procured by fraud and because defendants breached the express terms of the contract making it unenforcable. (Compl. ¶ 179-186.) As a result, plaintiffs assert they have a claim for restitution. Horizon responds that "because [the unjust enrichment claim] is derivative of plaintiffs' other defective claims, it must fail with them." (MTD at 17.)
In order to establish a claim for unjust enrichment, a plaintiff must plead "receipt of a benefit and unjust retention of the benefit at the expense of another." Lectrodryer v. SeoulBank, 77 Cal. App. 4th 723, 726 (2000). Furthermore, the plaintiff must demonstrate that the defendant received the benefit through mistake, fraud, coercion or request. Nibbi Bros., Inc. v. Home Fed. Sav. Loan Ass'n, 205 Cal. App. 3d 1415, 1422 (1988).
Alternatively, a court may grant restitution based on a "quasi-contract theory." McBride v. Boughton, 123 Cal. App. 4th 379, 388 (2004). "Quasi-contractual" unjust enrichment is sought in order to avoid unjustly conferring a benefit upon a defendant where there is no valid contract. Id. However, under California law, a quasi-contract action does not lie "when an enforceable, binding agreement exists defining the rights of the parties."Paracor Fin. v. Gen. Elec. Capital Corp., 96 F.3d 1151, 1167 (9th Cir. 1996); Hedging Concepts, Inc. v. First Alliance Mortgage Co., 41 Cal. App. 4th 1410, 1419-1420 (1996).
Plaintiffs' unjust enrichment claim fails because, as the the court concluded supra, plaintiffs have insufficiently alleged fraud or breach of contract, and thus, fail to state that Horizon received and retained benefits and payments which they were not entitled to. Further, plaintiffs' alternative "quasi-contract" theory fails as well. Here, plaintiffs and defendants entered into the Subject Loan, and none of plaintiffs allegations support a claim that a valid contract did not exist between the parties. As such, plaintiffs do not allege sufficient facts to maintain a plausible claim for unjust enrichment.
In addition, most California courts agree that there is no cause of action for unjust enrichment. Walker v. Equity 1 Lenders Group, 2009 WL 1364430, *9 (S.D. Cal. 2009); Jogani v. Superior Court, 165 Cal. App. 4th 901, 911 (2008); Melchior v. New Line Productions, Inc., 106 Cal. App. 4th 779, 794 (2003) ("Unjust enrichment is a general principle, underlying various legal doctrines and remedies, rather than a remedy itself.");Lauriedale Associates, Ltd. v. Wilson, 7 Cal. App. 4th 1439, 1448 (1992) ("The phrase `Unjust Enrichment' does not describe a theory of recovery, but an effect: the result of a failure to make restitution under circumstances where it is equitable to do so.").
Accordingly, Horizon's motion to dismiss plaintiffs' unjust enrichment claim is GRANTED with leave to amend.
J. California Civil Code § 2923.6 claim
Plaintiffs' fifteenth claim for relief is for violation of Section 2923.6. Specifically, plaintiffs claim that after they defaulted on their loan, Horizon was required to offer them a loan modification that was in their best interest and that Horizon failed to do this "when they offered and executed a so-called `loan modification' in January 2009 with a two-year loan term and an excessive balloon payment in an amount of $1,015,050, and then refused to offer a subsequent meaningful modification." (Compl. ¶ 234.) Defendant Horizon responds that no private right of action exists under Section 2923.6.
In California, "[n]either a private right of action nor actionable duty is discernable from section 2923.6 to defeat a claim based on its violation." Manabat v. Sierra Pacific Mortg. Co., Inc., No. CV F 10-1018 LJO JLT, 2010 WL 2574161, (E.D. Cal. Jun. 25, 2010). Indeed, "Section 2923.6 does not require a lender to enter into a loan modification to serve the parties' best interests." Id.; Zendejas v. GMAC Wholesale Mortg. Corp., 2010 WL 2490975, *5 (E.D. Cal. Jun. 16, 2010) ("[Section 2923.6] in no way confers standing on a borrower to contest a breach of that duty. Other courts to consider this question have agreed unanimously.") (internal citations and quotations omitted);Alford v. Wachovia Bank/World Savings Bank, No. CV F 10-0091 LJO SMS, 2010 WL 415260, *10 (E.D. Cal. Jan. 26, 2010) (same);Pittman v. Barclays Capital Real Estate, Inc., No. 09 CV 0241, 2009 WL 1108889, at *3 (S.D. Cal. Apr. 24, 2009) ("[T]he cited statute clearly addresses this concern by creating a duty between a loan servicer and a loan pool member. The statute in no way confers standing on a borrower to contest a breach of that duty"); Farner v. Countrywide Home Loans, No. 08cv2193, 2009 WL 189025, *2 (S.D. Cal. Jan. 26, 2009) (same).
Because no private right of action exists, Horizon is entitled to dismissal of plaintiffs' Section 2923.6 claim. Accordingly, Horizon's motion to dismiss plaintiffs' Section 2923.6 claim is GRANTED without leave to amend.
K. California Business Professions Code § 17200
In their eleventh claim for relief, plaintiffs allege that Horizon violated § 17200 of the California Business and Professions Code ("UCL") by engaging in fraudulent business practices. (Compl. ¶¶ 189-202.)
UCL forbids acts of unfair competition, which includes "any unlawful, unfair or fraudulent business act or practice." Id. § 17200. UCL "incorporates other laws and treats violations of those laws as unlawful business practices independently actionable under state law." Plascencia v. Lending 1st Mortgage, 583 F. Supp. 2d 1090, 1098 (N.D. Cal. 2008); see also Farmers Ins. Exch. v. Superior Court, 2 Cal. 4th 377, 383 (1992). "California's UCL has a broad scope that allows for `violations of other laws to be treated as unfair competition that is independently actionable' while also `sweep[ing] within its scope acts and practices not specifically proscribed by any other law.'" Hauk v. JP Morgan Chase Bank U.S.A., 552 F.3d 1114 (9th Cir. 2009) (internal citations omitted). "Violation of almost any federal, state, or local law may serve as the basis for a UCL claim." Plascencia, 583 F. Supp. 2d at 1098 (citing Saunders v. Superior Court, 27 Cal. App. 4th 832, 838-839 (1994)).
Plaintiffs' UCL claim is founded upon the same allegations as their fraud claim, and as set forth supra, plaintiffs' allegations are insufficient to state a claim for fraud against Horizon. Accordingly, Horizon's motion to dismiss plaintiffs' claim for violations of California Business Professions Code § 17200 is GRANTED with leave to amend.
Plaintiffs' thirteenth cause of action is a predatory lending practice "claim." Plaintiffs characterize "predatory lending practice" as "an umbrella term [used] to describe some of the other claims alleged in this action, such as claims under TILA, RESPA and California UCL." (Opp.'n at 13.) In other words, plaintiffs' thirteenth cause of action is not a cause of action at all; it simply restates Horizon's alleged violations of TILA, RESPA, and UCL. As already stated, plaintiffs fail to state a claim pursuant to these statutes; accordingly, Horizon's motion to dismiss plaintiffs' predatory lending practices "claim" is GRANTED without leave to amend.
CONCLUSION
For the foregoing reasons, defendant Horizon's motion to dismiss is GRANTED. Plaintiffs' TILA, rescission and continuing violation claims; RESPA § 2604 claim; Section 2923.6 claim; and predatory lending "claim" are dismissed without leave to amend. As to all other claims, plaintiffs are granted fifteen (15) days from the date of this order to file a second amended complaint in accordance with this order. Horizon is granted thirty (30) days from the date of service of plaintiffs' second amended complaint to file a response thereto.
IT IS SO ORDERED.
DATED: November 22, 2010