Hughes v. Equity Plus Financial et al, No. 3:2009cv02927 - Document 25 (S.D. Cal. 2010)
Court Description: ORDER Granting 19 Wachovia's Motion to Dismiss; Quashing Service on Equity Plus Financial; Denying as moot 20 Equity Plus Financial's Motion to Dismiss. Plaintiff's claims against Wachovia are DISMISSED. However, the Court will gi ve Plaintiff one more chance to amend her claims against Wachovia. Any amended complaint must be filed within 15 days of the entry of this Order. The Court also QUASHES service on Equity Plus Financial. Plaintiff must properly serve the operative complaint and a summons on Equity Plus Financial and file a proof of service within 30 days of the entry of this Order. Signed by Judge Barry Ted Moskowitz on 11/15/2010. (All non-registered users served via U.S. Mail Service)(jer)
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Hughes v. Equity Plus Financial et al Doc. 25 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 LILLIAN HUGHES, Case No. 09cv2927 BTM(RBB) Plaintiff, 12 ORDER GRANTING WACHOVIA’S MOTION TO DISMISS; QUASHING SERVICE ON EQUITY PLUS FINANCIAL; DENYING AS MOOT EQUITY PLUS FINANCIAL’S MOTION TO DISMISS v. 13 14 EQUITY PLUS FINANCIAL, et al., Defendant. 15 16 17 Defendant Wachovia Mortgage (“Wachovia”) (a Division of Wells Fargo Bank, N.A., 18 formerly known as Wachovia Mortgage, FSB, formerly known as World Savings Bank, FSB 19 and named herein as “Golden West Financial, FSB, d/b/a World Savings Bank, FSB, 20 Wachovia, FSB, Wells Fargo, N.A.”) has filed a motion to dismiss the Second Amended 21 Complaint for failure to state a claim. Defendant Equity Plus Financial has also filed a motion 22 to dismiss pursuant to Fed. R. Civ. P. 12(b)(4), (b)(5), and (b)(6). For the reasons discussed 23 below, Wachovia’s motion to dismiss is GRANTED, service of the summons and complaint 24 on Equity Plus Financial is QUASHED, and Equity Plus Financial’s motion to dismiss is 25 DENIED AS MOOT. 26 /// 27 /// 28 /// 1 09cv2927 BTM(RBB) Dockets.Justia.com 1 I. FACTUAL BACKGROUND 2 On or about November 16, 2006, Plaintiff obtained a loan in the amount of $540,000 3 from World Savings Bank, FSB (which changed its name in December, 2007, to Wachovia 4 Mortgage, FSB (Wachovia’s RJN, Ex. 2)). The purpose of the loan was to refinance 5 Plaintiff’s home located at 993 Via Sinuoso, Chula Vista, CA 91910 (the “Property”). The 6 note was secured by a deed of trust on the Property. 7 Plaintiff claims that she was emotionally distraught during the loan application process 8 and that Defendants, through fraud and concealment, tricked her into entering into a loan she 9 could not actually afford. Plaintiff alleges that defendant Equity Plus Financial (“Equity”), 10 Plaintiff’s mortgage broker, inflated her income on the loan application without her 11 knowledge. (SAC ¶ 10.) According to Plaintiff, although her average monthly income for 12 2005 was $2,008.17, Equity stated that her monthly income was $11,000.00. (SAC ¶ 16.) 13 Equity and World Savings Bank did not ask for proof of Plaintiff’s stated income because it 14 would be evidence that Plaintiff was not qualified for the loan. (SAC ¶ 10.) Plaintiff alleges 15 that Equity did not explain the loan’s features to her before she agreed to the loan, and that 16 Defendants failed to include accurate initial disclosures and final disclosures. (SAC ¶¶ 11- 17 12.) Plaintiff entered into the loan based on the false representations that she qualified for 18 the loan and Defendants’ concealment of the truth. (SAC ¶ 14.) 19 Additionally, Plaintiff alleges that World Savings Bank paid Equity an undisclosed 20 yield-spread premium (“YSP”) in the amount of $5,400 as an incentive to place Plaintiff in a 21 non-conventional “Fixed Rate Pick-A-Payment” loan instead of a conventional but less 22 profitable loan. (SAC ¶ 15.) Under the terms of the note (Wachovia’s RJN Ex. 5), interest 23 was to be paid at the yearly rate of 7.7%. The initial monthly payments were in the amount 24 of $2,064.13. The monthly payment was scheduled to change on January 1, 2008, and 25 every twelve months thereafter, until the 121st month, which would be the final payment 26 change. 27 28 On or about August 5, 2009, Plaintiff sent a letter of rescission to Wachovia. (SAC ¶ 29.) 2 09cv2927 BTM(RBB) 1 Plaintiff’s SAC asserts the following claims: (1) intentional misrepresentation (against 2 Equity only); (2) fraudulent concealment (against Equity only); (3) breach of fiduciary duty 3 (against Equity only); (4) constructive fraud (against Equity only); (5) violation of RESPA, 12 4 U.S.C. § 2607; (6) quiet title; and (7) violation of Cal. Civ. Code § 2923.5 (against Wachovia 5 only). 6 7 8 9 10 II. DISCUSSION A. Wachovia Wachovia moves to dismiss Plaintiff’s claims against it for failure to state a claim. The Court agrees that Plaintiff has failed to state a claim against Wachovia. 11 Plaintiff’s fifth cause of action alleges that the YSP was an unlawful kickback in 12 violation of RESPA, 12 U.S.C. § 2607. In an order filed on July 19, 2010, the Court 13 dismissed Plaintiff’s claim under 12 U.S.C. § 2607 on the ground that the claim appeared to 14 be barred by RESPA’s one-year statute of limitations. 12 U.S.C. § 2614. Plaintiff’s SAC 15 adds some allegations regarding misleading statements by Equity. 16 allegations are not sufficient to show that Plaintiff is entitled to equitable tolling of the 17 limitations period. However, these 18 According to the SAC, at the time of the transaction, Plaintiff expressed her concern 19 to her mortgage broker regarding the amount of the monthly payment. (SAC ¶ 8.) The agent 20 for the mortgage broker reassured Plaintiff that she would be fine because she had been 21 placed into a three payment option plan, and she could choose the lowest payment option. 22 When Plaintiff saw her first monthly payment amount, Plaintiff asked the agent why the 23 amount was so high, and he reiterated his explanation regarding her ability to choose 24 between three different monthly amounts. (SAC ¶ 17.) Plaintiff did not understand his 25 explanation and was unable to get in touch with him from that time forward. (SAC ¶ 18.) 26 Plaintiff sought legal advice in early 2009, and, after an audit of her loan transaction was 27 performed, discovered the violations of law that occurred. (SAC ¶¶ 24-25.) 28 These additional facts do not establish that Plaintiff is entitled to equitable tolling. 3 09cv2927 BTM(RBB) 1 “Equitable tolling may be applied if, despite all due diligence, a plaintiff is unable to obtain 2 vital information bearing on the existence of his claim.” Santa Maria v. Pacific Bell, 202 F.3d 3 1170, 1178 (9th Cir. 2000). Absent an explanation as to why Plaintiff could not have 4 instigated an investigation into the propriety of the YSP within the limitations period, Plaintiff 5 has failed to plead a sufficient basis for equitable tolling. 6 Correspondents, Inc., 2009 WL 3757398, at *2 (C.D. Cal. Nov. 6, 2009) (“Accordingly, the 7 Lymans have not pleaded a sufficient basis for equitable tolling, as they have not pleaded 8 facts to suggest that despite all due diligence, they did not have a reasonable opportunity to 9 discover the violations that now form the basis of their RESPA claims.”) See Lyman v. Loan 10 Plaintiff has not alleged facts explaining why she could not have looked into the 11 propriety of the loan, including the YSP within the limitations period. Plaintiff does not explain 12 how the allegedly illegal YSP was discovered through the audit and does not claim that these 13 facts could not have been uncovered earlier.1 Furthermore, as discussed by the Court 14 previously, based on the facts alleged by Plaintiff, it should have been clear to her almost 15 immediately that something was amiss with the loan. 16 The amount of the initial payment (due in January 2007) was more than Plaintiff’s 17 monthly income in 2005. According to the SAC, when Plaintiff raised her concern regarding 18 the amount of the payment, the agent for the mortgage broker gave Plaintiff an 19 incomprehensible explanation regarding the option to choose from three different payments. 20 Plaintiff did not understand the explanation and tried to have further discussions with the 21 agent. However, Plaintiff was unable to get in touch with the agent. The amount of the initial 22 payment coupled with the fact that Plaintiff was getting the run-around should have spurred 23 Plaintiff to look into the legality of the loan. Instead, Plaintiff waited until 2009 to seek legal 24 advice. 25 Absent facts showing that Plaintiff is entitled to equitable tolling, Plaintiff’s RESPA 26 claim is time-barred. Therefore, Wachovia’s motion to dismiss is granted as to Plaintiff’s fifth 27 28 1 Plaintiff claims that the YSP was “undisclosed,” but does not specify whether the YSP was disclosed on Plaintiff’s HUD-1 Settlement Statement. 4 09cv2927 BTM(RBB) 1 cause of action. 2 Plaintiff’s seventh cause of action alleges a violation of Cal. Civ. Code § 2923.5. 3 Section 2923.5 provides that a mortgagee, trustee, beneficiary, or authorized agent may not 4 file a notice of default pursuant to Section 2924 until 30 days after initial contact is made or 5 30 days after failing to contact the borrower despite the exercise of due diligence as defined 6 in subsection (g). “Initial contact” is governed by the following requirements: 7 8 9 10 11 12 A mortgagee, beneficiary, or authorized agent shall contact the borrower in person or by telephone in order to assess the borrower's financial situation and explore options for the borrower to avoid foreclosure. During the initial contact, the mortgagee, beneficiary, or authorized agent shall advise the borrower that he or she has the right to request a subsequent meeting and, if requested, the mortgagee, beneficiary, or authorized agent shall schedule the meeting to occur within 14 days. The assessment of the borrower's financial situation and discussion of options may occur during the first contact, or at the subsequent meeting scheduled for that purpose. In either case, the borrower shall be provided the toll-free telephone number made available by the United States Department of Housing and Urban Development (HUD) to find a HUD-certified housing counseling agency. Any meeting may occur telephonically. 13 Plaintiff claims that Wachovia failed to comply with the requirements of § 2923.5 prior to filing 14 a Notice of Default. According to Plaintiff, she “is entitled to certain amounts already paid, 15 including interest, finance charges and closing costs, as an offset against amounts owing on 16 the loan, and collect statutory damages and attorney fees as well.” (SAC ¶ 95.) 17 In Mabry v. Superior Court, 185 Cal. App. 4th 208 (2010), the court addressed the 18 issue of whether there is a private right of action under § 2923.5. Upon examination of the 19 language of § 2823.5 and the other statutory provisions governing foreclosure sales, the 20 court concluded that borrowers have a private right of action under § 2923.5. However, the 21 court also held that the right conferred by § 2923.5, a right to be contacted to assess and 22 explore alternatives to foreclosure prior to the filing of a notice of default, is enforced by the 23 postponement of a foreclosure sale. Postponement of the sale before it occurs is “the only 24 remedy provided.” Id. at 235. 25 As explained by Mabry, section 2923.5 does not provide for the recovery of damages. 26 Therefore, Plaintiff’s claim for damages under the statute is dismissed. If Plaintiff wishes to 27 28 5 09cv2927 BTM(RBB) 1 bring a claim under § 2923.5 to postpone the sale, Plaintiff has leave to do so.2 2 Plaintiff’s sixth cause of action is to quiet title. Because Plaintiff has failed to state a 3 claim under RESPA or Cal. Civ. Code § 2923.5, Plaintiff’s quiet title claim fails as well. 4 Accordingly, Wachovia’s motion to dismiss is granted as to Plaintiff’s sixth cause of action. 5 6 B. Equity Plus Financial 7 Equity moves for dismissal based on improper service of process, or, in the 8 alternative, for failure to state a claim. As discussed below, the Court finds that Equity was 9 not properly served. Therefore, the Court quashes the service and denies the motion to 10 dismiss as moot. 11 In an order filed on July 19, 2010, the Court dismissed Plaintiff’s FAC against 12 Wachovia for failure to state a claim and ordered Plaintiff to show cause why this case should 13 not be dismissed as against defendant Equity for failure to serve it with the summons and 14 complaint within 120 days of the filing of the action. In an order filed on August 4, 2010, the 15 Court explained that if Plaintiff did not effect service on Equity by September 13, 2010, the 16 Court would dismiss the action against Equity. On August 9, 2010, Plaintiff filed a proof of 17 service, which indicates that the summons and complaint were personally served upon Emil 18 Ibrahim Jabre, an agent for service for Equity. 19 In a declaration filed in support of Equity’s motion, Jabre explains that he was not 20 personally served and that he discovered the documents attached as Exhibit A to his 21 declaration lying in the shrubs adjacent to his front door. (Jabre Decl. ¶¶ 4-6.) Exhibit A 22 consists of the proof of service, a summons, and the original complaint filed by Plaintiff on 23 December 30, 2009. No other documents were included in the packet. (Jabre Decl. ¶ 6.) 24 Based on Jabre’s declaration, Equity was not properly served. In addition to the fact 25 that Jabre was not personally served, Jabre was not served with the Second Amended 26 Complaint (which was filed on August 4, 2010). If an initial complaint has been superseded 27 28 2 The Court does not know when the Notice of Default was filed and is unaware of the status of the foreclosure proceedings. 6 09cv2927 BTM(RBB) 1 by an amended complaint, service is ineffective if a defendant is served with the original 2 complaint rather than the amended complaint. See Patel v. Dameron Hospital, 2000 WL 3 35619441, at * 4 (E.D. Cal. 2000). 4 5 Accordingly, the Court QUASHES service on Equity. Equity’s motion to dismiss is DENIED AS MOOT. 6 7 III. CONCLUSION 8 For the reasons discussed above, Wachovia’s motion to dismiss the Second 9 Amended Complaint [Doc. No. 19] is GRANTED. Plaintiff’s claims against Wachovia are 10 DISMISSED. However, the Court will give Plaintiff one more chance to amend her claims 11 against Wachovia. Any amended complaint must be filed within 15 days of the entry of this 12 Order. 13 The Court also QUASHES service on Equity Plus Financial. Plaintiff must properly 14 serve the operative complaint and a summons on Equity Plus Financial and file a proof of 15 service within 30 days of the entry of this Order. Failure to do so will result in the entry of 16 judgment dismissing the case against Equity Plus Financial. 17 18 Equity Plus Financial’s motion to dismiss [Doc. No. 20] is DENIED as moot. IT IS SO ORDERED. 19 DATED: November 15, 2010 20 21 Honorable Barry Ted Moskowitz United States District Judge 22 23 24 25 cc: Lilian Hughes 993 Via Sinuoso Chula Vista, CA 91910 26 27 28 7 09cv2927 BTM(RBB)
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