-WVG Hernandez Jr. et al v. First American Loanstar Trustee Services et al, No. 3:2010cv00119 - Document 9 (S.D. Cal. 2010)
Court Description: ORDER Granting Motions To Dismiss (Re Docs. 5 , 6 ): Plaintiffs' Complaint is dismissed for failure to state a claim. The Court will grant Plaintiffs leave to file an amended complaint. If Plaintiffs choose to file an amended complaint, they m ust do so within 14 days of the filing of this Order. Failure to do so will result in the entry of judgment dismissing the case. Signed by Judge Barry Ted Moskowitz on 4/12/2010. (All non-registered users served via U.S. Mail Service; notice re ECF registration also sent to Atty Wechsler.) (mdc)
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-WVG Hernandez Jr. et al v. First American Loanstar Trustee Services et al Doc. 9 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 SALVADOR HERNANDEZ, JR. and WENDY CUEVAS, Case No. 10cv00119 BTM(WVG) ORDER GRANTING MOTIONS TO DISMISS 12 Plaintiffs, 13 14 v. FIRST AMERICAN LOANSTAR TRUSTEE SERVICES, et al., 15 Defendants. 16 17 Defendant First American Loanstar Trustee Services (“Loanstar”) and Defendants 18 Wells Fargo Bank, N.A. (“Wells Fargo”) and HSBC Bank USA, N.A. (“HSBC”), have filed 19 motions to dismiss Plaintiffs’ Complaint for failure to stat a claim. For the reasons discussed 20 below, Defendants’ motions are GRANTED. 21 22 23 24 I. BACKGROUND Plaintiffs commenced this action in the Superior Court of California, County of San Diego. On January 15, 2010, Defendants removed the action to federal court. 25 On or about February 15, 2007, Plaintiffs obtained a loan from Wells Fargo in the 26 principal amount of $448,000, secured by real property located at 1551 Masterson Lane, San 27 Diego, CA 92154 (the “Property”). (Ex. G to Compl.) On June 10, 2009, Loanstar recorded 28 a Notice of Default. (Ex. D to Compl.) On July 16, 2009, Wells Fargo recorded a 1 10cv00119 BTM(WVG) Dockets.Justia.com 1 Substitution of Trustee that substituted Loanstar as the Trustee in lieu of Fidelity National 2 Title Insurance Company. (Loanstar RJN, Ex. A.) On July 23, 2009, the Deed of Trust was 3 assigned by Wells Fargo to HSBC Bank USA National Association as Trustee for Wells 4 Fargo Asset Securities Corporation Mortgage Pass-Through Certificates, Series 2007-6. 5 (Loanstar RJN, Ex. B.) 6 On September 11, 2009, Loanstar recorded a Notice of Trustee’s Sale. (Ex. A to 7 Compl.) On October 1, 2009, Loanstar conducted a trustee sale of the Property. HSBC was 8 the successful purchaser, and Loanstar recorded a Trustee’s Deed Upon Sale in favor of 9 HSBC. (Ex. C to Compl.) 10 11 II. STANDARD ON MOTION TO DISMISS 12 Under Fed. R. Civ. P. 8(a)(2), the plaintiff is required only to set forth a “short and plain 13 statement” of the claim showing that plaintiff is entitled to relief and giving the defendant fair 14 notice of what the claim is and the grounds upon which it rests. Conley v. Gibson, 355 U.S. 15 41, 47 (1957). A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) should 16 be granted only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient 17 facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 18 699 (9th Cir. 1988). When reviewing a motion to dismiss, the allegations of material fact in 19 plaintiff’s complaint are taken as true and construed in the light most favorable to the plaintiff. 20 See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Although 21 detailed factual allegations are not required, factual allegations ”must be enough to raise a 22 right to relief above the speculative level.” Bell Atlantic v. Twombly, 550 U.S. 544, 127 S.Ct. 23 1955, 1965 (2007). 24 relief’ requires more than labels and conclusions, and a formulaic recitation of the elements 25 of a cause of action will not do.” Id. “A plaintiff’s obligation to prove the ‘grounds’ of his ‘entitle[ment] to 26 27 28 III. DISCUSSION In their Complaint, Plaintiffs assert the following causes of action: (1) claim to set 2 10cv00119 BTM(WVG) 1 aside trustee’s sale; (2) claim to cancel trustee’s deed; (3) lack of standing; (4) negligence 2 per se - violation of Cal. Bus. & Prof. Code § 17500 (against Wells Fargo only); (5) 3 negligence per se - violations of the Home Ownership Equity Protection Act (“HOEPA”), 15 4 U.S.C. § 1602, et seq. (against Wells Fargo only); (6) negligence per se - violation of Cal. 5 Civil Code § 2924b (against Loanstar and Wells Fargo only); (7) negligence per se - violation 6 of Cal. Fin. Code § 4973(f)(1) (against Wells Fargo only); (8) negligence per se-violation of 7 the Truth In Lending Act (“TILA”), 15 U.S.C. § 1601, et seq. and Regulation Z (against Wells 8 Fargo only); (9) negligent lending (against Wells Fargo only); (10) quiet title; and (11) 9 injunctive relief. Defendants contend that Plaintiffs’ Complaint should be dismissed for failure 10 to state a claim. The Court agrees with Defendants. 11 12 A. Claims to Set Aside Sale, Cancel Trustee’s Deed, and Quiet Title 13 Plaintiffs seek to set aside the sale of the Property, cancel the Trustee’s Deed Upon 14 Sale in favor of HSBC, and quiet title. These claims fail because Plaintiffs have not alleged 15 that they tendered the amounts owing under the loan. 16 Under California law, “an action to set aside a trustee’s sale for irregularities in sale 17 notice or procedure should be accompanied by an offer to pay the full amount of the debt for 18 which the property was security.” Arnolds Management Corp. v. Eischen, 158 Cal. App. 3d 19 575, 577 (1984). “A valid and viable tender of payment of the indebtedness owing is 20 essential to an action to cancel a voidable sale under a deed of trust.” Karlsen v. American 21 Sav. & Loan Assn., 15 Cal. App. 3d 112, 117 (1971). The reason for this requirement is that 22 a court of equity will not use its remedial power to accomplish a futile act that has no 23 beneficial purpose. Id. at 117-18. 24 Plaintiffs do not allege that they have tendered the amounts due under the loan. 25 Therefore, Plaintiffs cannot bring a claim to set aside the trustee’s sale or to quiet title. See 26 Manown v. Cal-Western Reconveyance Corp., 2009 WL 2406335, * 6 (S.D. Cal. Aug. 4, 27 2009). 28 3 10cv00119 BTM(WVG) 1 B. Standing 2 Plaintiffs claim that Defendants lacked standing to take any action on the note or to 3 initiate the foreclosure proceedings because they have not produced the “Original 4 Promissory Note.” 5 Plaintiffs’ theory that the original note must be produced lacks merit. 6 California Civil Code §§ 2924-2924k provide a “comprehensive framework for the 7 regulation of a nonjudicial foreclosure sale pursuant to a power of sale contained in a deed 8 of trust.” Moeller v. Lien, 25 Cal. App. 4th 822, 830 (1994). Within this framework, 9 nonjudicial foreclosure proceedings can be instituted by “the trustee, mortgagee, or 10 beneficiary, or any of their authorized agents” by filing a notice of default with the office of the 11 recorder. Cal. Civ. Code § 2924(a)(1). No less than three months after the filing of the 12 notice of default, a notice of sale may be given by “the mortgagee, trustee, or other person 13 authorized to take the sale.” 14 requirement that the original note be in possession of or produced by the party filing the 15 notice of default or giving the notice of sale. 16 Cal. Civ. Code § 2924(a)(3). There is absolutely no Therefore, this claim is dismissed for failure to state a claim. 17 18 19 20 C. Negligence Per Se - Statutory Claims Plaintiffs have not stated a valid claim under any of the California or federal statutes referenced in the Complaint. 21 22 1. Cal. Bus. & Prof. Code § 17500 23 Plaintiffs claim that Wells Fargo violated Cal. Bus. & Prof. Code § 17500 by (1) telling 24 Plaintiffs they were getting a typical 30 year fixed-rate loan for the purchase of the Property 25 when they actually received a loan with interest-only payments for the first 15 years; and (2) 26 giving Plaintiffs a “Stated Income Loan” so that Plaintiff’s income could be inflated without 27 documentation to support the borrowed amount, without regard to future ability to pay. 28 Cal. Bus & Prof. Code § 17500 makes it illegal for anyone to engage in false or 4 10cv00119 BTM(WVG) 1 deceptive advertising. To state a cause of action under this statute, the plaintiff must 2 demonstrate that members of the public are likely to be deceived. Wayne v. Staples, Inc., 3 135 Cal. App. 4th 466, 484 (2006). Allegations of fraudulent conduct alleged in support of 4 a plaintiff’s § 17500 claim must satisfy the heightened pleading requirements of Rule 9(b). 5 Labra v. Cal-Western Reconveyance Corp., 2010 WL 889537 (N.D. Cal. March 11, 2010). 6 Plaintiffs have not alleged facts showing that Wells Fargo engaged in deceptive 7 advertising or otherwise made statements likely to deceive the public. Furthermore Plaintiffs 8 have not pled fraud with specificity. Plaintiffs do not detail what statements were made to 9 Plaintiffs, who made the statements, when the statements were made, and whether the 10 statements were in writing. In the Complaint, Plaintiffs reference a “Commitment Letter” 11 which states that the loan is a “30 year fixed rate first mortgage loan.” (Ex. H to Compl.) 12 However, the letter also indicates that the “amortization type” is an “interest only payment,” 13 and the second page specifies that Plaintiffs will make 180 “interest-only” payments of 14 $2,380.00. It is unclear whether Plaintiffs are relying on other representations made by Wells 15 Fargo. 16 17 Accordingly, Plaintiffs have failed to state a claim for violation of Cal. Bus. & Prof. Code § 17500. 18 19 2. HOEPA and TILA Violations 20 Plaintiffs allege that Wells Fargo violated the HOEPA and TILA by failing to disclose 21 until the time of signing that they were getting an “interest only” loan that was based on 22 “stated income.” Plaintiffs also allege that the final Truth-in-Lending Disclosure was not 23 provided to them at any time. (Compl. ¶ 58.) 24 Setting aside the fact that it appears that Plaintiffs were informed about the interest- 25 only nature of the loan, these claims are barred by the applicable one-year statute of 26 limitations. TILA and HOEPA claims must be brought “within one year from the date of the 27 occurrence of the violation.” 15 U.S.C. § 1640(e). Based on the allegations of the Complaint 28 there is no basis for equitable tolling of the statute of limitations. Plaintiffs admit that they 5 10cv00119 BTM(WVG) 1 knew at the time of signing about the true nature of their loan, but it was “too late” to change 2 course “because the Plaintiffs had no time to find another lender and compare, or they would 3 lose out the property they really wanted after an exhaustive search that would meet their 4 lifestyles.” (Compl. ¶ 59.) Furthermore, Plaintiffs allege that they did not get the final truth-in- 5 lending disclosure at all, not that certain terms were incorrect and they had no reason to 6 know until a future time. 7 The alleged violations occurred at the time of closing, in or about February 2007. 8 Plaintiffs did not bring this action until November 16, 2009. Therefore, Plaintiffs’ HOEPA and 9 TILA claims are time-barred. 10 11 3. Cal. Civ. Code § 2924b 12 Plaintiffs allege that Loanstar and Wells Fargo violated Cal. Civil Code § 2924b 13 because the Notice of Default did not specify whether the amount owing on the loan was for 14 “principal, interest, or something else.” 15 However, no part of Cal. Civil Code § 2924b requires that the notice of default 16 separate the amount owed into principal and interest. Cal. Civ. Code § 2924c actually 17 provides the form for notices of default. This form, which was utilized in this case, provides 18 in relevant part, “[Y]ou may have the legal right to bring your account in good standing by 19 paying all of your past due payments plus permitted costs and expenses within the time 20 permitted by law for reinstatement of your account . . . . This amount is ________ as of 21 __________.” Section 2924c does not require that the amount owed be divided into principal 22 and interest. Therefore, Plaintiffs have not pled a violation of California law governing 23 notices of default. 24 25 4. Cal. Financial Code § 4973(f)(1) 26 Plaintiffs allege that Wells Fargo violated Cal. Fin. Code § 4973(f)(1) by failing to 27 ensure that Plaintiffs would be able to make the scheduled payments based upon their 28 current and expected income, obligations, employment status, and other financial resources. 6 10cv00119 BTM(WVG) 1 However, Plaintiffs have failed to allege facts establishing that Cal. Fin. Code § 4973 2 is applicable. Section 4973 prohibits certain acts in connection with “covered loans,” which 3 are defined as follows: 4 5 6 7 8 9 (b) “Covered loan” means a consumer loan in which the original principal balance of the loan does not exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association in the case of a mortgage or deed of trust, and where one of the following conditions are met: (1) For a mortgage or deed of trust, the annual percentage rate at consummation of the transaction will exceed by more than eight percentage points the yield on Treasury securities having comparable periods of maturity on the 15th day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor. 10 11 (2) The total points and fees payable by the consumer at or before closing for a mortgage or deed of trust will exceed 6 percent of the total loan amount. 12 Cal. Fin. Code § 4970. 13 Plaintiffs do not allege that the annual percentage rate at consummation of the loans 14 exceeded the Treasury securities rate by more than eight percentage points or that the total 15 points and fees paid by Plaintiffs at or before closing exceeded six percent of the total loan 16 amount. Therefore, Plaintiffs have failed to state a claim under Cal. Fin. Code § 4973(f). 17 18 D. Negligent Lending 19 Plaintiffs allege that Wells Fargo negligently created the loan on a stated loan basis, 20 putting Plaintiffs at risk of not being able to make payments in the future and losing their 21 property. However, Wells Fargo did not owe a general duty of care to Plaintiffs independent 22 of its obligation to comply with all applicable laws and regulations and to perform under the 23 loan agreement. See, e.g., Castaneda v. Saxon Mortg. Services, Inc., __F. Supp. 2d __, 24 2009 WL 4640673 (E.D. Cal. Dec. 3, 2009) (holding that no duties arose from loan 25 transaction outside of those in the agreement and that lender did not owe a duty of care to 26 plaintiffs); Labra, 2010 WL 889537 at * 12 (“Lenders and loan servicers owe no duty to a 27 borrower other than as expressly agreed to in the promissory note, deed of trust, and 28 foreclosure statutes.”). 7 10cv00119 BTM(WVG) 1 E. Accounting 2 Plaintiffs seek an accounting because “the amount of money still owed to defendant 3 WELLS FARGO is unknown to Plaintiffs and cannot be determined without an accounting.” 4 (Compl. ¶ 98.) 5 has no right to seek an accounting. A suit for an accounting lies where an action is for an 6 amount which is unliquidated and unascertained. St. James Church of Christ Holiness v. 7 Superior Court In and For Los Angeles County, 135 Cal. App. 2d 352, 359 (1955). Since 8 Plaintiffs are seeking an accounting for amounts they allegedly owe, the Court dismisses 9 Plaintiffs’ claim. See Nguyen v. LaSalle Bank Nat. Ass’n, 2009 WL 3297269, * 11 (C.D. Cal. 10 However, Plaintiffs, as the party owing money, not the party owed money, Oct. 13, 2009) (dismissing plaintiffs claim for accounting of amounts due on their loan). 11 12 F. Injunctive Relief 13 Plaintiffs seek an injunction that prohibits Defendants from seeking payment from 14 Plaintiffs on the loans and prohibits HSBC from evicting Plaintiffs. However, injunctive relief 15 is a remedy, not a separate cause of action. Cox Communications PCS, L.P. v. City of San 16 Marcos, 204 F. Supp. 2d 1272, 1283 (S.D. Cal. 2002). Because Plaintiffs’ underlying causes 17 of action have failed to state a claim, Plaintiffs’ claim for injunctive relief is dismissed as well. 18 19 IV. CONCLUSION 20 For the reasons discussed above, Defendants’ motions to dismiss are GRANTED. 21 Plaintiffs’ Complaint is DISMISSED for failure to state a claim. Although the Court has 22 doubts that Plaintiffs can state a valid claim, the Court will grant Plaintiffs leave to file an 23 amended complaint. If Plaintiffs choose to file an amended complaint, they must do so within 24 14 days of the filing of this Order. Failure to do so will result in the entry of judgment 25 dismissing the case. 26 IT IS SO ORDERED. 27 DATED: April 12, 2010 28 Honorable Barry Ted Moskowitz United States District Judge 8 10cv00119 BTM(WVG)
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