Herrera et al v. Countrywide KB Home Loans et al, No. 5:2010cv00902 - Document 15 (N.D. Cal. 2010)

Court Description: ORDER GRANTING 10 DEFENDANTS' MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART by Judge Jeremy Fogel(jflc3, COURT STAFF) (Filed on 5/4/2010).
Download PDF
Herrera et al v. Countrywide KB Home Loans et al Doc. 15 1 2 **E-Filed 5/4/2010** 3 4 5 6 7 8 IN THE UNITED STATES DISTRICT COURT 9 FOR THE NORTHERN DISTRICT OF CALIFORNIA 10 SAN JOSE DIVISION 11 12 NELSON R. HERRERA and NENEBETH T. HERRERA, 13 Plaintiffs, 14 15 16 v. COUNTRYWIDE KB HOME LOANS aka COUNTRYWIDE MORTGAGE VENTURES, LLC, a business entity, et al., 17 Case Number C 10-0902 JF (HRL) ORDER1 GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART [re: document no. 10] Defendants. 18 19 20 Defendants Countrywide Mortgage Ventures, LLC (“Countrywide”); BAC Home Loans 21 Servicing, LP (“BACHL”) (erroneously sued as “BAC Home Loan Servicing, LP”); ReconTrust 22 Company, N.A.; and Mortgage Electronic Registration Systems, Inc. (“MERS”) (collectively 23 “Defendants”) move pursuant to Fed. R. Civ. P. 12(b)(6) to dismiss the complaint in the above- 24 entitled action for failure to state a claim upon which relief may be granted. The Court has 25 considered the moving and responding papers and the oral argument presented at the hearing on 26 April 30, 2010. For the reasons discussed below, the motion will be granted, with leave to 27 28 1 This disposition is not designated for publication in the official reports. Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) Dockets.Justia.com 1 amend in part. 2 I. BACKGROUND 3 This action arises out of a residential mortgage transaction. Plaintiffs’ principal residence 4 (“the Property”) is located at 341 Rayos Del Sol Drive, San Jose, California. (Compl. ¶ 2.) On 5 November 28, 2006, Plaintiffs obtained a loan from Countrywide in the amount of $564,461.00, 6 which was secured by the Property. (Id.) The loan agreement contained an adjustable rate 7 feature and required only interest payments for the first ten years of the loan. (Id.) Plaintiffs 8 allege that Countrywide was the original mortgage lender, direct broker lender, and original 9 mortgage servicer. (Compl. ¶ 3.) Plaintiffs further allege that BACHL is the current loan 10 servicer, ReconTrust was the original loan trustee, and MERS was the named beneficiary. 11 (Compl. ¶¶ 3-4.) 12 Plaintiffs assert that Countrywide knew or should have known that they could not afford 13 to make payments on the loan. (Compl. ¶ 17.) Plaintiffs also allege that Defendants, among 14 other things: failed to explain how the loan worked; failed “to perform their due diligence in 15 investigation [sic] the legal requirements that this loan should have been processed within”; 16 failed to provide Plaintiffs with a “Mortgage Loan Origination Agreement”; approved the loan 17 “based only upon a stated income and a medium to high risk credit score”; charged Plaintiffs 18 hidden fees; and “failed to provide Plaintiffs with written notice of the furnishing of negative 19 credit information to consumer reporting agency [sic] after Defendants furnished such negative 20 credit information about Plaintiffs.” (Compl. ¶¶ 19, 21, 23, 24, 26, 27.) On January 15, 2010, Plaintiffs, proceeding pro se, filed the operative complaint in the 21 22 Santa Clara Superior Court, alleging twenty-one state and federal law claims including violations 23 of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., and the Real Estate and 24 Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq. Defendants removed the action 25 to this Court on March 3, 2010, and filed the instant motion on March 10, 2010, seeking 26 dismissal of all of Plaintiffs’ claims. 27 // 28 // 2 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 II. LEGAL STANDARDS 2 Dismissal under Fed. R. Civ. P. 12(b)(6) “is appropriate only where the complaint lacks a 3 cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. 4 Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). For purposes of a motion to 5 dismiss, the plaintiff’s allegations are taken as true, and the court must construe the complaint in 6 the light most favorable to the plaintiff. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). At the 7 same time, “[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need 8 detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] 9 to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of 10 a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal 11 citations omitted). Thus, a court need not accept as true conclusory allegations, unreasonable 12 inferences, legal characterizations, or unwarranted deductions of fact contained in the complaint. 13 Clegg v. Cult Awareness Network, 18 F.3d 752, 754-755 (9th Cir. 1994). 14 As the Supreme Court recently has clarified, a court must determine whether the well- 15 pled facts in the complaint “plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 16 U.S. —, 129 S.Ct. 1937, 1950 (2009) (emphasis added). “[W]here the well-pleaded facts do not 17 permit the court to infer more than the mere possibility of misconduct, the complaint has 18 alleged–but it has not ‘show[n]’–‘that the pleader is entitled to relief.’” Id. (quoting Fed. R. Civ. 19 P. 8(a)(2)) (emphasis added). 20 “Although a pro se litigant . . . may be entitled to great leeway when the court construes 21 his [or her] pleadings, those pleadings nonetheless must meet some minimum threshold in 22 providing a defendant with notice of what it is that it allegedly did wrong.” Brazil v. United 23 States Dept. of Navy, 66 F.3d 193, 199 (9th Cir. 1995). It is not enough for a plaintiff simply to 24 allege that a wrong has been committed and demand relief. Plaintiffs must give fair notice of the 25 claims being asserted and the grounds upon which it rests. Conley v. Gibson, 355 U.S. 41, 47-48 26 (1957). 27 28 Leave to amend must be granted unless it is clear that the complaint’s deficiencies cannot be cured by amendment. Lucas v. Dep’t of Corrs., 66 F.3d 245, 248 (9th Cir. 1995). When 3 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 amendment would be futile, however, dismissal may be ordered with prejudice. Dumas v. Kipp, 2 90 F.3d 386, 393 (9th Cir. 1996). 3 4 III. DISCUSSION Much of the complaint consists of broad, conclusory allegations of violations of law by 5 the “defendants” generally. Defendants move to dismiss all twenty-one claims, many on multiple 6 grounds. In their opposition papers, Plaintiffs address specifically only Defendants’ contentions 7 with respect to the TILA claims. They contend that 8 9 it is in the very least, good public policy that this Court either (a) allow the bare bones pled Complaint and its Exhibits to commence as a viable action so that Plaintiffs, [sic] can see this action all the way through; or in the alternative (b) allow Plaintiff [sic] to amend their Complaint to the satisfaction of the Court. 10 11 12 (Pls.’ Opp. 4.) The Court is mindful of the fact that Plaintiffs are proceeding pro se and that this area of 13 the law is complex. Nonetheless, courts in the Ninth Circuit have held consistently that the 14 pleadings of pro se plaintiffs still must meet the pleading requirements of Rule 8 to survive a 15 motion under Rule 12(b)(6). See, e.g., Brazil, 66 F.3d at 199. 16 1. 17 Defendants request that the Court take judicial notice of four documents related to the Documents Considered by the Court 18 loan transaction at issue: the Adjustable Rate Note (Request for Judicial Notice (“RJN”) Ex. A), 19 the Deed of Trust (RJN Ex. B), the Truth in Lending Disclosure Statement (RJN Ex. C), and the 20 Servicing Transfer Disclosure (RJN Ex. D). Plaintiffs do not oppose Defendants’ request. 21 The Court properly may consider documents that are referenced in the complaint. See In 22 re Stac Elcs. Sec. Litig., 89 F.3d 1399, 1405 n.4 (9th Cir. 1996) (noting that complete copies of 23 documents whose contents are alleged in the complaint may be considered in connection with a 24 motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6)). Here, the complaint refers to the Note 25 and the Deed of Trust. (See Compl. ¶¶ 2, 15.) However, the complaint does not allege the 26 contents of either Exhibit C or D to Defendants’ RJN. Although Plaintiffs do not oppose the 27 request, neither the existence or contents of the Truth in Lending Disclosure Statement or the 28 Servicing Transfer Disclosure is a proper matter for judicial notice pursuant to Fed. R. Evid. 4 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 201(b). Compare RJN Ex. C & D (the Truth in Lending Disclosure Statement and Servicing 2 Transfer Disclosure for Loan Number 145139606 “which appear[] to be signed by Plaintiff[s]” 3 (RJN 2)) with Fed. R. Evid. 201(b) (“A judicially noticed fact must be one not subject to 4 reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the 5 trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy 6 cannot reasonably be questioned.”) Accordingly, Defendants’ request will be granted as to 7 Exhibits A and B and denied as to Exhibits C and D. 8 9 10 2. The Federal Claims a. TILA Claim for Damages Defendants argue that Plaintiffs’ claim for damages under TILA fails because it is barred 11 by the applicable statute of limitations and because Plaintiffs’ allegations are insufficiently 12 specific to state a TILA claim. 13 14 i. Statute of limitations Defendants argue that Plaintiffs’ damages claim under TILA is barred by the one-year 15 limitations period set forth in 15 U.S.C. § 1640. The loan at issue was consummated on 16 November 28, 2006, more than three years before Plaintiff filed the instant action. Plaintiffs 17 allege that “[a]ny and all statute[s] of limitations relating to disclosures and notices required 18 pursuant to 15 U.S.C. § 1601 et seq. were tolled due to Defendants’ failure to effectively provide 19 the required disclosures and notices.” (Compl. ¶ 58.) Courts have recognized that “the doctrine 20 of equitable tolling may, in the appropriate circumstances, suspend the limitations period until 21 the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that 22 form the basis of the TILA action.” King v. State of Cal., 784 F.2d 910, 915 (9th Cir. 1986). 23 However, Plaintiffs’ bare allegation that they did not receive “the required notices and 24 disclosures” is insufficient to support a claim of equitable tolling. See, e.g., Lingad v. Indymac 25 Federal Bank, — F. Supp. 2d —, No. 2:09-cv-02347, 2010 WL 347994, at *3 (E.D. Cal. Jan. 29, 26 2010) (“[W]hen a plaintiff fails to allege any facts demonstrating that the TILA violations alleged 27 could not have been discovered by due diligence during the one-year statutory period, equitable 28 tolling should not be applied and dismissal at the pleading stage is appropriate.” (citation 5 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 omitted)). 2 3 ii. Disclosure of loan terms Defendants assert that Plaintiffs’ TILA claim should be dismissed even if it is not barred 4 by the statute of limitations because the complaint fails to allege specific TILA violations and 5 because the loan documents before the Court demonstrate that Plaintiffs were provided with the 6 required information. Among other things, Defendants point out that it is impossible to 7 determine which Defendants are alleged to have violated which specific provisions of the statute. 8 In any amended complaint, Plaintiffs must identify which disclosures and notices Defendants 9 failed to provide and explain why they could not have brought suit within the one-year statutory 10 period. In their opposition, Plaintiffs ask the Court to allow them to “remedy any deficiencies in 11 the pleadings, should that be the case.” (Pls.’ Opp. 9.) Because it will permit Plaintiffs to amend 12 for the purpose of showing that their TILA claim is not barred by the statute of limitations, the 13 Court also will direct Plaintiffs to include additional detail as to the ways in which each 14 Defendant allegedly violated TILA. 15 b. TILA Claim for Rescission 16 Defendants contend that Plaintiffs’ TILA claim for rescission is barred by the statute of 17 limitations and is insufficient because Plaintiffs have failed to allege tender or ability to tender; 18 they also argue that Plaintiffs’ factual allegations are contradicted by the loan documents 19 themselves, which indicate that the loan terms were disclosed to Plaintiffs. Because the statute 20 of limitations argument is dispositive, the Court does not reach Defendants’ other arguments.and 21 the loan documents indicate the loan terms were disclosed to Plaintiffs. 22 The applicable limitations period for rescission claims under TILA is three years. 15 23 U.S.C. § 1635(f). It is undisputed that Plaintiffs filed the instant action more than three years 24 after the consummation of the loan. Plaintiffs nonetheless claim that 25 26 27 [i]n certain instances, when the borrower is not clearly informed as to his/her right to cancel their transaction and if they are not given two copies of that form explaining their right(s), their right to cancel; AND if they are not also provided the same amount of copies of their TILA rights and Disclosures, their time is tolled until this problem is corrected. 15 USC section 1635(f). 28 6 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 2 (Pls.’ Opp. 5.) However, unlike §1640(e), the limitations period of 15 U.S.C. § 1635(f) is not subject to 3 equitable tolling. The statute provides that the “right of rescission shall expire three years after 4 the date of consummation of the transaction or upon the sale of the property, whichever occurs 5 first, notwithstanding the fact that the information and forms required under this section or any 6 other disclosures required under this part have not been delivered to the obligor.”2 15 U.S.C. § 7 1635(f) (emphasis supplied). The Ninth Circuit has recognized that “§ 1635 is a statute of 8 repose, depriving the courts of subject matter jurisdiction when a § 1635 claim is brought outside 9 the three year limitation period.” See Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 10 (9th Cir. 2002). Consummation of the transaction occurs at “the time that a consumer becomes 11 contractually obligated on a credit transaction.” 12 C.F.R. § 226.2(a)(13). Accordingly, 12 Plaintiffs’ rescission claim is untimely as of November 26, 2009, more than a month and a half 13 before the instant action was filed in state court. 14 15 c. RESPA Claim Plaintiffs’ sixth claim alleges violations of RESPA. Although the complaint asserts that 16 the claim is brought against all Defendants, the allegations with respect to RESPA pertain only to 17 Countrywide. (See Compl. ¶ 66-71.) Plaintiff alleges that Countrywide “failed to use proper 18 underwriting techniques to ensure that Plaintiffs were likely to not suffer financial detriment 19 when paying off th[e] loan” and “was well aware that Plaintiffs had a likelihood of default and 20 allowed th[e] loan to be offered anyway, with an Adjustable Rate” and that “the payment 21 schedule to the Plaintiffs [sic] was misleading and designed to create a windfall to 22 COUNTRYWIDE.” (Compl. ¶¶ 69-70.) 23 Defendants move to dismiss Plaintiffs’ RESPA claim on the basis that the claim is not 24 actionable under the statute, is untimely, and fails to allege any damages or injury. Plaintiffs do 25 not oppose any of Defendants’ arguments. 26 27 28 2 Plaintiffs actually concede that the right to rescind expires in three years after consummation or upon transfer of all of the consumer interests in the property or upon sale of the property, whichever occurs first. (Pls.’ Opp. 5.) 7 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 2 i. Private rights of action under RESPA Defendants contend correctly that the RESPA claim fails because the statute does not 3 create a private right of action related to loan disclosures. See, e.g., Lingad, 2010 WL 347994 4 (“[T]here is no private right of action for violations of Section 2603’s disclosure requirements. 5 Bloom v. Martin, 865 F.Supp. 1377, 1384 (N.D.Cal.1994) (finding that Congress did not intend 6 to create a private right of action for violations of Section 2603), aff’d, 77 F.3d 318 ([9th Cir. 7 ]1996). Further, the disclosure provisions of RESPA that do confer a private right of action do 8 not pertain to disclosures at a loan’s closing. Lopez v. Wachovia Mort., 2:09-CV01510- 9 JAM-DAD, 2009 WL 4505919, at *3 ([E.D. Cal. Nov. 20, 2009). Therefore, Plaintiff’s RESPA 10 claim brought under Section 2603 against MortgageIT is dismissed with prejudice.”) Unless 11 Plaintiffs can allege a RESPA claim based on facts that do not arise from Countrywide’s loan 12 disclosures, amendment would be futile. 13 14 ii. Statute of limitations Defendants’ argument that Plaintiffs’ RESPA claim is barred even if the Court applies a 15 three-year statute of limitations, “the longest statute of limitations available under RESPA,” also 16 is well taken. Vrabel v. JP Morgan Chase Bank, N.A. No. C-C-09-1278 MMC 2009 WL 17 2421856, at *1 (N.D. Cal. 2009) (applying 12 U.S.C. § 2614’s three-year statute of limitations to 18 the assertion of a violation of RESPA disclosure claim). The subject loan was consummated on 19 November 28, 2006, more than three years before the filing of the instant complaint on January 20 15, 2010. Cf. Kelly v. Mortg. Elec. Registration Sys., Inc., 642 F. Supp. 2d 1048, 1058 (N.D. 21 Cal. 2009) (“Section 2605 of RESPA governs disclosure requirements. Claims under § 2605 are 22 governed by a three-year statute of limitations. 12 U.S.C. § 2614. The mortgage transaction at 23 issue here was consummated on March 28, 2006. Plaintiffs filed their complaint in state court on 24 March 24, 2009. Therefore, contrary to defendants’ contention, a claim under § 2605 would not 25 be time-barred.”). 26 27 28 iii. Failure to allege pecuniary damages Finally, Defendant’s contention that Plaintiffs have failed to allege any pecuniary damages resulting from any alleged RESPA violation also has merit. See Hutchinson v. 8 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 Delaware Sav. Bank FSB, 410 F.Supp.2d 374, 383 (D.N.J.,2006) (finding that “[p]laintiffs must, 2 at a minimum, also allege that the breach resulted in actual damages”); see also Reynoso v. Paul 3 Financial, LLC, No. 09-3225 SC, 2009 WL 3833298, 7 (N.D. Cal. Nov. 16, 2009) (dismissing a 4 RESPA claim that alleged damages in a conclusory manner and that failed to describe the 5 putative QWR); Singh v. Washington Mut. Bank, No. C-09-2771 MMC, 2009 WL 2588885, *5 6 (N.D. Cal. Aug. 19, 2009) (dismissing a RESPA claim that only contained a conclusory 7 allegation that the defendants were liable for damages). “[C]ourts have interpreted this 8 requirement liberally.” Yulaeva v. Greenpoint Mortg. Funding, Inc., No. CIV. S-09-1504 9 LKK/KJM, 2009 WL 2880393, *15 (E.D. Cal. Sept. 3, 2009). Plaintiffs allege only that the 10 alleged RESPA violation has caused them to suffer damages “in an amount not yet ascertained, 11 to be proven at trial.” (Compl. ¶ 71). This conclusory allegation is insufficient, even under a 12 liberal pleading standard. 13 2. 14 Plaintiffs’ federal claims provide the sole basis for federal subject matter jurisdiction. Supplemental Jurisdiction 15 While federal courts may exercise supplemental jurisdiction over state-law claims “that are so 16 related to claims in the action within [the court’s] original jurisdiction that they form part of the 17 same case or controversy under Article III of the United States Constitution,” 28 U.S.C. § 18 1367(a), a court may decline to exercise supplemental jurisdiction where it “has dismissed all 19 claims over which it has original jurisdiction,” id. § 1367(c)(3). Indeed, unless “considerations 20 of judicial economy, convenience[,] and fairness to litigants” weigh in favor of the exercise of 21 supplemental jurisdiction, “a federal court should hesitate to exercise jurisdiction over state 22 claims.” United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966); see also Carnegie-Mellon 23 Univ. v. Cohill, 484 U.S. 343, 350 (1988) (“[A] federal court should consider and weigh in each 24 case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, 25 and comity.”). Because it is not clear that Plaintiff can state a viable federal claim, the Court will 26 defer its review of the remaining state-law claims. 27 28 IV. CONCLUSION Good cause therefor appearing, the motion to dismiss is GRANTED, with leave to amend 9 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3) 1 solely as to Plaintiffs’ TILA claim for damages. Consideration of Plaintiffs’ state-law claims 2 will be deferred pending a determination as to whether Plaintiffs are able to assert any federal 3 claims. Any amended complaint shall be filed within thirty (30) days of the date this order is 4 filed. The Case Management Conference will be continued to July 30, 2010, at 10:30 a.m. 5 6 IT IS SO ORDERED. 7 8 DATED: 5/4/2010 9 10 __________________________________ JEREMY FOGEL United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10 Case No. C 10-0902 JF (HRL) ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS, WITH LEAVE TO AMEND IN PART (JFLC3)