Behl v. Specialized Loan Servicing, LLC et al, No. 5:2023cv00478 - Document 21 (N.D. Cal. 2023)
Court Description: ORDER GRANTING 8 MOTION TO DISMISS; REMANDING TO SANTA CLARA COUNTY SUPERIOR COURT. Signed by Judge Beth Labson Freeman on 8/8/2023. (blflc3, COURT STAFF) (Filed on 8/8/2023)
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1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 RAJIV BEHL, Plaintiff, 8 9 10 11 Case No. 23-cv-00478-BLF ORDER GRANTING MOTION TO DISMISS v. SPECIALIZED LOAN SERVICING, LLC, et al., [Re: ECF No. 9] United States District Court Northern District of California Defendants. 12 13 Plaintiff Rajiv Behl filed this action in state court asserting one federal law claim and eight 14 state law claims against Defendants Specialized Loan Servicing, LLC (“SLS”) and First Franklin 15 Mortgage Loan Trust, Mortgage Loan Asset-Backed Certificates, Series 2007-FFC, U.S. Bank 16 National Association, as Trustee, successor in interest to Bank of America, N.A., as Trustee, 17 successor by merger to LaSalle Bank National Association, as Trustee (“U.S. Bank”). Behl 18 alleges that Defendants failed to comply with various laws in servicing his lien mortgage. 19 Defendants removed the action to this Court on February 1, 2023. 20 Before the Court is Defendants’ Motion to Dismiss. Mot., ECF No. 8. Plaintiff Rajiv Behl 21 has not filed an opposition or otherwise appeared before this Court. And it does not appear that 22 Plaintiff’s attorney is a member of this Court’s bar. Defendants have filed proofs of service 23 showing that they served Plaintiff’s counsel with the notice of removal and motion to dismiss at 24 the address listed on Plaintiff’s pleadings in the underlying state court proceedings. See Not. of 25 Removal 5, ECF No. 1; Mot. 18; Compl., at p.1, ECF No. 1-1. 26 For the foregoing reasons, Defendants’ motion to dismiss Behl’s federal law claim is 27 GRANTED WITHOUT LEAVE TO AMEND. The Court declines to exercise supplemental 28 jurisdiction over Behl’s state law claims. I. 1 BACKGROUND On December 5, 2006, Rajiv Behl obtained a mortgage loan in the amount of $108,000 2 3 4 (“Subject Loan”) on real property at 854 N. 16th Street, San Jose, California, 95112 (“Subject Property”). Compl. ¶¶ 1,10 & Ex. A (“Deed of Trust”), ECF No. 1-1. The lender was First Franklin, a Division of National City Bank (“First Franklin”) and the trustee was Cornerstone Title 5 Company. See Deed of Trust 1. The mortgage loan is the second lien mortgage on the property. 6 Compl. ¶ 15; Deed of Trust 1. The Deed of Trust was recorded on December 8, 2006, as 7 Instrument No. 1921949. Compl. ¶ 10; Deed of Trust 1. 8 On June 15, 2021, First Franklin assigned the Deed of Trust to Defendant U.S. Bank. 9 Compl. ¶ 11 & Ex. B (“Assignment”). The assignment was recorded on July 22, 2021, as 10 Instrument No. 25037071. Compl. ¶ 11; Assignment 1. 11 United States District Court Northern District of California On October 21, 2021, a Substitution of Trustee was recorded with the Santa Clara County 12 13 Clerk substituting Affinia Default Services, LLC, as trustee of the Deed of Trust. See Def’s Req. for Judicial Not. (“RJN”) Ex. 4 (“Substitution”), ECF No. 9-1.1 The Substitution was recorded as 14 Instrument No. 25120671. 15 That day, a Notice of Default and Election to Sell Under Deed of Trust was recorded with 16 the Santa Clara County Recorder’s Office. See Compl. ¶ 12 & Ex. C (“Notice of Default”) 17 (showing recording on October 1, 2021). The Notice of Default stated that a breach of the 18 obligations in the Deed of Trust had occurred. Notice of Default 3. The Notice of Default was 19 recorded as Instrument No. 25120672. 20 21 22 23 24 25 26 27 28 1 In support of their motion, Defendants submit a request for judicial notice of various documents. Rule 201 of the Federal Rules of Evidence allows courts to take judicial notice of facts that are “not subject to reasonable dispute because [they] . . . can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed. Rule Evid. 201(b). The documents include deeds of trust, the assignment of the Deed of Trust, the Substitution, a Notice of Default, and a Notice of Trustee’s sale. The documents were recorded with the Santa Clara County Recorder’s Office, as shown by the date stamps and record numbers. Behl has not appeared or otherwise objected to the judicial notice of these documents. Behl included certain of these documents as attachments to his complaint. The Court GRANTS the request for judicial notice. See Hinojosa v. Wells Fargo Bank, C-12-0483 EMC, 2012 WL 3313554, at *1 n.1 (N.D. Cal. Aug. 13, 2012) (granting judicial notice of deed of trust, notice of default, substitution of trustee, and corporate assignment of the deed of trust); Gamboa v. Tr. Corps, 09-0007 SC, 2009 WL 656285 at *2-3 (N.D. Cal. Mar. 12, 2009) (granting judicial notice of various documents concerning a foreclosure sale, including notice of default, substitution of trustee, assignment of deed of trust, and notice of trustee sale). 2 1 On February 10, 2022, a Notice of Trustee’s Sale was recorded with the Santa Clara 2 County Recorder’s Office. See Compl. ¶ 13 & Ex. D (“Notice of Trustee’s Sale”). The Notice of 3 Trustee’s Sale set April 20, 2022, as the sale date of the Subject Property. Compl. ¶ 13; Notice of 4 Trustee’s Sale 1. Behl alleges that the property was sold on that date. Compl. ¶ 13. Behl’s March 2022 statement on the loan showed an amount due of $17,847. Compl. ¶ 14 5 6 & Ex. E (“March 2022 Loan Statement”). Behl alleges that he did not receive any statement on 7 his loan from June 2009 to July 2021. Compl. ¶ 41. He also alleges that “back since 2008, [he] 8 has not received statements as also required by Title 12 C.F.R. § 1026.7.” Compl ¶ 16. Behl filed this action in state court on December 30, 2022. See Compl. Defendants United States District Court Northern District of California 9 10 removed to this Court based on federal question jurisdiction. Not. of Removal ¶ 8, ECF No. 1. 11 The complaint asserts one federal law claim and eight state law claims. Behl brings his 12 federal law claim for violation of the Truth in Lending Act (TILA), 15 U.S.C. § 1640 (Claim 4). 13 Behl brings his state law claims for violation of California Civil Code § 2923.5 (Claim 1); 14 violation of California Civil Code § 2924(a)(1) (Claim 2); violation of California Civil Code 15 § 2924.9 (Claim 3); violation of California Civil Code § 1788.30 (Claim 5); violation of California 16 Financial Code § 4978(a) and Article XV, Section 1, of the California Constitution (Claim 6); 17 wrongful foreclosure (Claim 7); unfair business practices in violation of the California Business 18 and Professions Code § 17200, et seq. (Claim 8); and cancellation of written instruments under 19 California Civil Code § 3412 (Claim 9). 20 21 II. LEGAL STANDARD “A motion to dismiss under Federal Rules of Civil Procedure 12(b)(6) for failure to state a 22 claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation 23 Force v. Salazar, 646 F.3d 1240, 1241–42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 24 729, 732 (9th Cir. 2011)). When determining whether a claim has been stated, the Court accepts 25 as true all well-pled factual allegations and construes them in the light most favorable to the 26 plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the 27 Court need not “accept as true allegations that contradict matters properly subject to judicial 28 notice” or “allegations that are merely conclusory, unwarranted deduction of fact, or unreasonable 3 1 inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). While a 2 complaint need not contain detailed factual allegations, “it must contain sufficient factual matter, 3 accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 4 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is 5 facially plausible when it “allows the court to draw the reasonable inference that the defendant is 6 liable for the misconduct alleged.” Id. 7 III. Defendants move to dismiss all of Behl’s claims. The Court will address Behl’s federal 8 United States District Court Northern District of California 9 DISCUSSION law claim and then address Behl’s state law claims. 10 A. 11 Behl alleges that Defendants violated several regulations implementing the Truth in Federal law Claim: Alleged Violation of the Truth in Lending Act (Claim 4) 12 Lending Act (“TILA”), 15 U.S.C. § 1601. Specifically, Behl alleges that SPS violated 12 C.F.R. 13 § 1026.41 by failing to provide periodic statements for the Subject Loan from June 2009 to July 14 2021. Compl. ¶¶ 41-43. Behl further alleges that he SPS either improperly accrued interest on his 15 loan while it was charged off in violation of 12 C.F.R. § 1026.5(b)(2)2, or if the loan was not 16 charged off, violated TILA’s monthly statement mandate under 12 C.F.R. § 1027. Compl. ¶ 45. 17 Behl seeks damages under 15 U.S.C. § 1640(a). Compl. ¶¶ 48, 50. He also seeks rescission of the 18 Subject Loan under “15 C.F.R. § 1639(j)”—a regulation that, as far as the Court can tell, does not 19 exist. Compl. ¶¶ 49, 51. Defendants move to dismiss Behl’s TILA claim on two bases. First, Defendants argue that 20 21 the claim is barred under the statute of limitations. Second, Defendants argue that Behl has failed 22 to allege actual damages. The Court first addresses Defendants’ statute-of-limitations argument. In general, TILA 23 24 claims are subject to a one-year statute of limitations from the date of the occurrence of the 25 violation. See 15 U.S.C. § 1640(e). One exception that is possibly relevant in this case is that 26 violations of 15 U.S.C. §§ 1639, 1639b, or 1639c are subject to a three-year statute of limitations 27 28 If a loan is “charged off,” the loan servicer will not charge any additional fees or interest on the account. See 12 C.F.R. § 1026.41(e)(6)(i)(A). 4 2 1 2 Here, Behl’s claims for damages are barred under the one-year statute of limitations. Behl 3 alleges that he did not receive any statement on his loan from June 2009 to July 2021. Behl did 4 not file his complaint until December 30, 2022. Thus, on its face, the complaint alleges that 5 Behl’s claim is barred by TILA’s statute of limitations. 6 United States District Court Northern District of California from the date of the occurrence of the violation. See id. Behl’s request for rescission under “15 C.F.R. § 1639(j)” does not take his claim out of the 7 one-year statute of limitations. As noted above, it appears that this regulation does not exist and 8 therefore cannot support a viable claim. Cf. Majano v. Specialized Loan Servicing, LLC, No. 9 2:22-CV-07156-ODW-SKx, 2023 WL 2918729, at *2 n.4 (C.D. Cal. Apr. 12, 2023) (“[Plaintiff] 10 cites to 15 C.F.R. § 1639(j), a statutory provision which, as far as this Court can tell, does not 11 exist.”). The Court has considered that the complaint may contain a scrivener’s error and that 12 Behl intended to invoke 15 U.S.C. § 1639(j), which may be subject to a three-year statute of 13 limitations. See 15 U.S.C. § 1640(e). But it is unclear to the Court how this statute would apply 14 to Behl’s claim as pled or entitle Behl to rescission. Turcios v. Specialized Loan Servicing LLC, 15 No. CV 21-7506-GW-JEMX, 2022 WL 19569534, at *2 n.1 (C.D. Cal. Jan. 18, 2022) (“Section 16 1639(j) has nothing to do with any right of rescission (under TILA or otherwise).”). Accordingly, 17 the Court finds that Behl’s invocation of “15 C.F.R. § 1639(j)” does not take his claim out of the 18 one-year statute of limitations. 19 And Behl’s allegation that “back since 2008, [he] has not received statements as also 20 required by Title 12 C.F.R. § 1026.7” also does save his claim, as this is a legal conclusion, which 21 the Court need not accept as true. See Whitaker v. Tesla Motors, Inc., 985 F.3d 1173, 1176 (9th 22 Cir. 2021) (“Taken together, Iqbal and Twombly require well-pleaded facts, not legal conclusions 23 that plausibly give rise to an entitlement to relief.” (citations and internal quotations omitted)). 24 Accordingly, the Court finds that Behl’s claim is barred by the TILA’s statute of 25 26 limitations. The Court next turns to Defendants’ assertion that Behl’s claim must be dismissed because 27 Behl has not alleged actual damages. Under TILA “actual damages are only available if the 28 plaintiff actually relied to his detriment on the allegedly incomplete or inaccurate disclosures.” 5 1 Schuster v. Citibank (S. Dakota), N.A., No. 00-CV-5940-LMM, 2002 WL 31654984, at *3 2 (S.D.N.Y. Nov. 21, 2002) (collecting cases) (citing In re Smith, 289 F.3d 1155, 1157 (9th Cir. 3 2002)). Here, the complaint is devoid of any allegations of detrimental reliance. And as noted 4 above, Behl has not offered a plausible basis for his rescission request. Thus, Behl’s claim is 5 subject to dismissal for failure to allege detrimental reliance. It does not appear to the Court that Behl would be able to cure these deficiencies through 6 7 an amended pleading. Accordingly, Defendants’ motion to dismiss Behl’s TILA claim is 8 GRANTED WITHOUT LEAVE TO AMEND. Before turning Behl’s state law claims, the Court notes that it disagrees with Defendants’ United States District Court Northern District of California 9 10 interpretation of Behl’s claim for violation of the Rosenthal Fair Debt Collection Practice Act 11 (Claim 5) as asserting a federal law claim. Although the federal Fair Debt Collection Act and 12 California’s Rosenthal Fair Debt Collection Act may overlap, Behl has pled the claim under 13 California Civil Code § 1788.30. See Compl., at p.9. Accordingly, Behl has asserted this claim 14 only under state law. 15 B. 16 As noted above, Behl asserts eight state law claims. A district court may decline to State Law Claims 17 exercise supplemental jurisdiction if it has dismissed all claims over which it has original 18 jurisdiction. 28 U.S.C. § 1367(c)(3). Here, the Court has dismissed Behl’s federal law claim. 19 And it appears that the Court does not have diversity jurisdiction over the other claims, as the 20 complaint does not contain allegations that would establish diversity of the parties. Compl., ¶¶ 1- 21 3. Moreover, Defendants’ notice of removal expressly bases removal on “the existence of federal 22 question jurisdiction.” Not. of Removal ¶ 8. The Court therefore declines to exercise 23 supplemental jurisdiction over Behl’s state law claims. The state law claims are REMANDED to 24 Santa Clara County Superior Court. 25 IV. 26 27 28 ORDER For the foregoing reasons, IT IS HEREBY ORDERED that: 1. Defendants’ motion to dismiss Plaintiff’s claim for violation of the Truth in Lending Act (Claim 4) is GRANTED WITHOUT LEAVE TO AMEND. 6 1 2 2. The Clerk shall REMAND the remainder of this action to Santa Clara County Superior Court and close the case. 3 4 5 6 Dated: August 8, 2023 ______________________________________ BETH LABSON FREEMAN United States District Judge 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7
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