-CAB Bernardo et al v. New Century Mortgage Corporation et al, No. 3:2009cv01828 - Document 22 (S.D. Cal. 2010)
Court Description: ORDER granting 16 Motion to Dismiss First Amended Complaint filed by Litton Loan Servicing, L.P. For the reasons stated herein, the Court grants Litton's motion to dismiss. Plaintiffs' sixth and seventh causes of action for TILA and RESPA violations are dismissed with prejudice, and Plaintiffs' remaining nine causes of action are dismissed without prejudice. Signed by Judge Michael M. Anello on 5/13/2010. (leh)
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-CAB Bernardo et al v. New Century Mortgage Corporation et al Doc. 22 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 TERESITA BERNARDO, VIRGILIO BERNARDO, individuals, CASE NO. 09 CV 01828 MMA (CAB) ORDER GRANTING LITTON LOAN SERVICING, L.P.’S MOTION TO DISMISS FIRST AMENDED COMPLAINT 12 Plaintiff, vs. 13 14 15 16 NEW CENTURY MORTGAGE CORPORATION, LITTON LOAN SERVICING LP, et al., [Doc. No. 16] Defendants. 17 Before the Court is Defendant Litton Loan Servicing, L.P.’s (“Litton”) motion to dismiss 18 19 Plaintiffs Teresita Bernardo and Virgilio Bernardo’s first amended complaint (“FAC”). [Doc. No. 20 16.] Litton filed its motion on January 11, 2010, Plaintiffs filed an opposition on February 8, and 21 Litton filed a reply brief on February 10. [Doc. Nos. 19, 21.] The Court found Litton’s motion 22 suitable for decision on the papers and without oral argument pursuant to Civil Local Rule 23 7.1(d)(1) [Doc. No. 20]. For the reasons discussed below, the Court GRANTS Litton’s motion to 24 dismiss. 25 26 27 28 /// -1- 09cv1828 Dockets.Justia.com 1 2 BACKGROUND This action arises from foreclosure-related events with respect to Plaintiffs’ home.1 On or 3 about January 9, 2007, Plaintiffs purchased a house located at 10328 Limetree Lane, Spring 4 Valley, California 91977 (the “Property”). [FAC, Doc. No. 7, ¶6.] Plaintiffs obtained financing to 5 purchase the Property from Defendant New Century Mortgage Corporation (“New Century”). [Id. 6 at ¶6.] New Century provided Plaintiffs a first loan in the amount of $419,747 (“First Loan”), and 7 a second loan in the amount of $104,400 (“Second Loan”), each secured by a trust deed. [Id. at 8 ¶¶7-8.] Defendant Litton is the current serving company for the First Loan, and Defendant Saxon 9 Mortgage Services, Inc. (“Saxon”) services the Second Loan. [Id.] Defendants, however, should 10 11 never have approved Plaintiffs’ loan application. [Id. at ¶¶9-10.] In their initial loan application, Plaintiffs accurately stated their yearly income, which 12 would have been approximately $96,000 based on Plaintiffs’ 2006 tax returns that reported their 13 monthly income as $7,993. [Id. at ¶9.] Defendants did not request proof of Plaintiffs’ income, and 14 instead, intentionally increased Plaintiffs’ stated monthly income on the loan application to 15 $16,000 per month. [Id. at ¶¶9, 11.] Because Defendants exaggerated Plaintiffs’ income, 16 Plaintiffs obtained loans for the purchase of the Property that they would not have otherwise been 17 qualified. [Id. at ¶¶9-10.] 18 In addition, Plaintiffs did not receive two completed Notices of Right to Cancel within 19 three days after consummation of the loan, as required by the federal Truth in Lending Act 20 (“TILA”). [Id. at ¶12.] The Notices Plaintiffs received were incomplete, as they “failed to include 21 a transaction date or the expiration of the rescission period.” [Id.] Defendants also violated TILA 22 by providing Plaintiffs an incomplete and unsigned Truth-In-Lending Statement. [Id. at ¶13.] 23 Similarly, the Good Faith Estimate Defendants provided Plaintiffs was incomplete and unsigned, 24 in violation of the Real Estate Settlement Procedures Act (“RESPA”). [Id. at ¶14.] The loan 25 documents also failed to include other initial and final disclosures required by TILA and RESPA. 26 [Id. at ¶15.] 27 1 28 Because this matter is before the Court on a motion to dismiss, the Court must accept as true the allegations of the complaint in question. Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976). All facts cited are taken from Plaintiffs’ FAC unless otherwise noted. -2- 09cv1828 1 As a result of Defendants’ wrongful conduct, Plaintiffs experienced difficulty paying the 2 mortgages on the Property. [Id. at ¶16.] Beginning in April 2009, Plaintiffs repeatedly asked 3 Litton to provide them with copies of their loan documents. [Id. at ¶17.] Litton ignored Plaintiffs’ 4 requests. [Id.] On May 4, 2009, Plaintiffs received a Notice of Default on the First Loan. [Id. at 5 ¶18.] Defendants did not work with Plaintiffs to modify the loan in the month prior to or after 6 Plaintiffs received the Notice of Default. [Id. at ¶19.] Plaintiffs filed this action against several 7 named defendants on August 21, 2009 [Doc. No. 1], and later filed the FAC on November 30, 8 2009, alleging eleven causes of action, including: (1) Intentional Misrepresentation; (2) 9 Constructive Fraud; (3) Breach of Covenant of Good Faith and Fair Dealing; (4) Action to Quiet 10 Title; (5) Accounting; (6) Violations of TILA; (7) Violations of RESPA; (8) Violation of 11 California Civil Code § 1632(b); (9) Violation of California Business and Professions Code § 12 17200 et seq.; (10) Violation of California Civil Code § 2923.6; and (11) Violation of California 13 Civil Code § 2923.5. [Doc. No. 7.] 14 LEGAL STANDARD 15 A complaint survives a motion to dismiss if it contains “enough facts to state a claim to 16 relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The 17 court reviews the contents of the complaint, accepting all factual allegations as true, and drawing 18 all reasonable inferences in favor of the nonmoving party. Knievel v. ESPN, 393 F.3d 1068, 1072 19 (9th Cir. 2005). Notwithstanding this deference, the reviewing court need not accept “legal 20 conclusions” as true. Ashcroft v. Iqbal, -- U.S. -- , 129 S. Ct. 1937, 1949 (2009). Moreover, it is 21 improper for a court to assume “the [plaintiff] can prove facts that [he or she] has not alleged.” 22 Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 23 U.S. 519, 526 (1983). Accordingly, a reviewing court may begin “by identifying pleadings that, 24 because they are no more than conclusions, are not entitled to the assumption of truth.” Ashcroft, 25 supra, 129 S. Ct. at 1950. 26 “When there are well-pleaded factual allegations, a court should assume their veracity and 27 then determine whether they plausibly give rise to an entitlement to relief.” Id. A claim has 28 “facial plausibility when the plaintiff pleads factual content that allows the court to draw the -3- 09cv1828 1 reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 1949. “The 2 plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer 3 possibility that a defendant has acted unlawfully.” Id. “Where a complaint pleads facts that are 4 ‘merely consistent with’ a defendant’s liability, it ‘stops short of the line between possibility and 5 plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at 557). 6 7 8 DISCUSSION I. Federal Claims In their sixth and seventh causes of action, Plaintiffs allege Defendants violated federal 9 statutes, TILA (15 U.S.C. § 1601-1667f) and RESPA (12 U.S.C. § 2601 et seq.), respectively. The 10 Court considers the propriety of these two claims first, as its jurisdiction is premised on the alleged 11 TILA and RESPA violations; Plaintiffs’ remaining nine causes of action are based on state law. 12 Plaintiffs assert Defendants violated TILA by intentionally misstating Plaintiffs’ income to 13 make them a loan they could not afford, and failing to provide Plaintiffs complete and executed 14 copies of the Notice of Right to Cancel and the Truth-In-Lending Statement within three days of 15 consummating the loan. [Doc. No. 7, ¶¶56-57.] Similarly, Plaintiffs assert Defendants’ course of 16 conduct violated RESPA, when Defendants failed to provide Plaintiffs a Good Faith Estimate 17 within three days of completing the loan process. [Id. at ¶¶63-64.]2 18 In its motion to dismiss, Litton makes numerous arguments asserting several deficiencies in 19 Plaintiffs’ sixth and seventh causes of action. For example, with respect to Plaintiffs’ TILA claim, 20 Litton argues it cannot be held liable for the alleged TILA violations in its capacity as the 21 servicing company for the First Loan. [Doc. No. 16, p.8 citing 15 U.S.C. § 1641(f); Pelayo v. 22 Home Capital Funding, 2009 WL 1459419 *4 (S.D. Cal.).] Litton also asserts Plaintiffs’ TILA 23 cause of action is barred by the one-year statute of limitation under 15 U.S.C. § 1640, because 24 Plaintiffs admit they entered the loan in January 2007, but failed to file their complaint until 25 August 2009. [Doc. No. 16, p.9.] Litton similarly argues Plaintiffs’ RESPA claim is barred by the 26 27 28 2 Nowhere in the FAC do Plaintiffs specify which Defendants are responsible for any particular conduct; all allegations are against Defendants, collectively. -4- 09cv1828 1 one-year statute of limitation under 12 U.S.C. § 2614, and that Plaintiffs did, in fact, receive and 2 execute a Good Faith Estimate.3 3 Plaintiffs concede Litton is not a proper defendant as to their TILA and RESPA causes of 4 action. Specifically, Plaintiffs “stipulate that the [sixth] and [seventh] claims of relief for violation 5 of RESPA and TILA are only asserted against Defendant NEW [Century] for failure to provide (or 6 accurately provide) all of the documents and disclosures under TILA/RESPA.” [Doc. No. 19, 7 p.11.] Accordingly, the Court need not reach the merits of Litton’s arguments regarding Plaintiffs’ 8 deficient TILA and RESPA allegations, and hereby DISMISSES Plaintiffs’ sixth and seventh 9 causes of action against Litton, with prejudice. 10 11 II. State Law Claims Because the Court grants Litton’s motion to dismiss as to both of Plaintiffs’ federal claims 12 upon which the Court’s jurisdiction is based, the Court declines to retain jurisdiction over 13 Plaintiffs’ remaining state law claims. When the Court’s jurisdiction is initially premised on a 14 federal question, it may decline to exercise supplemental jurisdiction over state law claims if no 15 independent basis for subject matter jurisdiction exists after the dismissal of the federal claims. 28 16 U.S.C. § 1367(c)(3); Osborn v. Haley, 549 U.S. 225, 245 (2007) (citing Carnegie-Mellon Univ. v. 17 Cohill, 484 U.S. 343, 350–51 (1988)). The decision whether to retain or dismiss state claims after 18 dismissal of all federal claims is fully discretionary. Schneider v. TRW, Inc., 938 F.2d 986, 19 993–94 (9th Cir. 1991). In the usual case where federal claims are dismissed before trial, the 20 balance of factors will point toward declining to exercise jurisdiction over the remaining state law 21 claims. Schultz v. Sundberg, 759 F.2d 714, 718 (9th Cir. 1995); Gini v. Las Vegas Metro. Police 22 Dep’t, 40 F.3d 1041, 1046 (9th Cir. 1994). Accordingly, the Court declines to exercise its 23 discretion to retain the remaining state law claims, and DISMISSES those claims without 24 prejudice. 25 26 27 28 3 In connection with Litton’s motion to dismiss, it submitted a Request for Judicial Notice [Doc. No. 16-2], requesting the Court consider the Notice of Right to Cancel, Truth-In-Lending Disclosure Statement, and Good Faith Estimate, that Plaintiffs executed on January 14, 2007. The Court finds these documents suitable for judicial notice under the incorporation by reference doctrine, and hereby GRANTS Litton’s request. See Knieval v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005); Hovsepian v. Apple, Inc., 2009 WL 2591445 *2 (N.D. Cal.). -5- 09cv1828 1 CONCLUSION 2 For the reasons stated herein, the Court GRANTS Litton’s motion to dismiss. Plaintiffs’ 3 sixth and seventh causes of action for TILA and RESPA violations are dismissed with prejudice, 4 and Plaintiffs’ remaining nine causes of action are dismissed without prejudice. 5 6 IT IS SO ORDERED. DATED: May 13, 2010 7 8 9 Hon. Michael M. Anello United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6- 09cv1828
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