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Ross v. Wells Fargo Bank

May 7, 2009



Plaintiff Sue Ann Ross brought this action in state court against Wells Fargo Bank N.A., Wells Fargo Home Mortgage (together, "Wells Fargo"), First American Title Company ("FATCO"), First American Loanstar Trustee ("Loanstar"), and Mortgage Electronic Registration Systems Inc. alleging various state and federal claims relating to a loan she obtained to purchase her home in Antelope, California. Having removed the action to federal court, Wells Fargo, FATCO, and Loanstar now move to dismiss plaintiff's First Amended Complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

I. Factual and Procedural Background

On May 1, 2006, plaintiff obtained a loan of $356,000 from Wells Fargo in order to purchase her home in Antelope, California. (See FAC 5:1-3; Loanstar & FATCO's Req. Judicial Notice ("RJN") Ex. A.) This loan was secured by a Deed of Trust on the property. (FAC 5:1-3; RJN Ex. A.) Approximately two years after she obtained her loan, plaintiff defaulted, and a Notice of Default and Election to Sell was recorded on December 8, 2008. (FAC 5:10-18, 7:2-7; RJN Ex. D.) Plaintiff proceeded to file a complaint in state court on December 15, 2008, alleging various state and federal claims relating to her loan. (Docket No. 1 Ex. A.) Loanstar was subsequently substituted as the trustee on the Deed of Trust. (FAC 5:6-9; RJN Ex. C.)

On January 6, 2009, plaintiff allegedly mailed a Qualified Written Request ("QWR") to defendants pursuant to the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, which included a demand to cancel the trustee sale and to rescind the loan pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f. (FAC 7:10-13.) Plaintiff alleges that defendants "fail[ed] and refus[ed] to provide a written response" to her QWR. (Id. at 14:1-2.)

Thereafter, on February 4, 2009, defendants removed plaintiff's state-court action to federal court, asserting federal question jurisdiction pursuant to 28 U.S.C. § 1331. (Docket No. 1.) On March 3, 2009, Loanstar recorded a Notice of Trustee's Sale (FAC 7:10-13) and, nine days later, plaintiff amended her complaint as a matter of course pursuant to Federal Rule of Civil Procedure 15(a)(1)(A) (Docket No. 11).

Plaintiff's FAC alleges claims for wrongful foreclosure, breach of contract, breach of the implied covenant of good faith and fair dealing, breach of fiduciary duty, fraud, as well as violations of TILA; RESPA; the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968; the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), Cal. Civ. Code §§ 1788.1-1788.33; and California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210. Defendants Wells Fargo, FATCO, and Loanstar now move to dismiss the FAC pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff needs to plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Dismissal is appropriate, however, where the plaintiff fails to state a claim supportable by a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

In general, the court may not consider materials other than the facts alleged in the complaint when ruling on a motion to dismiss. Anderson v. Angelone, 86 F.3d 932, 934 (9th Cir. 1996). The court may, however, consider additional materials if the plaintiff has alleged their existence in the complaint and if their authenticity is not disputed. See Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994), overruled on other grounds by Galbraith v. County of Santa Clara, 307 F.3d 1119 (9th Cir. 2002). Here, defendants have provided the court with plaintiff's Deed of Trust (RJN Ex. A); a Notice of Substitution of Trustee (id. Ex. C); a Notice of Default and Election to Sell (id. Ex. D); and a Notice of Trustee's Sale (id. Ex. E). Plaintiff has alleged the existence of these documents in her FAC (see FAC 5:1-9, 7:2-7), and no party has questioned their authenticity. Accordingly, the court will consider these documents in deciding defendants' motions to dismiss.

Upon granting a motion to dismiss prior to issuing a scheduling order, Federal Rule of Civil Procedure 15(a) "advises the court that 'leave shall be freely given when justice so requires,'" and the court should grant leave under Rule 15(a) "'with extreme liberality.'" Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). "Absent prejudice, or a strong showing of any [other relevant] factor[], there exists a presumption under Rule 15(a) in favor of granting leave to amend." Id. "Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . that the complaint could not be saved by amendment." Id. Although plaintiff has already amended her complaint once as a matter of course, this action has been pending for less than three months in this court and defendants have failed to show that they will suffer prejudice if plaintiff is allowed to file a second amended complaint. Accordingly, upon dismissing any claims, the court must grant plaintiff leave to amend her FAC unless the futility of amendment warrants dismissing a claim with prejudice.


An action for damages under TILA must be brought "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). A TILA violation occurs on "the date of consummation of the transaction," King v. California, 784 F.2d 910, 915 (9th Cir. 1986), and "consummation" means "the time that a consumer becomes contractually obligated on a credit transaction," 12 C.F.R. § 226(a)(13). The doctrine of equitable tolling, however, may "suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action." King, 784 F.2d at 915.

Here, plaintiff consummated her loan on May 1, 2006, but her state-court complaint was not filed until December 15, 2008, which is over one year after the deadline for a damages claim under TILA. (See RJN Ex. A; Docket No. 1 Ex. A.) Plaintiff's FAC, moreover, is devoid of relevant dates or similar information that could apprise the court of the propriety of equitable tolling, and her filings in opposition to defendants' motions to dismiss appear to all but concede by omission that this particular claim fails as a matter of law. (See Opp'n to Wells Fargo's Mot. Dismiss 2:18-21 ("Wells Fargo contends that plaintiff's TILA claim for damages is barred by TILA's one-year statute of limitations, [15 U.S.C. § 1640(e)]. Section 1640, however, is not a defense when a plaintiff sues for rescission."); Opp'n to Loanstar & FATCO's Mot. Dismiss 2:26-28 (same).) Accordingly, the court will grant defendants' motion to dismiss plaintiff's TILA claim for damages.

Regarding plaintiff's claim under TILA for rescission, defendants correctly note that her claim pertains to a "residential mortgage transaction" as that term is defined by TILA. See 15 U.S.C. § 1602(w) ("The term 'residential mortgage transaction' means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer's dwelling to finance the acquisition or initial construction of such dwelling."); (FAC 3:7-9 ("Plaintiff[] bring[s] this action against defendants . . . concerning a residential mortgage loan transaction with plaintiffs."); id. at 5:1-2 ("Plaintiff purchased the property and became the owner of legal title to the property using funds acquired through a loan from Defendants.").)

Under TILA, the right to rescind does not extend to residential mortgage transactions such as this one. 12 C.F.R. § 226.23(f); see 15 U.S.C. § 1635(e)(1) (providing that the "right of rescission" for consumer credit transactions "does not apply to . . . a residential mortgage transaction as defined in section 1602(w)"); Turczynski v. Friedman, No. 07-890, 2007 WL 4556923, at *4 (E.D. Cal. Dec. 20, 2007) (Beistline, J.) ("Case law supports the express language of sections 1602(w) and 1635(e)(1) exempting residential mortgage transactions, specifically, purchase-money first mortgages (as here), from the right of rescission."); Watts v. Decision One Mortgage Co., LLC, No. 09-43, 2009 WL 648669, at *4 (S.D. Cal. Mar. 9, 2009) ("While home equity loans and refinancing transactions would be amenable to rescission, Plaintiff's purchase money mortgage is not. Plaintiff's TILA rescission claim is therefore ...

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