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Connors v. Home Loan Corp.

May 9, 2009


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


Defendants America's Servicing Company ("ASC") and U.S. Bank, N.A. ("U.S. Bank")(collectively "defendants")*fn1 move to dismiss the second amended complaint ("SAC") under Federal Rule of Civil Procedure 12(b)(6). [doc. #44] The motion has been fully briefed. For the reasons set forth below, the Court enters its decision.


"The focus of any Rule 12(b)(6) dismissal . . . is the complaint." Schneider v. California Dept. of Corrections, 151 F.3d 1194, 1197 n.1 (9th Cir. 1998). A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint, i.e., whether the complaint lacks a cognizable legal theory or where the complaint presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). "A district court should grant a motion to dismiss if plaintiffs have not pled 'enough facts to state a claim to relief that is plausible on its face.'" Williams ex rel. Tabiu v. Gerber Products , 523 F.3d 934, 938 (9th Cir. 2008), quoting Bell Atlantic Corp. v. Twombley, 127 S.Ct. 1955, 1974 (2007). "'Factual allegations must be enough to raise a right to relief above the speculative level.'" Id. (quoting Twombley, 127 S.Ct. 1965). Although a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, plaintiff bears the responsibility of providing the grounds of his entitlement to relief which requires "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not Twombley, 127 S.Ct. at 1964-1965.

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe all inferences from them in the light most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002). But legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003).

Finally, in determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint for additional facts, e.g., facts presented in plaintiff's memorandum in opposition to a defendant's motion to dismiss or other submissions. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998); see 2 MOORE'S FEDERAL PRACTICE, § 12.34[2]("The court may not ... take into account additional facts asserted in a memorandum opposing the motion to dismiss, because such memoranda do not constitute pleadings under Rule 7(a)."). But in addition to the facts alleged in the complaint, the Court may consider documents attached to the complaint, documents relied upon but not attached to the complaint when authenticity is not contested, and matters of which the court takes judicial notice. Parrino, 146 F.3d at 705-706.



Plaintiff Richard A. Connors ("Connors" or "plaintiff") filed this action on June 24, 2008, alleging that defendants had violated various federal statutes and state laws concerning his home mortgage loan. It is undisputed that plaintiff defaulted on the home mortgage loan and by defaulting on the loan, plaintiff's house was subject to foreclosure. Plaintiff sought a TRO to prevent defendants from foreclosing on his home on July 3, 2008. After two hearings, the Court granted a TRO, set a hearing on plaintiff's motion for preliminary injunction and required the filing of an amended complaint.

On July 3, 2008, plaintiff filed a first amended complaint ("FAC") against the same defendants.*fn2 In the FAC, plaintiff alleged violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1640 et seq.; the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2605; the Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C. § 1602 et seq.; Fair Debt Collections Practice Act ("FDCPA"), 26 U.S.C. § 1692; the Rosenthal Fair Debt Collections Act ("R-FDCPA"), California Civil Code § 1788; breach of fiduciary duty; breach of covenant of good faith and fair dealing; to quiet title; and for declaratory relief. As noted above, plaintiff has not disputed that he failed to make mortgage payments and was in default on the home loan.

On August 22, 2008, at the preliminary injunction hearing, the parties entered into an agreement on the record requiring plaintiff to make a payment of $10,000 and then making monthly mortgage payments. The agreement also continued the foreclosure of the home in order for the parties to work toward a settlement of this case. Subsequently, the parties filed a joint motion vacating the temporary restraining order and denying as moot the motion for preliminary injunction. Although one settlement conference was held before the magistrate judge, a second conference was vacated based on plaintiff's failure to make payments as agreed.

Defendants ASC and U.S. Bank filed a motion to dismiss the FAC [doc. #25] on August 13, 2008, contending that plaintiff's claims under TILA, RESPA, HOEPA, breach of fiduciary duty, breach of the covenant of good faith and fair dealing are insufficiently pleaded, time-barred and/or not legally cognizable. The Court granted defendants' motion with prejudice as to plaintiff's TILA claim for rescission if the foreclosure sale had occurred; RESPA; and breach of fiduciary duty. Plaintiff's claim for TILA damages and for breach of good faith and fair dealing were dismissed without prejudice. See Order filed December 11, 2008. [doc. #41] Plaintiff was given leave to file a SAC and was advised that care should be exercised in determining whether or not to file an amended complaint because Rule 11 sanctions could be imposed.

Plaintiff filed a verified second amended complaint ("SAC") on December 26, 2008 [doc. #42] to which defendants ASC and U.S. Bank, N.A. seek dismissal. Defendant Mortgage Electronic Registration Systems ("MERS") filed a notice of joinder in the pending motion to dismiss the SAC.*fn3

Plaintiff's Causes of Action

In the SAC, plaintiff brings claims under TILA for damages and rescission, RESPA, FDCPA, and state law claims for violation of R-FDCPA, breach of fiduciary duty, breach of the covenant of good faith and fair dealing, to quiet title, and for violation of California Civil Code § 2923.6. Plaintiff has not alleged a cause of action for wrongful foreclosure.


Plaintiff asserts in the SAC that defendants violated TILA when they did not "validate and otherwise make a full accounting and required disclosures as to the true finance charged and fees;" "improperly retained funds belonging to Plaintiff;" and refused to "disclose the status of the ownership of said loans." (SAC ¶ 33(a)) The TILA claim found in the SAC at paragraphs 31-37 is identical to that found in the FAC at paragraphs 26-32. As noted above, the Court dismissed the TILA damage cause of action found in the FAC without prejudice as being time barred. The Court also dismissed with prejudice the TILA rescission cause of action unless plaintiff could allege that the property had not been sold.

As the Court noted in its prior Order, plaintiff's cause of action for damages under TILA is subject to a one-year statute of limitations, 15 U.S.C. § 1640(e), which runs from the time the loan transaction is consummated. King v. State of California, 784 F.2d 910, 915 (1986). A debtor also has three days to rescind the transaction after it has been consummated, and up to three years to rescind the transaction if the required notice or material disclosures are not delivered. 12 C.F.R. § 226.23(a)(3); see also 15 U.S.C. § 1635(f). The Court found that based upon the undisputed timing of the loan transaction as alleged in the FAC, plaintiff's TILA claim for damages or rescission was time barred. Although plaintiff had not raised the issue, the Court noted that under Ninth Circuit law equitable tolling of a TILA claim for damages could be appropriate in certain circumstances. In dismissing the TILA damages claim in the FAC without prejudice, the Court noted that "plaintiff has not offered any facts demonstrating entitlement to equitable tolling.*fn4 (Order filed December 11, 2008 at 4. [doc. #41])

Although a plaintiff does not need to specifically allege equitable tolling in a complaint, plaintiff must provide the Court with some factual basis to support his belief that he is entitled to equitable tolling. As the Ninth Circuit noted: "The sole issue is whether the complaint, liberally construed in light of our 'notice pleading' system, adequately alleges facts showing the potential applicability of the equitable tolling doctrine." Cervantes v. City of San Diego, 5 F.3d 1273, 1277 (9th Cir. 1993).

"Equitable tolling may be applied if, despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim." Santa Maria v. Pacific Bell, 202 F.3d 1170, 1178 (9th Cir. 2000). The Santa Maria court also noted that "equitable tolling does not depend on any wrongful conduct by the defendant to prevent the plaintiff ...

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