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Blanco v. American Home Mortgage Serving

December 3, 2009



Plaintiff Jessica Blanco filed this action against defendants American Home Mortgage Serving, Inc. ("AHMSI"), Option One Mortgage Corporation ("Option One")*fn1 , The Funding & Lending Network ("FLN"), Mandale Johnson, Myron W. Butler, AHMSI Default Services ("Default Services"), and T.D. Service Company ("TD"), alleging various state and federal claims relating to a loan they obtained to refinance their home in Woodland, California. AHMSI, Default Services and Option One 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.*fn2

I. Factual and Procedural Background

On June 22, 2006, plaintiff obtained a loan from Option One to refinance her home, located at 406 Monte Vista Way in Woodland, California. (FAC ¶¶ 7, 29) This loan was secured by a Deed of Trust on the property. (FAC ¶ 29.) Plaintiff claims that she was channeled into this allegedly unaffordable loan through the conduct of Johnson, who allegedly exaggerated plaintiff's earnings to secure the loan. (Id. ¶¶ 20-25.) The Deed of Trust listed Premier Trust Services, Inc. as trustee and Option as lender. (Id. ¶ 29.)

Plaintiff eventually defaulted on her loan, and a Notice of Default and Election to Sell Under Deed of Trust was filed in Yolo County by T.D. Service Company on November 4, 2008, which stated that Wells Fargo Bank, N.A. as trustee for Option One had become the beneficiary of the loan. (Id. ¶ 40.) On December 3, 2008, an Assignment of Deed was allegedly recorded in Yolo County which allegedly stated that AHMSI would transfer an interest in plaintiff's mortgage to LaSalle Bank National Association, as Trustee for Merrill Lynch.*fn3 (Id. ¶ 41.) Plaintiff allegedly was sent notice of a trustee sale by T.D. on February 5, 2009. (Id. ¶ 42.) On February 25, 2009, plaintiff allegedly sent a Qualified Written Request ("QWR") under the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, to AHMSI that included a demand to rescind their loan under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f.

(Id. ¶ 30.)

In her FAC, plaintiff asserts ten causes of action against seven defendants. AHMSI, Default Services, and Option One's motion to dismiss challenges only the causes of action that apply to MERS and Saxon.

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). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57).

In general a court may not consider items outside the pleadings upon deciding a motion to dismiss, but may consider items of which it can take judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts "not subject to reasonable dispute" because they are either "(1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201.

AHMSI, Default Services, and Option One submitted a RJN in support of their motion to dismiss which contains three exhibits: (1) a copy of the Deed of Trust and accompanying riders executed by plaintiff, recorded in Yolo County on June 30, 2006; (2) a copy of the Notice of Default and Election to Sell Under Deed of Trust, recorded in Yolo County on November 4, 2008; and (3) a copy of the Notice of Trustee's Sale, recorded in Yolo County on February 5, 2009.

The court will take judicial notice of defendants' exhibits, as they are matters of public record whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).


Plaintiff alleges that Option One failed to comply with TILA by "(a) failing to provide the required disclosures prior to consummation of the transaction; (b) failing to make required disclosures clearly and conspicuously in writing; (c) failing to timely deliver to [p]laintiff notice required by TILA; (d) placing terms prohibited by TILA into the transaction; and (e) failing o disclose all finance charge details and the annual percentage rate based upon properly calculated and disclosed finance charges and amounts financed." (FAC ¶ 58.) Plaintiff prays for both damages and rescission of her loan based on these alleged TILA violations. (Id. ¶¶ 61-65.)

1. Damages

The statute of limitations for a TILA damages claim is one year from the date of the alleged TILA violation. 15 U.S.C. § 1640(e). Moving defendants argue that plaintiff's claim for damages under TILA is foreclosed by the statute of limitations because it was filed more than one year after the alleged TILA violations. Here, plaintiff's TILA claim arises solely out of failure to make required disclosures at the time the loan was entered, which was on June 22, 2006. The limitations period began to run at that time, King v. California, 784 F.2d 910, 914 (9th Cir. 1986), and would normally have expired on June 22, 2007. Plaintiff's initial complaint was not filed until February 27, 2009, more than a year and a half past the statute of limitations. Plaintiff's TILA claim is therefore time barred, unless the doctrine of equitable estoppel applies.

The Ninth Circuit has held that equitable tolling of claims for damages under TILA may be appropriate "in certain circumstances," and can operate to "suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or non-disclosures that form the basis of the TILA action." Id. at 914-15. Because the applicability of the equitable tolling doctrine often depends on matters outside the pleadings, it "is not generally amenable to resolution on a Rule 12(b)(6) motion." Supermail Cargo, Inc. v. U.S., 68 F.3d 1204, 1206 (9th Cir. 1995). However, when a plaintiff does not allege any facts demonstrating that he or she could have not discovered the alleged violations by exercising due diligence, dismissal may be appropriate. See Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 902-03 (9th Cir. 2003) (dismissing equitable tolling of TILA claim because plaintiff was in full possession of all loan documents and did not allege any actions that would have prevented discovery of the alleged TILA violations); Hubbard v. ...

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