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Wong v. American Servicing Co.

December 17, 2009



This matter is before the court on the motions of Meridias Capital, Inc. ("Meridias"), Brent Hicks ("Hicks"), American Servicing Company, Inc. ("American Servicing"), Mortgage Electronic Registration Systems, Inc. ("MERS"), and First American Loanstar Trustee Services ("Loanstar") to dismiss plaintiffs' First Amended Complaint pursuant to Federal Rule of Civil Procedure ("FRCP") 12(b)(6). Plaintiffs Gary T. Wong and Maria Wong (collectively, "plaintiffs") oppose the motions. For the reasons set forth below, defendants' motions are GRANTED in part and DENIED in part.*fn1


Plaintiffs brought this action against American Servicing, Litton Loan Servicing ("Litton"), Loanstar, MERS, Meridias, William A. Arriola ("Arriola"), and Hicks for conduct arising out of a loan and subsequent foreclosure activity. (Pls.' First Amended Complaint ("Compl."), filed Aug. 4, 2009, ¶ 17.) Plaintiffs allege that on or about April 20, 2006, Hicks, who held himself out as a loan officer employed by Meridias, solicited plaintiffs to refinance their residence. (Id. ¶ 23.) During the loan application process, plaintiffs allege that Hicks told plaintiffs that he could get them the "best deal" and the "best interest rates" available on the market. (Id. ¶ 25.) Plaintiffs allege that Hicks intentionally falsified their income on the loan application, stating that plaintiffs' combined income was $20,599.00 per month, when their net income was approximately $10,000.00 per month. (Id. ¶ 26.)

Plaintiffs claim that Hicks advised them that they would receive $100,000.00 if they closed the loan, but at closing Hicks informed them that the underwriting department had made a mistake, and plaintiffs would actually not receive the discount.

(Id. ¶ 24.)*fn2 Hicks allegedly advised plaintiffs that he could acquire a fixed rate loan, and based in part on plaintiffs' reliance upon this assertion, he sold plaintiffs two loans for the purchase of their residence totaling $625,796.00. (Id. ¶ 25.) Plaintiffs allege that the first loan included a 7.875% variable rate with a payment of $4,106.79 and the second loan included a 12.5% variable rate with a payment of $1,669.71. (Id. ¶ 26.) Plaintiffs further allege that Hicks advised them that if the loan ever became unaffordable, he would simply refinance it into an affordable loan. (Id. ¶ 27.)

Prior to closing, plaintiffs allege that they were not given a copy of any of the loan documents as required. (Id. ¶ 28.) At the closing, plaintiffs allege that they had a few minutes to sign the documents, that they were not allowed to review any documents, and that they did not receive the required copies of a proper notice of cancellation. (Id.)

On or about June 1, 2006, plaintiffs completed the loan transaction. The terms of the loan were included in a promissory note, secured by a deed of trust on the property, which identified Loanstar as the trustee and Meridias as the lender. (Id. ¶ 30.) Plaintiff claims that MERS was also the named nominee and beneficiary. (Id. ¶ 31.) Plaintiffs allege that when the loan was completed, they did not receive "the required documents and disclosures, including, but not limited to the TILA disclosure and the required number of copies of the Notice of Right to Cancel." (Id. ¶ 39.)

On or about March 31, 2009, plaintiffs allegedly sent a Qualified Written Request to defendant American Servicing pursuant to the Real Estate Settlement Procedures Act ("RESPA"), which demanded rescission of the loan pursuant to the provisions of the Truth in Lending Act ("TILA"). (Id. ¶ 32.) Plaintiffs allege that American Servicing has not responded to the QWR. (Id.) On or about July 18, 2008, Loanstar filed a Notice of Default ("Notice") in Placer County, and on or about August 29, 2008, plaintiffs received a Notice of Trustee Sale. (Id. ¶¶ 42, 43.)

In their First Amended Complaint, plaintiffs assert claims for 1) violation of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq.,; 2) violation of the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), 3) negligence, 4) violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 1788 et seq., 5) breach of fiduciary duty, 6) fraud, 7) violations of California Business and Professions Code § 17200; 8) breach of contract, 9) breach of implied covenant of good faith and fair dealing, and 10) wrongful foreclosure. (Compl.)


A. Motion To Dismiss For Failure To State A Cognizable Claim

Under Federal Rule of Civil Procedure 8(a), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege "'specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombley, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

Nevertheless, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Twombly, 550 U.S. at 555; Iqbal, 129 S.Ct. at 1950 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.").

Moreover, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the . . . laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).

Ultimately, the court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 570 (2007)). Only where a plaintiff has failed to "nudge [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 1952. While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 1949. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.

B. Motion For A More Definite Statement

A motion for a more definite statement should not be granted unless a pleading is "so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading." Fed. R. Civ. P. 12(e). This liberal standard is consistent with FRCP 8(a)(2) which allows pleading that contains a "short and plain statement of the claim." See Hutson v. Am. Home Mortg. Servicing, 2009 U.S. Dist. LEXIS 96764, at *9 (N.D. Cal. Oct. 16, 2009) ("A motion for a more definite statement attacks intelligibility, not simply lack of detail."). The Federal Rules of Civil Procedure anticipate that the parties will familiarize themselves with the claims and ultimate facts through the discovery process. See Famolare, Inc. v. Edison Brothers Stores, Inc., 525 F. Supp. 940, 949 (E.D. Cal. 1981). Indeed, "where the information sought by the moving party is available and/or properly sought through discovery, the motion should be denied." Id. However, a plaintiff must not be permitted to use "shotgun" pleading tactics, such as providing inadequate factual bases for his claims, to thwart the defendant's ability to seek dismissal of the claims against him as early in the litigation as possible. See Marx v. Gumbinner, 855 F.2d 783, 792 (11th Cir. 1988).



Plaintiffs' first claim for relief alleges that defendant Meridias violated TILA by failing to provide the required disclosures to plaintiff at the time of closing and failing to give clear and conspicuous disclosures. (Compl. ¶ 59.) Meridias moves to dismiss the count on grounds that the claim for damages is time-barred by the one-year statute of limitation.*fn3 (Def.'s Mot. to Dismiss ("MTD", filed Aug. 24, 2009, 4:3-5:22.) Plaintiff argues that equitable tolling should be applied to suspend the statute of limitations (Pl.'s Opp'n Mot. Dismiss ("Pl.'s Opp'n"), filed Sept. 30, 2009, 8:11-22.)

TILA violations include the failure to provide the required disclosures pursuant to 15 U.S.C. § 1631 and the failure to clearly and conspicuously disclose information relating to the "annual percentage rate" and the "finance charge" pursuant to 15 U.S.C. § 1632. To recover damages arising from alleged TILA violations, a plaintiff must file an action to recover damages "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). However, in certain circumstances, equitable tolling of civil damages claims brought under TILA might be appropriate. See King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986). The doctrine of equitable tolling may be appropriate when the imposition of the statute of limitations would be unjust or would frustrate TILA's purpose "to assure a meaningful disclosure of credit terms so that the consumer will be able to . . . avoid the uninformed use of credit." Id. (quoting 15 U.S.C. § 1601(a)). District courts, therefore, have the discretion to evaluate specific claims of equitable tolling and adjust the limitations period accordingly when the borrower may not have reasonable opportunity to discover the fraud or nondisclosures that give rise to a TILA action. Id.

In this case, Meridias contends, and plaintiffs do not dispute, that the alleged TILA violations occurred no later than June 1, 2006, the date plaintiffs entered into the loan agreement with defendant. (MTD 4:9-11.) Accordingly as plaintiffs did not bring the claim until June 1, 2009, more than one year has elapsed since the alleged TILA violations. Plaintiffs argue that equitable tolling may apply to their TILA claim because it is based upon defendants' alleged failure to clearly and conspicuously disclose various terms of the loan. (Compl. at ¶¶ 39, 40.) However, plaintiffs plead no other facts to explain how defendants concealed the true facts or why plaintiff could not otherwise have discovered the TILA violations at the consummation of her loan. "Such factual underpinnings are all the more important . . . since the vast majority of [p]laintiffs'] alleged violations under TILA are violations that are self-apparent at the consummation of the transaction." Cervantes v. Countrywide Home Loans, Inc., 2009 U.S. Dist. LEXIS 87997, at ** 13-14 (D. Ariz. Sept. 23, 2009) (holding that equitable tolling was not appropriate when plaintiffs simply alleged that defendants "fraudulently misrepresented and concealed the true facts related to the items subject to disclosure").

Accordingly, defendant Meridias' motion to dismiss plaintiffs' claim for civil damages based on ...

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