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Chua v. American

March 17, 2010


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


Plaintiff, proceeding pro se, seeks to rescind a mortgage, receive reimbursement of the closing costs and accrued interest, and prevent Defendants from encumbering, selling, hypothecating or transferring the mortgaged property. Defendant Countrywide Home Loans, Inc. ("Countrywide") removed this action from state court based on federal question jurisdiction and filed a motion to dismiss with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6), or in the alternative, for a more definite statement pursuant to Rule 12(e). Plaintiff did not file an opposition. For the reasons which follow, Countrywide's motion is GRANTED WITH LEAVE TO AMEND.

In his First Amended Complaint Plaintiff alleges that he purchased a residence at 978 Mira Lago Way in San Marcos, California ("Property"). In March 2006 Plaintiff borrowed funds from Countrywide to purchase the Property, and secured the repayment of the loan with a Deed of Trust against the Property. He alleges that Defendants, Barratt American, the real estate agent and broker as well as a loan broker associated with the purchase, and Countrywide, the lender, violated the Home Ownership and Equity Protection Act, 15 U.S.C. §§ 1602, 1604, 1610, 1639-1641 & 1647-1648 ("HOEPA"), the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. ("TILA"), the Real Estate Settlement Procedure Act, 12 U.S.C. § 2601 et seq. ("RESPA"), the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691 et seq. ("ECOA"), and California Business and Professions Code Section 17500.

Countrywide moves to dismiss all causes of action for failure to state a claim upon which relief can be granted. A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks, brackets and citations omitted). In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions need not be taken as true merely because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Similarly, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 699 (9th Cir. 1998).

Countrywide argues that HOEPA does not apply to Plaintiff's loan because the loan was a residential mortgage transaction, which is exempt from HOEPA. 15 U.S.C. § 1602(aa). Among other things, a residential mortgage transaction is for the purpose of "financ[ing] the acquisition or initial construction of such dwelling." Id. § 1602(w). Plaintiff alleged that he borrowed from Countrywide in order to purchase the Property. (First Am. Compl. at 2-3.) Accordingly, Plaintiff's first cause of action for HOEPA violations is dismissed with prejudice.

Countrywide next contends that to the extent Plaintiff seeks damages under TILA, the claim is time barred. The applicable statute of limitations is "one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). "[T]he limitations period in Section 1640(e) runs from the date of consummation of the transaction but . . . the doctrine of equitable tolling may, in the appropriate circumstances, 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 v. California, 784 F.2d 910, 915 (9th Cir. 1986). Because the transaction was consummated in 2006, the statute of limitations has long expired. Since Plaintiff has not filed an opposition, the court has no basis to conclude that there are grounds for equitable tolling for a sufficient period of time to make this action timely.

To the extent Plaintiff requests rescission under TILA, Countrywide argues that Plaintiff's transaction does not meet the criteria for the rescission remedy to apply. Like HOEPA, the TILA rescission remedy excludes residential mortgage transactions as defined in 15 U.S.C. § 1602(w). 15 U.S.C. § 1635(e)(1). Rescission under TILA is not available to Plaintiff for the same reasons HOEPA does not apply to this case. Based on the foregoing, Plaintiff's TILA claim is dismissed with prejudice.

Countrywide also seeks dismissal of the RESPA claim, arguing that any claims brought under 12 U.S.C. Sections 2607 (Prohibition against kickbacks and unearned fees) and 2608 (Title companies, liability of seller) are time barred. RESPA provides a one-year statute of limitations for these claims, which begins to run on "the date of the occurrence of the violation."

12 U.S.C. § 2614. "The date of the occurrence" is interpreted to refer to the closing. Snow v. First Am. Title Ins. Co., 332 F.3d 356, 359 (5th Cir. 2003). The loan transaction between Countrywide and Plaintiff closed in March 2006. Accordingly, to the extent the RESPA claim is based on sections 2607 and 2608, it is barred by the statute of limitations and dismissed with prejudice.

RESPA also provides for jurisdiction in the courts over section 2605 violations. Section 2605 requires disclosure and notice of assignments, sales or transfers of loan servicing. 12 U.S.C. 2605(a) & (b). Plaintiff alleges, albeit in the context of his HOEPA claim, that Defendants violated the law by selling or otherwise assigning the loan without providing the requisite notice. (First Am. Compl. at 5.) These allegations are incorporated by reference into the RESPA claim. (Id. at 6.) Although Plaintiff does not expressly reference RESPA but refers to other statutes, it appears that Plaintiff intended to assert a RESPA violation as well. The statute of limitations for section 2605 violations is three years. 12 U.S.C. § 2614. This action was filed on September 15, 2008; accordingly, a section 2605 claim is not barred by the statute of limitations.

However, to the extent Plaintiff intended to state a section 2605 claim, he does not allege sufficient facts to meet the notice pleading requirements of Rule 8(a) of Federal Rules of Civil Procedure. For example, he does not affirmatively allege that his loan was sold or assigned, and he does not identify the transferee. Although Rule 8 does not require that the complaint include all facts necessary to carry the plaintiff's burden, it must allege plausible grounds to infer the existence of a claim for relief. Al-Kidd v. Ashcroft, 580 F.3d 949, 977 (9th Cir. 2009). This calls for enough facts to raise a reasonable expectation that discovery will reveal evidence to prove that claim. Id. Plaintiff's complaint falls short of this requirement. Accordingly, to the extent Plaintiff intends to assert a claim under section 2605, the claim is dismissed.

Plaintiff's fourth cause of action, which Countrywide moves to dismiss, alleges violations of various federal statutes and regulations. With regard to the ECOA, Plaintiff claims that Defendants did not provide an "ECOA Appraisal Notice." Under the ECOA, a creditor is required to provide a copy of an appraisal report to a loan applicant either routinely or, if the creditor does not routinely provide appraisals, upon the applicant's request. 15 U.S.C. 1691(e) & 12 C.F.R. § 202.14(a). If the creditor provides appraisal reports only upon request, it must give the applicant written notice of the right to receive a copy of the appraisal. 12 C.F.R. § 202.14(a)(2)(i). Plaintiff does not allege that he did not receive the appraisal, only that he did not receive notice of his right to request it. (First Am. Compl. at 4, 7.) Accordingly, this claim is not supported by sufficient factual allegations and Countrywide's motion to dismiss it is granted.

Plaintiff further claims that Defendants violated 24 C.F.R. Parts 203 and 3500 by failing to disclose the Yield Spread Premium in the Good Faith Estimate. (First Am. Compl. at 8.) Apparently a premium was paid to the broker for procuring the loan. (See id. Ex. D (Buyer's Final Settlement Statement) at 1.) This claim is based on 12 U.S.C. Section 2607 (Prohibition against kickbacks and unearned fees). It is time barred and therefore dismissed with prejudice.

Plaintiff also claims that Defendants violated 24 C.F.R. 3500.21, which addresses mortgage servicing transfers pursuant to RESPA. Plaintiff alleges that Defendants failed to give him notice regarding a mortgage servicing transfer. (First Am. Compl. at 5, 7 (incorporation by reference).) This claim is dismissed for ...

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