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Pica v. Wachovia Mortgage

April 14, 2010


The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge


Defendant Wachovia Mortgage ("Wachovia") filed a motion to dismiss Plaintiffs' complaint under Federal Rule of Civil Procedure ("Rule") 12(b)(6) for failure to state a claim upon which relief can be granted. Wachovia also seeks in this motion to have portions of Plaintiffs' complaint stricken under Rule 12(f). Wachovia also argues it is erroneously sued in this case separately as "Wachovia Mortgage" and "World Savings Bank, FSB." Since Plaintiffs have not disputed this contention, the allegations against both entities are treated as allegations against Wachovia. Wachovia also argues Plaintiffs' state law claims are preempted by the Home Owners' Loan Act. (Mot. 2:12-13.) Since it is unclear precisely what Plaintiffs allege in each state law claim, and these claims will be dismissed based on arguments made in Wachovia's Rule 12(b)(6) motion, the merits of Wachovia's preemption arguments are not decided. See Webb v. Indymac Bank Home Loan Servicing, No. CIV 2:09-2380 WBS DAD, 2010 WL 121084, at *6 n.2 (E.D. Cal. Jan. 7, 2010) (declining to reach HOLA preemption since "plaintiffs' [state law] claim is facially deficient and will be dismissed").

I. Plaintiffs' Factual Allegations in their Complaint

In July 2006,*fn2 Plaintiffs Jeffrey and Tessie Pica sought to purchase the residential property located at 44 South Pacifico Street, Mountain House, in San Joaquin County, California. (Compl. ¶¶ 7, 20.) Plaintiffs met with Novia Realty & Financial loan officer Tony Dihn ("Dihn"), who informed Plaintiffs he could get them the "best deal" and the "best interest rates" available on the market. (Id. ¶ 21.) Plaintiffs requested and Dihn guaranteed an "affordable loan." (Id. ¶ 22.) Plaintiffs agreed to a loan with an adjustable rate of 7.590% with a "cap" of 11.950%. (Id.) Dihn informed Plaintiffs that if the loan ever became unaffordable, he would refinance the loan. (Id. ¶ 24.)

Plaintiffs were not given a copy of the loan documents prior to closing as required, and at the time of closing, Plaintiffs were rushed to sign the documents. (Id. ¶ 25.) The loan documents were never explained to Plaintiffs, Plaintiffs were never given an opportunity to review them, and Plaintiffs never received the required copies of the notice of cancellation. (Compl. ¶ 25.) Plaintiffs' English skills are limited. (Id. ¶ 23.) Plaintiffs' native language is Tagalog, and there was no translator at the signing of the loan documents, nor were the loan documents in Tagalog. (Id.)

On October 9, 2006, Plaintiffs completed the loan transaction. (Id. ¶ 27.) The terms of the loan were memorialized in a promissory note, which was secured by a deed of trust. (Id.) The deed of trust identified Golden West Savings Association Service Co. as the trustee. (Id.)

Plaintiffs sent a Qualified Written Request ("QWR") to Wachovia under the Real Estate Settlement Procedures Act ("RESPA") on May 18, 2009, in which Plaintiffs demanded rescission of the loan under the Truth in Lending Act ("TILA"). (Compl. ¶ 28.)

Plaintiffs allege the following ten claims against Wachovia: (1) violation of TILA, 15 U.S.C. §§ 1601, et seq.; (2) violation of the California Rosenthal Act, Cal. Civil Code §§ 1788 et seq.; (3) negligence; (4) violation of RESPA, 12 U.S.C. §§ 2601, et seq.; (5) breach of fiduciary duty; (6) fraud; (7) violation of the California Business and Professions Code, Cal. Civ. Code §§ 17200, et seq.; (8) breach of contract; (9) breach of the implied covenant of good faith and fair dealing; and (10) violation of California Civil Code § 1632.

II. Legal Standards

A Rule 12(b)(6) motion "challenges a complaint's compliance with... pleading requirements." Champlaie v. BAC Home Loans Servicing, LP, No. S-09-1316 LKK/DAD, 2009 WL 3429622, at *1 (E.D. Cal. Oct. 22, 2009). A pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief...." Fed. R. Civ. P. 8(a)(2). The complaint must "give the defendant fair notice of what the [plaintiff's] claim is and the grounds upon which relief rests...." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Further, "[a] pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).

To avoid dismissal, the plaintiff must allege "only enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 547. "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. Plausibility, however, requires more than "a sheer possibility that a defendant has acted unlawfully." Id. "When a complaint pleads facts that are merely consistent with a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief." Id. (quotations and citation omitted).

In evaluating a dismissal motion under Rule 12(b)(6), the court "accept[s] as true all facts alleged in the complaint, and draw[s] all reasonable inferences in favor of the plaintiff." Al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009). However, neither conclusory statements nor legal conclusions are entitled to a presumption of truth. See Iqbal, 129 S.Ct. at 1949-50.

Further, a court may strike from a pleading "an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). "The function of a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from litigating spurious issues by dispensing with those issues prior to trial." Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir.1983). "[M]otions to strike should not be granted unless it is clear that the matter to be stricken could have no possible bearing on the subject matter of the litigation." Colaprico v. Sun Microsystems, Inc., 758 F. Supp. 1335, 1339 (N.D. Cal. 1991) (citation omitted).

III. Judicial Notice

Wachovia requests that judicial notice be taken of two documents related to Plaintiffs' mortgage loan which are publicly recorded in the Official Records of San Joaquin County: an October 9, 2006 Deed of Trust and a September 8, 2006 Grant Deed. (RJN Exs. C, D.) "[A]s a general rule, a district court may not consider materials not originally included in the pleadings in deciding a Rule 12 motion[,]... [however,] it may take judicial notice of matters of public record and may consider them without converting a Rule 12 motion into one for summary judgment." United States v. 14.02 Acres of Land, 547 F.3d 943, 955 (9th Cir. 2008) (quotations and citations omitted). Exhibits C and D are publicly recorded and may be considered in deciding Wachovia's dismissal motion. See Champlaie, 2009 WL 3429622, at *4 (taking judicial notice of recorded Notice of Default, Notice of Trustee's Sale, and Trustee's Deed Upon Sale).

Wachovia also requests that judicial notice be taken of an October 9, 2006 Adjustable Rate Mortgage Note signed by Plaintiffs and an October 11, 2006 Federal Truth in Lending Disclosure signed by Plaintiffs. (RJN Exs. B, E.) Under the "incorporation by reference" doctrine, the court may consider documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [plaintiff's] pleading." In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999) (internal quotations omitted). Here, Plaintiffs allege the existence of Exhibits B and E in their complaint and have not disputed their authenticity. (See, e.g., Compl. ¶¶ 17, 32, 52-53.) Accordingly, Exhibits B and E may be considered in deciding Wachovia's dismissal motion. See Rivera v. Wachovia Bank, No. 09-cv-0433-JM-AJB, 2009 WL 2406301, at *1 n.1 (S.D. Cal. Aug. 4, 2009) (incorporating by reference the Mortgage Note and Lending Disclosures).

Finally, Wachovia requests that judicial notice be taken of four documents related to Wachovia's status as a federal savings bank subject to the Home Owners' Loan Act ("HOLA"): an April 12, 2006 Certificate of Corporate Existence issued by the Office of Thrift Supervision, Department of Treasury (the "OTS"); a letter dated November 19, 2007 from the OTS; Wachovia's Corporate Charter dated December 31, 2007; and the Federal Deposit Insurance Corporation ("FDIC") profile and history of Wachovia dated July 9, 2009, from the FDIC's official website. (RJN Ex. A.) Plaintiffs have not disputed the authenticity of these documents, nor have Plaintiffs disputed Wachovia's status as a federal savings bank subject to HOLA. Wachovia's request for judicial notice of these documents is granted. See Molina v. Washington Mutual Bank, No. 09-cv-00894-IEG-AJB, 2010 WL 431439, at *3 (E.D. Cal. 2010 Jan. 29, 2010) (stating that "[i]nformation on government agency websites has often been treated as properly subject to judicial notice" and taking judicial notice of FDIC website).

IV. Analysis

A. Plaintiffs' Truth in Lending Act Claim

1. Plaintiffs' Claim for Damages Under TILA

Wachovia seeks dismissal of the civil damages portion of Plaintiffs' TILA claim, arguing, inter alia, it is time barred. (Mot. 6:27.) Wachovia further argues "no basis for equitable tolling exists." (Id. 7:13.) Plaintiffs rejoin they have plead sufficient facts to show that the statute of limitations period should be equitably tolled. (Opp'n 13:2-14:12.)

An action under TILA for actual or statutory damages must be brought "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). The limitation period starts to run "at the consummation of the [loan] transaction." King v. California, 784 F.2d 910, 915 (9th Cir. 1986). However, the doctrine of equitable tolling may "suspend the limitations period" "in certain circumstances," such as where the allegations in the complaint permit a reasonable inference that the borrower did not have a reasonable opportunity to discover the alleged fraud or nondisclosures that form the basis of the plaintiff's TILA claim. Id. at 914-15; Al-Kidd, 580 F.3d at 956.

Plaintiffs allege the TILA violations occurred on October 9, 2006, the date Plaintiffs entered into the loan agreement with Defendants and consummated the loan transaction. Since Plaintiffs did not bring their TILA damages claim until August 25, 2009, which is more than one year after July 21, ...

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