UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
April 20, 2010
ARMANDO IBARRA, AN INDIVIDUAL, PLAINTIFF,
LOAN CITY, A CALIFORNIA CORPORATION AUTHORIZED TO DO BUSINESS IN CALIFORNIA, AURORA LOAN SERVICES INC., A FOREIGN CORPORATION AUTHORIZED TO DO BUSINESS IN CALIFORNIA; CAL-WESTERN RECONVEYANCE CORPORATION, A CALIFORNIA CORPORATION AUTHORIZED TO DO BUSINESS IN CALIFORNIA; WACHOVIA FINANCIAL SERVICES, INC., FKA WORLD SAVINGS BANK, FSB, A FEDERAL SAVINGS BANK AND REGISTERED FOREIGN CORPORATION DOING BUSINESS IN CALIFORNIA; HARBORSIDE FINANCIAL NETWORK, A CALIFORNIA CORPORATION AUTHORIZED TO DO BUSINESS IN CALIFORNIA, AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.
The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S FIRST AMENDED COMPLAINT DEFENDANT'S MOTION TO DISMISS [Doc. No. 33]
Presently before the Court is Defendant Aurora Loan Services LLC's ("Aurora") motion to dismiss Plaintiff Armando Ibarra's ("Plaintiff") First Amended Complaint. (Doc. No. 33.) Plaintiff filed an opposition, and Aurora filed a reply.
The Court finds the motion suitable for disposition without oral argument pursuant to Local Civil Rule 7.1(d)(1). For the reasons stated herein, the Court grants in part and denies in part the motion to dismiss.
This matter concerns the refinancing of Plaintiff's principal residence in Chula Vista, San Diego (the "Property"). The following facts are drawn from Plaintiff's First Amended Complaint ("FAC") unless otherwise noted.
On September 6, 2006, Plaintiff obtained a loan from Loan City, brokered by Equipoint Financial Network, Inc. d/b/a Harborside Financial Network ("Harborside"). According to Plaintiff, Aurora later assumed the loan. In early 2009, foreclosure proceedings were initiated. Also in early 2009, Plaintiff discovered that he had not been provided certain notices and disclosures at the time of the loan origination in violation of the Truth in Lending Act ("TILA"). On July 9, 2009, Plaintiff sent a letter to Loan City, World Savings, and Harborside rescinding the loan contract. Five days later on July 14, 2009, Plaintiff sent the same letter to Aurora.
OnAugust 18, 2009, Plaintiff initiated the action in the Superior Court for the County of San Diego, naming Aurora, Loan City, Cal-Western Reconveyance Corp., Wachovia Financial Services, Inc., and Harborside as defendants. The defendants subsequently removed the case to this Court. (Doc. No. 1.) In September of 2009, Aurora purchased the property at the trustee's sale.
On January 27, 2010, the Court granted in part Aurora's motion to dismiss Plaintiff's original Complaint for failure to state a claim, and denied as moot Aurora's motion to strike. (Doc. No. 31.) The Court dismissed with prejudice all causes of action in the Complaint, except for Plaintiff's cause of action for violation of TILA, which was dismissed with leave to amend.
On February 3, 2010, Plaintiff timely filed the FAC, which sets forth one cause of action for violation of TILA. (Doc. No. 32.) Plaintiff seeks rescission and damages for violation of TILA, 15 U.S.C. § 1601, et seq., and TILA's implementing regulation ("Regulation Z"), 12 C.F.R. § 226, which sets out TILA's general disclosure requirements. Subsequently, Aurora filed the instant motion to dismiss the FAC. (Doc. No. 33.)
I. Legal Standard
A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a) (2009). A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court must accept all factual allegations pled in the complaint as true, and must construe them and draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). To avoid a Rule 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, it must plead "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). 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." Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556).
However, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555 (citation omitted). A court need not accept "legal conclusions" as true. Iqbal, 129 S.Ct. at 1949. In spite of the deference the court is bound to pay to the plaintiff's allegations, it is not proper for the court to assume that "the [plaintiff] can prove facts that [he or she] has not alleged or that 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).
II. Analysis of Aurora's Motion to Dismiss
As the Court previously determined in its January 27, 2010 Order dismissing Plaintiff's original Complaint, Plaintiff fails to state a claim for damages for failure to provide disclosures at the time of the loan origination. Plaintiff's claim is barred by the one-year statute of limitations for actions for damages under TILA. See 15 U.S.C. § 1640(e). Plaintiff initiated suit on August 18, 2009, nearly three years after the loan origination. Also, as the Court previously determined in its January 27, 2010 Order, Plaintiff fails to state a claim for rescission. Plaintiff's right to rescind under TILA expired on September 8, 2009 when the Property was sold at the trustee's sale. Section 1635(f) of TILA provides that the right of rescission expires at the latest, "three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first." 15 U.S.C. § 1635(f). Accordingly, the Court dismisses these claims with prejudice.
Plaintiff also alleges he is entitled to damages for violation of TILA's rescission provision because Aurora failed to respond within twenty days to Plaintiff's notice of rescission, sent on July 14, 2009.*fn1 (FAC ¶¶ 24, 28, 33.) Section 1635(b) of TILA sets forth the actions a creditor must take upon receiving a notice of recission:
When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. . . .
15 U.S.C. § 1635(b). Section 1640 permits a plaintiff to bring an action for damages against "any creditor who fails to comply with any requirement imposed under [TILA], including any requirement under section 1635." Id. § 1640(a). A creditor can generally be held liable for actual and statutory damages, as well as attorney's fees and costs. Id. § 1640.
Aurora argues that Plaintiff fails to state a claim for three reasons. First, Aurora argues that it cannot be liable under TILA because it is a loan servicer and is listed as beneficiary solely for administrative purposes in servicing the loan. Only creditors can be liable under TILA. Id. § 1640(a). Liability does not extend to a loan servicer as an assignee of a creditor "unless the servicer is or was the owner of the obligation." Id. § 1641(f). A servicer is not treated as the "owner of the obligation" on the basis of an assignment "solely for the administrative convenience of the servicer in servicing the obligation." Id. § 1641(f)(2).
The statute is clear that Aurora cannot be held liable under TILA if it is a servicer assigned the loan solely for administrative purposes. However, construing the facts and all reasonable inferences from them in favor of Plaintiff, the Court finds it plausible that Aurora was an assignee of the loan for more than just administrative purposes. Plaintiff alleges Aurora owns the loan. (FAC ¶¶ 12, 22.) In addition, the Trustee's Deed Upon Sale lists Aurora as the foreclosing beneficiary. (Aurora's Mot. to Dismiss, Ex. 5.) Aurora argues that it was only assigned MERS' nominal interest in the loan, and points to the Deed of Trust, which names MERS as the nominal beneficiary. (Request for Judicial Notice in Supp. of Mot. to Dismiss, Ex. 1.)*fn2 However, this document and Aurora's bare assertions are not conclusive.
Aurora next argues that Plaintiff is not entitled to damages because Plaintiff has not alleged an ability to tender the loan proceeds. Aurora contends that if the Court, in its discretion, modifies the rescission-tender chronology set forth in Section 1635(b) to require Plaintiff to first allege an ability to tender before he can be entitled to rescission, then Aurora could not have violated the statute by failing to respond to the notice of rescission. As discussed above, Plaintiff's right to rescind under TILA expired on September 8, 2009 when the Property was sold at the trustee's sale. The Court declines to engage in a discussion of what it would have done had Plaintiff's rescission claim not been barred by the sale of the Property.
Finally, Aurora contends that the content of Plaintiff's notice of rescission is ambiguous. This argument is without merit. The letter, titled "Request for Loan Modification (And Notice of Rescission)," clearly states that Plaintiff's counsel is "authorized to rescind this loan transaction and hereby exercise[s] that right." (FAC, Ex. A.) The letter concludes by requesting that Aurora contact Plaintiff's counsel if it would like to enter into negotiations, "so that our client may consider withdrawing this Notice of Rescission." (FAC, Ex. A.)
The Court GRANTS IN PART Aurora's motion to dismiss with prejudice Plaintiff's FAC, to the extent Plaintiff asserts claims under TILA for rescission and for damages relating to the loan origination. The Court DENIES Aurora's motion, to the extent Plaintiff asserts a claim for damages for violation of TILA's rescission provision.
IT IS SO ORDERED.