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Gwin v. Pacific Coast Financial Services

April 23, 2010


The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge


Defendants Pacific Coast Financial Services ("PCFS"), FCI Lender Services, Inc., and David Bridgeman have filed a Motion to Dismiss the Complaint for Failure to State a Claim [Docs. 4, 6]. For the following reasons, the Court GRANTS the Motion.


The following factual statements are allegations in the Complaint, not the Court's findings.

This action concerns a $445,000 loan from PCFS to Plaintiffs, secured by a deed of trust on their home located at 13393 Samantha Avenue, San Diego, CA 92129. Plaintiffs executed the loan on August 31, 2007. At the signing, Plaintiffs discovered a falsified income statement, stating that Mrs. Gwin, one of the Plaintiffs, owned a business called Michiko's Bridal, which had a net income of $15,000 per month. Plaintiffs did not sign the false income statement, but signed the remainder of the loan documents.

Plaintiffs did not receive copies of the deed of trust, nor any other loan documents, including any notices of right to cancel and truth in lending disclosures. Although they later asked Defendant David Bridgeman, the mortgage broker who arranged the loan, for copies of these documents, they have not received them.

Defendants struggled to make payments on the loan and eventually defaulted in June of 2008. Plaintiffs did not receive a Notice of Default under California Civil Code § 2924 et seq. In August 2008, Plaintiffs received a Notice of Trustees Sale, which set forth a sale date of December 29, 2008. On December 29, 2008, defendant PCFS purchased the property. In June 2009, Defendants obtained a judgment for possession of the property.

On November 2, 2009, Plaintiffs filed a Complaint in the Superior Court of California in the County of San Diego alleging eleven causes of action against all Defendants and requesting declaratory, injunctive and monetary relief. On November 3, 2009, the Superior Court entered a temporary restraining order enjoining Defendants from, among other things, evicting Defendants from their residence. Defendants filed a Notice of Removal in this Court on December 7, 2009.

Defendants have now moved to dismiss all eleven causes of action. The Court addresses each claim below.


Under Federal Rule of Civil Procedure 8(a)(2), the plaintiff is required only to set forth a "short and plain statement of the claim showing that the pleader is entitled to relief," and "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). When reviewing a motion to dismiss, the allegations of material fact in plaintiff's complaint are taken as true and construed in the light most favorable to the plaintiff. See Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). But only factual allegations must be accepted as true-not legal conclusions. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009).

"Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Although detailed factual allegations are not required, the factual allegations "must be enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. Furthermore, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Iqbal, 129 S.Ct. at 1949.

In ruling on a motion to dismiss, a court may take judicial notice of matters of public record that are not subject to reasonable dispute. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).


1. First Cause of Action -- Truth in Lending Act

Any action for damages under the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., must be brought within one year of the loan execution. 15 U.S.C. § 1640(e); see King v. California, 784 F.2d 910, 915 (9th Cir. 1986). Here, Plaintiffs executed the loan documents in August 2007. They filed their suit in state court in November 2009, well beyond the one-year limitations period. Additionally, although courts may equitably toll TILA claims "in certain circumstances" such as fraudulent concealment, King v. State of California, 784 F.2d 910, 914--15 (9th Cir. 1986), Plaintiffs have not alleged any facts justifying equitable tolling.

Plaintiffs also seek rescission of the loan under TILA. Rescission actions under TILA have a three-year limitations period. 15 U.S.C. § 1635(f). The right of rescission also expires upon the sale of the property. Id. Plaintiffs allege that their home has been sold to Defendant PCFS. Thus, their rescission claim is also time barred.

For these reasons, the Court DISMISSES without prejudice Plaintiffs' First Cause of Action for TILA Violations in its entirety.

2. Second Cause of Action -- Violations of California Financial Code § 4973

Plaintiffs allege that Defendants did not reasonably believe that Plaintiffs could make payments on the loan when they executed the loan transaction, in violation of California Financial Code § 4973(f)(1). In order for Plaintiffs to state a claim under California Financial Code § 4973, the loan must be a "covered loan" as defined by California Financial Code § 4970(b). See Cal. Fin. Code § 4970; Glover v. Fremont Inv. & Loan, No. 09-3922, 2009 WL 5114001, at *5 (N.D. Cal. December 18, 2009). If "the original balance of the loan does not exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association ("Fannie Mae") ..." then the loan is "covered." Cal. Fin.Code § 4970(b). The Court takes judicial notice that since January 1, 2006, the national conforming loan limit has been $417,000. See Defendants' Request for Judicial Notice; Alvara v. Aurora Loan Srvcs., No. 09-1512, 2009 WL 1689640, at ...

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