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Watkinson v. MortgageIT

June 1, 2010


The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court


Currently before the Court are Defendant's Motion to Dismiss and Motion to Strike. Having considered the parties' arguments, the Court GRANTS IN PART and DENIES IN PART the Motion to Dismiss and GRANTS IN PART and DENIES IN PART the Motion to Strike.


I. Factual Background

Plaintiff Don Tobin Watkinson resides at real property located at 8151 Caminito Santaluz Sur, San Diego, CA 92127 ("Property"). On November 11, 2006, Plaintiff obtained a loan from Defendant MortgageIT, Inc. Plaintiff alleges that he was offered an adjustable rate loan, even though he applied for a 30-year fixed rate loan. Shortly after closing the loan, however, Plaintiff encountered unexpected medical bills associated with a serious illness suffered by his wife, and therefore could no longer produce the necessary income to support his new mortgage. On April 3, 2009, Plaintiff alleges he contacted Defendant for a loan modification, but no modification proposal was ever given to him.

II. Procedural Background

Plaintiff originally filed the suit in the District Court for the Eastern District of California. Plaintiff's Complaint alleges nine cause of action: (1) violation of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq.; (2) violation of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601 et seq.; (3) rescission; (4) unfair competition in violation of Section 17200 of the California Business and Professions Code; (5) unjust enrichment; (6) predatory lending; (7) negligence; (8) resulting trust; and (9) constructive trust.

On February 9, 2010, the case was transferred to this Court. Subsequently, Defendant filed the present Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6) and Motion to Strike pursuant to Fed. R. Civ. P. 12(f). Plaintiff filed late oppositions to both motions, and Defendant replied. The Court took the motions under submission pursuant to Civil Local Rule 7.1(d)(1).


I. Motion to Dismiss

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the pleadings. A complaint survives a motion to dismiss if it contains "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). The court may dismiss a complaint as a matter of law for: (1) "lack of cognizable legal theory," or (2) "insufficient facts under a cognizable legal claim." SmileCare Dental Group v. Delta Dental Plan of Cal., 88 F.3d 780, 783 (9th Cir. 1996) (citation omitted). The court only reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. al-Kidd v. Ashcroft, 580 F.3d 949, 956 (9th Cir. 2009) (citation omitted).

Despite the deference, the court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949-50 (2009). It is also improper for the court to assume "the [plaintiff] can prove facts that [he or she] has not alleged." Assoc. Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Iqbal, 129 S.Ct. at 1950.

II. Motion to Strike

Under Rule 12(f), the court may "strike from a pleading . . . any redundant, immaterial, impertinent, or scandalous matter." FED. R. CIV. P. 12(f). "Immaterial" matter is that which has "'no essential or important relationship to the claim for relief or the defenses being pleaded.'" Fantasy, Inc. v. Fogerty, 984 F.2d 1524, 1527 (9th Cir. 1993) (citation omitted), rev'd on other grounds, 510 U.S. 517 (1994). "Impertinent" matter consists of statements that "'do not pertain, and are not necessary, to the issues in question.'" Id. (citation omitted). In ruling upon a motion to strike, just as with a motion to dismiss, the court must view the pleadings in a light most favorable to the nonmoving party. In re, Inc. Sec. Litig., 114 F. Supp. 2d 955, 965 (C.D. Cal. 2000).

The purpose of a Rule 12(f) motion 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) (citation omitted). However, courts often view motions to strike with disfavor, and therefore will not grant a motion to strike "unless the matter to be stricken clearly could have no possible bearing on the subject of the litigation." Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F. Supp. 2d 1048, 1057 (N.D. Cal. 2004) (citations omitted); see also Bureerong v. Uvawas, 922 F. Supp. 1450, 1478 (C.D. Cal. 1996). The court should deny the motion to strike if "there is any doubt as to whether the allegations might be an issue in the action." In re, 114 F. Supp. 2d at 965 (citing Fantasy, 984 F.2d at 1527) (emphasis in original).


I. Motion to Dismiss

A. TILA Violations

Plaintiff's first cause of action alleges Defendant violated TILA by "failing to provide Plaintiff with accurate and clear and conspicuous material disclosures required under TILA" and by not fully informing him "of the pros and cons of adjustable rate mortgages in a language (both written and spoken) that [he] can understand and comprehend." (Compl. ¶ 57.) Defendant moves to dismiss this cause of action, arguing that the TILA claim for damages is time-barred and that the TILA claim for rescission fails because Plaintiff has not properly complied with the notice requirements and has not alleged that he is able to tender the loan proceeds.

1. TILA Claim for Rescission

Section 1635 governs the borrower's right under TILA to rescind a "consumer credit transaction . . . in which a security interest . . . is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended." 15 U.S.C. § 1635(a). While the borrower's right of rescission must normally be exercised within a three-day period, TILA extends that period to three years where the lender fails to provide the borrower with certain "material disclosures"*fn1 or with the notice of the right to cancel. See id. § 1635(f); 12 C.F.R. § 226.23(a)(3).

In the present case, however, the allegations in the Complaint are insufficient to extend the limitations period to three years. The only alleged TILA violation that is ascertainable from Plaintiff's Complaint is that Defendant allegedly violated TILA by providing Plaintiff with only three, instead of four, copies of the Notice of Right to Cancel. (See Compl. ¶ 47.) However, under TILA, the creditor is only required to deliver "two copies of the notice of the right to rescind to each consumer entitled to rescind." 12 C.F.R. § 226.23(b)(1) (emphasis added). Accordingly, Defendant's failure to deliver four copies of the notice of the right to cancel does not constitute an actionable TILA violation.

Finally, apart from the alleged failure to provide a proper number of copies of the notice of the right to cancel, the Complaint fails to allege what specific material disclosures were not provided to Plaintiff or what specific provisions of TILA were violated. Rather, Plaintiff merely alleges in a conclusory fashion that:

Defendants violated TILA by failing to provide Plaintiff with accurate and conspicuous material disclosures required under TILA and not taking into account the intent of the Legislature in approving this statute which was to fully inform borrowers of the pros and cons of adjustable rate mortgages in a language (both written and spoken) that they can understand and comprehend; and to advise them to compare similar loan products that might be more advantageous for the borrower under the same qualifying matrix. (Compl. ¶ 57.) Such conclusory allegations, however, are insufficient "to raise a right to relief above the speculative level." See Twombly, 550 U.S. at 555. Accordingly, because Plaintiff has not demonstrated that he is entitled to the longer limitations period of three years, the Court GRANTS the motion to dismiss and DISMISSES WITH LEAVE TO AMEND the TILA claim for rescission.

2. TILA Claim for Damages

As to Plaintiff's TILA claim for damages, that claim is clearly barred on the face of the complaint. As Defendant points out, claims for damages under TILA must be commenced within one year following the date of the alleged violation. See 15 U.S.C. § 1640(e); see also Lynch v. RKS Mortgage Inc., 588 F. Supp. 2d 1254, 1259 (E.D. Cal. 2008). The date of violation refers to the date of the consummation of the transaction, unless the doctrine of equitable tolling applies. King v. State of Cal., 784 F.2d 910, 915 (9th Cir. 1986). In the present case, because the loan transaction took place on November 11, 2006, but the complaint was not filed until November 7, 2009, the running of the statute of limitations on Plaintiff's TILA claim for damages is clear on the face of the complaint.

Moreover, Plaintiff is not entitled to equitable tolling because he has not carried his burden of showing that it applies in this context. Plaintiff had all of the information he needed to discover and bring an action regarding the alleged wrongs when the loan transaction closed, and he has not alleged that he was prevented in any way from doing so. See Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 79 (9th Cir. 1996) (concluding that plaintiff was not entitled to tolling where "nothing prevented [her] from comparing the loan contract, [defendant's] initial disclosures, and TILA's statutory and regulatory requirements" (citing King, 784 F.2d at 915)). Accordingly, because Plaintiff's TILA claim for ...

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