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Gates v. Wachovia Mortgage

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA


June 28, 2010

LISA GATES, PLAINTIFF,
v.
WACHOVIA MORTGAGE, FSB, DEFENDANT.

The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge

MEMORANDUM AND ORDER

This matter is before the court on the motion of defendant Wachovia Mortgage, FSB ("Wachovia") to dismiss plaintiff Lisa Gates' ("plaintiff") second amended complaint ("SAC") pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff opposes the motion. For the reasons set forth below,*fn1 defendant's motion to dismiss is GRANTED in part and DENIED in part.

BACKGROUND

The court adopts the factual and procedural background set forth in its Order on Wachovia's motion to dismiss plaintiff's first amended complaint ("FAC"). (Order on Def.'s Mot Dismiss Pl.'s FAC ("Order"), Filed Feb. 2, 2010 (docket # 18).) Wachovia moves to dismiss plaintiff's SAC for failure to plead facts sufficient to state cognizable claims for relief.

STANDARDS

Under Federal Rule of Civil Procedure 8(a), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). A plaintiff need not allege "'specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombly, 550 U.S. at 570. "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.

Nevertheless, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Id. at 1950 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."); Twombly, 550 U.S. at 555. Moreover, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the 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).

Ultimately, the court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citing Bell Atl. Corp., 550 U.S. at 570). Only where a plaintiff has failed to "nudge [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 1952. While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 1949. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.

In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. of Mary Hosp., 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. v. Consumers Union of U.S., Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).

ANALYSIS

A. Wachovia's Exhibits

The court adopts the analysis of judicial notice of Wachovia's exhibits set forth in its Order on Wachovia's motion to dismiss plaintiff's FAC. Because the loan documents, specifically the Notice of Right to Cancel, form the basis of the relevant causes of action, the court considers them for the purpose of defendant's motion to dismiss.*fn2 (Def.'s Mot. Dismiss Pl.'s SAC ("MTD"), Filed April 6, 2010 (docket # 20).)

B. Truth in Lending Act

Plaintiff's first cause of action alleges defendant Wachovia violated the Truth in Lending Act ("TILA") 25 U.S.C. § 1601, et seq. (1) by failing to provide accurate copies of the required disclosures to plaintiff at the time of closing as required by the statute, and (2) by failing to respond to plaintiff's letter of "rescission." (SAC ¶¶ 27-30, 40-41, 43.) Wachovia moves to dismiss plaintiff's first cause of action, arguing that paragraph 72 of plaintiff's SAC is an attempt to revive her recission claim in direct contradiction of this court's Order. Specifically, Wachovia asserts: (1) plaintiff is barred from reasserting her recission claim following this court's Order; and (2) plaintiff's recission claim is time barred by TILA's three-year statute of limitations. Plaintiff responds that she is not attempting to reassert her recission claim contrary to this court's Order, but merely "attempt[ing] to plead damages in the broadest form possible." (Pl.'s Opp'n to Mot Dismiss ("Opp'n"), Filed June 3, 2010 (docket # 24) 3.) More specifically, plaintiff alleges that paragraph 72's "alternative requests" are merely an element of plaintiff's notice pleading, and necessary for a complete discussion of plaintiff's damages under her TILA claim. (Opp'n at 4.)

As noted by this court in its prior Order, if a borrower files his or her suit over three years from the date of a loan's consummation, a court is powerless to grant rescission. Miguel, 309 F.3d at 1164 ("[S]section 1635(f) represents an 'absolute limitation on rescission actions which bars any claims filed more than three years after the consummation of the transaction." (quoting King v. California, 784 F.2d 910, 913 (9th Cir. 1986)); accord Beach, 523 U.S. at 412 ("[Section] 1635(f) completely extinguishes the right of rescission at the end of the 3-year period."). If a borrower exercises his or her right to rescind within the three-year limitation period, such action only entitles the borrower to damages, not rescission. Cazares v. Household Fin. Corp., No. CV 04-6887 DSF, 2005 U.S. Dist. LEXIS 39222, at *24-25 (C.D. Cal. 2005) (citing 15 U.S.C. § 1640(a); Belini v. Wash. Mut. Bank, FA, 412 F.3d 17 (1st Cir. 2005)). But see Santos v. Countrywide Home Loans, No. 1:09-CV-00912-AWI-SM, 2009 WL 2500710, at *3-5 (E.D. Cal. Aug. 14, 2009) (finding that, if creditor does not properly respond to notice of rescission provided by borrower within limitations period, borrower could file suit after three-year period of repose). Accordingly, because a recision action is time barred in the present action, this court granted Wachovia's motion to dismiss plaintiff's recision claim and did not allow plaintiff leave to amend. (Order at 10.)

As such, plaintiff is barred from reasserting a recision claim in her amended complaint, and this court will not consider a recission claim brought under TILA by plaintiff. However, while plaintiff incorporates elements of a recission claim into her first cause of action*fn3 , these requests are presented as an alternate prayer for relief, following a thorough discussion of plaintiff's claim for damages under TILA, which this court allowed in its prior Order. The court emphasizes that plaintiff's recission claim has been dismissed and cannot be pressed in this litigation. However, as plaintiff unequivocally acknowledges the dismissal of this claim, Wachovia's motion to dismiss plaintiff's first cause of action is DENIED.

C. RESPA Violation

Plaintiff's second cause of action alleges Wachovia violated 12 U.S.C. § 2605 by failing to provide a written response to plaintiff's letter dated January 15, 2009, which she claims is a valid qualified written request ("QWR"). (SAC ¶¶ 82-85.) Wachovia moves to dismiss this claim on the basis that, inter alia, the letter of January 15, 2009 does not contain a valid QWR as defined by RESPA § 2605(e). (MTD at 3-4.)

In order to qualify as a QWR, a borrower's inquiry must include a statement of the reasons for the belief of the borrower . . . that the account is in error or provide sufficient detail to the servicer regarding other information sought by the borrower." 12 U.S.C. § 2605(e)(1)(B)(ii). Under RESPA, the term "servicing" refers to "receiving any scheduled periodic payments from a borrower pursuant to the terms of any loan." Id. at § 2605(i)(3). When presented with a valid QWR, section 2605 requires a loan servicer to provide disclosures "relating to the servicing of [the] loan," Id. at § 2605(e)(1)(A), and may be liable for damages for failing to do so. id. at § 2605(f)(1). Courts routinely interpret section 2605 as requiring a QWR to relate to the servicing of a loan, rather than the creation or modification of a loan. See Consumer Solutions REO, LLC. v. Hillery, 658 F. Supp. 2d 1002 (N.D. Cal. 2009) (dismissing RESPA claim with prejudice because plaintiff's "QWR" disputed the validity of a loan and not its servicing); MorEquity, Inc. v. Naeem, 118 F. Supp. 2d 885, 901 (N.D. Ill. 2000) (dismissing plaintiff's RESPA claim after finding that none of the irregularities alleged in the "QWR" related to servicing as defined by section 2605); Philips v. Bank of Am. Corp., 2010 U.S. Dist. LEXIS 35131 (finding defendant had no duty under RESPA to respond to plaintiff's "QWR" because it related to origination and modification of a loan, not its servicing).

In this case, exhibit B fails to relay any servicing error. The purported QWR contains no statement of plaintiff's belief as to the existence of a servicing error, nor does it contain anything to put Wachovia on notice of a servicing error. Rather, the letter is primarily aimed at uncovering documents relating to the ownership of the obligation, as well as seeking recission or modification by calling into question the validity of the loan. (Pl.'s Ex. B at 49 ("The loan being serviced is defective.").) However, neither an inquiry into the ownership of a loan, nor an allegation of defective loan documentation, are sufficient to transform an otherwise non-qualifying correspondence into a QWR. See Hillery, 658 F. Supp. 2d 1002; MorEquity, 118 F. Supp. 2d 885, 901. Moreover, while plaintiff's letter requests a "statement of all payments made on this loan," this request is similarly insufficient to meet the requirements of RESPA. A simple inquiry into payments made, without more, cannot be interpreted as either "a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error," or, "provid[ing] sufficient detail to the servicer regarding other information sought by the borrower," as required by RESPA. 12 U.S.C. § 2605(e)(1)(B)(ii). In other words, an unadorned request for a statement of payments made toward a loan is not an allegation of a servicing error.

Thus, plaintiff's correspondence fails to meet the requirement of section 2605 that a QWR put a loan servicer on notice of a servicing error. Because plaintiff's letter does not meet the requirements of a QWR, Wachovia was under no obligation to respond. Accordingly, there can be no liability for Wachovia's failure to provide a written response to plaintiff's correspondence.

Therefore, Wachovia's motion to dismiss plaintiff's second cause of action is GRANTED. Because plaintiff's RESPA cause of action is predicated on her having submitted a valid QWR to Wachovia, there is no possibility that the claim can be cured by amendment. Because leave to amend would be futile, plaintiff's RESPA cause of action is dismissed with prejudice.

D. RFDCPA Violation

Plaintiff's third cause of action alleges a violation of California's Rosenthal Fair Debt Collection Practices Act ("RFDCPA"). (SAC ¶¶ 105-111.) Plaintiff's SAC notes the date and time of 6 phone calls allegedly placed by Wachovia to plaintiff after plaintiff's January 15, 2009 letter to Wachovia requesting communications cease pursuant to RFDCPA. Wachovia moves to dismiss this cause of action arguing, inter alia, that plaintiff has failed to allege a violation of the RFDCPA with sufficient factual specificity. (MTD at 5-6.) Specifically, Wachovia contends that plaintiff's amended cause of action fails because contact alone is not enough to allege a violation of the RFDCPA. (Id. at 6.)

The RFDCPA precludes a debt collector from collecting or attempting to collect from a debtor on a consumer debt in a threatening or harassing manner. See Cal. Civ. Code § 1788 et seq. (West 2010). Specifically, the RFDCPA prohibits threats, obscenity, misleading or false communications, and overreaching.

Id. §§ 1788.10-.12, 1788.14-.16. However, "foreclosing on [a] property pursuant to a deed of trust is not the collection of a debt within the meaning of the FDCPA." Izenberg v. ETS Servs., LLC, 589 F. Supp. 1193, 1199 (C.D. Cal. 2008) (quoting Ines v. Countrywide Home Loans, 2008 WL 4791863, at *2 (S.D. Cal. Nov. 3, 2008)). Nor does foreclosure meet the requirements of a debt collection within the meaning of the RDFCPA. Id.

While the federal rules contemplate a short and plain statement of the factual basis for a plaintiff's claims, the allegations must be sufficiently pled to allow the court to determine whether the conduct violates the statute. See Iqbal, 129 S.Ct. at 1950; Twombly, 550 U.S. at 555. Although the SAC has improved upon the FAC's factually deficient claim by listing the date and time of the alleged debt collection phone calls, due to the unadorned nature of these added allegations, plaintiff's RFDCPA cause of action still fails to meet the applicable pleading requirements. As noted by the court in its prior Order, plaintiff's assertion that Wachovia "repeatedly called" plaintiff does not by itself constitute a violation of the RFDCPA. Plaintiff's SAC alleges little more than the FAC's bald assertion of harassment. Taken as true, plaintiff's SAC makes no allegation regarding the nature of the phone calls, only that they were placed. This alone is not enough to allow the court to infer that there has been conduct violating the statute.

Accordingly, Wachovia's motion to dismiss plaintiff's third claim for relief is GRANTED with leave to amend.

CONCLUSION

For the foregoing reasons, Wachovia's motion to dismiss is GRANTED in part and DENIED in part. Plaintiff is granted fifteen (15) days from the date of this order to file a third amended complaint in accordance with this order. Defendant is granted thirty (30) days from the date of service of plaintiff's third amended complaint to file a response thereto.

IT IS SO ORDERED.


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