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Davis v. Mortgageit


July 22, 2010


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


This matter is before the court on the motions of defendants MortgageIT, Inc. ("MortgageIT") and Deutsche Bank Securities, Inc. ("Deutsche Bank") (collectively "defendants") to dismiss plaintiffs David and Karen Davis' ("plaintiffs") Second Amended Complaint ("SAC") pursuant to Federal Rule of Civil Procedure 12(b)(6) and/or to strike certain provisions of the SAC pursuant to Rule 12(f).*fn1 Plaintiffs oppose the motion. For the reasons set forth below,*fn2 defendants' motion to dismiss is GRANTED.


As the relevant factual background in this case remains unchanged, the court adopts the factual and procedural background set forth in its order granting defendants' motion to dismiss plaintiff's First Amended Complaint ("FAC"). (Order on FAC ("April 29 Order"), filed April 29, 2010 (Docket # 45)). Plaintiffs have filed a SAC, alleging damages resulting from defendants' violation of the Truth in Lending Act ("TILA"), 15 U.S.C § 1601 et seq., and its implementing regulations at 12 C.F.R § 226 et seq. ("Regulation Z"). Pursuant to this court's April 29 Order, Wells Fargo Bank, America's Servicing Company, and NDEX West are no longer parties to this litigation.


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.


Plaintiffs allege defendants violated TILA and Regulation Z by failing to provide all required disclosures prior to consummating the loan. (SAC ¶ 42, i-iv.) Acknowledging their claim is time barred, plaintiffs invoke the doctrine of equitable tolling for their TILA damages claim, arguing defendants' TILA violations made it impossible for plaintiffs to discover the alleged fraud or non-disclosure within the one-year statute of limitations, even through the use of due diligence. (Id. at ¶ 44.) Defendants move to dismiss the claim, arguing, inter alia, that plaintiffs have failed to allege specific facts to justify tolling the statute of limitations set forth in 15 U.S.C. § 1640(e). (Def.'s Mot. Dismiss Pl.'s SAC ("MTD"), filed June 10, 2010 (Docket # 47), 1.)

A party alleging damages under TILA must bring a claim "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). As a general rule, the statutory period "starts at the consummation of the [loan] transaction." King v. California, 784 F.2d 910, 915 (9th Cir. 1986). The Ninth Circuit, however, has held that equitable tolling of the TILA limitations period is authorized in appropriate circumstances. Id. at 914-15. Such circumstances exist where "a reasonable plaintiff would not have known of the existence of a possible claim within the limitations period." Santa Maria v. Pac. Bell, 202 F.3d 1170, 1178 (9th Cir. 2000).

In such a case, the limitations period may be extended "until the borrower discovers or had reasonable opportunity to discover the fraud or non-disclosures that form the basis of the TILA action." King, 784 F.2d at 915. Generally, a litigant seeking equitable tolling of a limitations period bears the burden of establishing entitlement to equitable tolling. See Pace v. DiGuglielmo, 544 U.S. 408 (2005). However, "when a plaintiff does not allege any facts demonstrating that he or she could have not discovered the alleged violations by exercising due diligence, dismissal may be appropriate." Blanco v. Am. Home Mortg. Servicing, Inc., 2009 U.S. Dist. LEXIS 119338, *8-9 (E.D. Cal. Dec. 3, 2009) (citing Meyer v. Ameriquest Mortg. Co., 342 F.3d 899. 902-03 (9th Cir. 2003) (refusing to apply equitable tolling to TILA claim because plaintiff was in full possession of all loan documents and did not allege any actions that would have prevented discovery of the alleged TILA violations)).

Here, because plaintiffs allege they consummated the loan on February 26, 2007, and filed the instant lawsuit on October 29, 2009, their TILA damages claim is facially time-barred. Plaintiffs, however, claim that equitable tolling should apply because the nature of the violations rendered it, "impossible... to discover [the TILA and Regulation Z violations] within the one-year statutory period for civil damages..." (SAC ¶ 44.) Plaintiffs contend that it was only after performing a Forensic Loan Document Audit on the loan documents (admittedly in their possession since the consummation of the loan) that they discovered the violations, and hence, their claim for damages. (Id.)

Plaintiffs have once again failed to allege facts sufficient to establish their entitlement to equitable tolling. (April 29 Order at 15 (refusing to apply equitable tolling due to plaintiffs' failure to allege sufficient facts to support the application of that remedy).) The basis for plaintiffs' damages claim involves defendants' failure to provide the required disclosures at the consummation of the loan. (SAC ¶¶ 42, 43.) Courts have routinely held that such an allegation, standing alone, is insufficient to plausibly state a basis for tolling. See, e.g., Garcia v. Wachovia Mortgage Corp., No. 2:09-cv-03925, 2009 WL 3837621, at *7-8 (C.D. Cal. Oct. 14, 2009) (finding that the plaintiff did not "state facts plausibly indicating any basis for tolling the statute of limitations" because "the mere allegation of TILA disclosure violations does itself not toll the statute"). Similarly here, plaintiffs have not alleged additional facts in their SAC to sufficiently toll the statute of limitations on their damages claim.

Furthermore, plaintiffs' bare contention that they were unable to discover defendants' violations within the one-year limitations period, without more, is insufficient proof of a basis for equitable tolling. The complaint does not state sufficient facts as to how defendants allegedly failed to disclose the terms of the loan. See Lingad v. IndyMac Fed. Bank, 2:09-cv-02347, 2010 U.S. Dist. LEXIS 7350, at *7-8 (E.D. Cal. Jan. 29, 2010) ("[W]hen a plaintiff fails to allege facts demonstrating that the TILA violations alleged could not have been discovered by due diligence during the one-year statutory period, equitable tolling should not be applied and dismissal at the pleading stage is appropriate."). Plaintiffs' conclusory allegation that defendants' failure to comply with TILA and Regulation Z "made it impossible" to discover the errors within the one-year period is insufficient to apply the doctrine of equitable tolling. See Rosales v. Downey S&L Ass'n, F.A., 2009 U.S. Dist. LEXIS 15923 (S.D. Cal Mar. 2, 2009) (declining to allow equitable tolling due to the plaintiff's conclusory allegations and failure to explain, with adequate specificity, why the statute should be tolled).

This case is factually similar to Meyer v. Ameriquest Mortg. Co., 342 F.3d at 899. In Meyer, the plaintiffs claimed damages under TILA, alleging errors in the Right to Cancel Notice provided at the consummation of the loan. The court affirmed the defendant's motion for summary judgment, reasoning:

"[T]he failure to make the required disclosures occurred, if at all, at the time the loan documents were signed. The Meyers were in full possession of all information relevant to the discovery of a TILA violation and a § 1640(a) damages claim on the day the loan papers were signed. The Meyers have produced no evidence of undisclosed credit terms, or of fraudulent concealment or other action on the part of Ameriquest that prevented the Meyers from discovering their claim.

In the exercise of reasonable diligence the Meyers should have discovered [within the statutory period] the acts constituting the alleged violation. The limitation period has run on their claim."

Id. at 902 (citation omitted)(emphasis added). As in Meyer, in this case, plaintiffs were in possession of all documentation that gave rise to their claim since 2007. At any time during the statutory period, plaintiffs could have conducted an audit of their documents, forensic or otherwise, that would have revealed the alleged errors and inconsistencies. No adequate explanation is presented as to why plaintiffs did not do so. Nor are there any facts plead demonstrating any fraudulent concealment or other conduct by defendants that prevented plaintiffs from discovering their claim. In the exercise of reasonable diligence, plaintiffs should have discovered the alleged violations giving rise to their TILA claim within the statutory period.

Because plaintiffs fail to proffer allegations demonstrating why the alleged TILA violations could not have been discovered during the statutory period, this court cannot toll the statute of limitations.


For the foregoing reasons, defendants' motion to dismiss is GRANTED. Because plaintiffs were given "one final opportunity" to amend in the court's April 29 Order and have failed to do so adequately, plaintiffs' claim is dismissed with prejudice.


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