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Palestini v. Homecomings Financial

August 23, 2010


The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge


Defendants Homecomings Financial LLC ("Homecomings") and GMAC Mortgage LLC ("GMAC") (collectively "Defendants") bring a motion to dismiss Plaintiffs' Complaint. (Doc. No. 3.) Plaintiffs Luigi and Darla Palestini ("Plaintiffs") oppose the motion. (Doc. No. 10.) The Court, in its discretion, finds the matter suitable for resolution without oral argument. See Fed. R. Civ. P. 78(b).*fn1 For the reasons set forth below, the Court GRANTS IN PART and DENIES IN PART Defendants' motion to dismiss.


This action arises from foreclosure-related events with respect to Plaintiffs' home. Because this matter is before the Court on a motion to dismiss, the Court must accept as true the allegations of the complaint in question. Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976).

In October 2005, Plaintiffs purchased a home, located at 9715 Hinsdale Street, Santee, California, 92071. (Compl. at ¶ 7.) To finance the purchase, Plaintiffs obtained a loan through Defendant GMAC. On October 21, 2005, the loan was memorialized in an adjustable rate mortgage note and secured by a Deed of Trust ("DOT") recorded against the property. (Id.) Defendant GMAC also provided Plaintiffs with a Truth in Lending Act ("TILA") disclosure stating their adjustable interest rate was set at 7.375% per annum, with a scheduled rate adjustment in November 2007. (Id.) On December 1, 2005, Plaintiffs received a letter informing them Defendant Homecomings would be servicing their loan and directing them to make subsequent payments to Homecomings. Plaintiffs allege the letter stated that the transfer of servicing would not affect the terms of the original mortgage documents. (Id. at ¶ 8.)

In October 2007, Plaintiffs decided to refinance their loan before the scheduled interest rate increase in November 2007. Plaintiffs allege they requested documents from Defendant Homecomings, but Homecomings refused and, instead, demanded $4,200-three months of loan payments and an additional $600-before refinancing the loan.*fn2 (Id. at ¶ 9.) Plaintiffs allege they complied with Defendant Homecomings' request but did not understand the charges. From October 2007 through March 2008, Plaintiffs assert they were "bombarded with unexplained fees and charges," including force-placed insurance, multiple Speedpay fees, property inspection fees, late fees, and foreclosure fees. (Id. at ¶¶ 10, 24.) As a result of these improper charges, Plaintiffs allege that on November 7, 2007, First American, the loan trustee, filed a Notice of Default and Election to Sell Under Deed of Trust without their knowledge and without providing them notice. (Id. at ¶ 10.)

On or about May 19, 2008, Plaintiffs received a notice to vacate, which informed them the house would be sold in a trustee's sale and instructed them to vacate within three days. Plaintiffs allege the notice to vacate was the first document ever notifying them of the default and foreclosure status of their loan. (Id. at ¶ 10.) Accompanying the notice, Plaintiffs received a Cash-for-Keys Settlement Offer from Defendant Homecomings, which indicated they could avoid an eviction judgment by turning over possession of the home to Defendant. Plaintiffs allege they immediately contacted Defendant Homecomings to remedy the situation, and Homecomings requested Plaintiffs pay $300,000 within one week to avoid foreclosure. Plaintiffs assert that despite transferring the requested funds to Homecomings on May 28, 2008, Plaintiffs' home was sold to US Bank National Association in a foreclosure sale, and they were served with an unlawful detainer suit in July 2008. ( ¶¶ 70--71.) Plaintiffs filed the instant Complaint on January 29, 2010, in California state court. Defendants subsequently removed the action to this Court on May 14, 2010 (Doc. No. 1.), and moved to dismiss Plaintiffs' claims on May 21, 2010. (Doc. No. 3.)


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 reviews the contents of the complaint, accepting all factual allegations as true, and drawing all reasonable inferences in favor of the nonmoving party. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). Notwithstanding this deference, the reviewing court need not accept "legal conclusions" as true. Ashcroft v. Iqbal, -- U.S. -- , 129 S.Ct. 1937, 1949 (2009). Moreover, it is improper for a court to assume "the [plaintiff] can prove facts that [he or she] has not alleged."Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). Accordingly, a reviewing court may begin "by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Ashcroft, supra, 129 S.Ct. at 1950.

"When 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." Id. 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." Id. at 1949. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (citing Twombly, 550 U.S. at 557).


I. Liability of GMAC Mortgage

As a preliminary matter, Defendants assert that Plaintiffs fail to attribute any of the wrongful conduct against Defendant GMAC Mortgage. (Defs.' Mot. to Dismiss at 6:24--7:14.) In their Complaint, Plaintiffs assert that they are "informed and believe, and thereon allege, that GMAC has assumed ownership and control of Homecomings and is liable for Homecomings' acts and omissions as a successor in interest." (Compl. at ¶ 4.) Plaintiffs then go on to allege that "Defendant GMAC, as the original lender and contracting party with Plaintiffs, cannot escape liability by simply contracting with Homecomings, or any other companies, for servicing of the loan they originated." (Id.) Plaintiffs' allegations that GMAC has assumed "ownership and control" over Homecomings appear to be based on pure speculation and do not appear to be based on facts. But the Complaint clearly alleges that Homecomings was hired by GMAC to service Plaintiffs' loan for the benefit of GMAC. This is enough to support an agency theory of liability. Because Plaintiffs have alleged enough to infer an agency relationship between GMAC and Homecomings such that GMAC could be held liable for the acts of the servicer, the Court DENIES Defendants' motion to dismiss all claims against GMAC.

II. Federal Claims

In their fourteenth and fifteenth causes of action, Plaintiffs allege Defendants violated federal statutes, the Truth in Lending Act ("TILA") and the Real Estate Settlement Procedures Act ("RESPA"). Plaintiffs' remaining thirteen causes of action are based on state law.

1. Truth in Lending Act ("TILA")

Plaintiffs allege that Defendants violated TILA by failing to accurately disclose improper fees in their variable rate adjustment disclosure notices. Plaintiffs allege that as a result of these improper fees, Defendants' TILA disclosures stated inaccurate loan balances in violation of Regulation Z, 12 C.F.R. § 226. (Compl. at ¶ 175.) Plaintiffs request damages and a declaratory judgment against Defendants to remedy the alleged TILA violations. (Id. at ¶ 176.) Defendants seek to dismiss Plaintiffs' TILA claim as they are factually insufficient and untimely.

A claim for damages under TILA must be brought within one year of "the date of the occurrence of the violation." See 15 U.S.C. § 1640(e). The one-year period commences when the loan documents are signed, provided there is no undisclosed credit term or fraudulent concealment that prevented discovery of the claim. Meyer v. Ameriquest Mortgage Co., 342 F.3d 899, 902 (9th Cir. 2003). Here, Plaintiff closed on the loan on October 21, 2005, but did not file a claim until January 29, 2010-more than four years later. (Compl. at ¶ 7.)

Although the one-year statute of limitations has passed, Plaintiffs contend they are entitled to equitable tolling. The Ninth Circuit has held that in TILA damages cases, "equitable tolling might be appropriate in certain circumstances." King v. State of California, 784 F.2d 910, 914 (9th Cir. 1986). Where applicable, the doctrine of equitable tolling suspends the statute of limitations "until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action." Id. at 915. To invoke equitable tolling, a plaintiff must allege facts to support a finding of delayed discovery or a lack of opportunity to discover. Myvett v. Litton Loan Servicing, 2010 U.S. Dist. LEXIS 18753, at *7 (N.D. Cal. Mar. 3, 2010). "Under Twombly, that factual basis may not be merely speculative, but must be plausible on its face." Distor v. US Bank NA, 2009 U.S. Dist. LEXIS 98361, at *11 (N.D. Cal. Oct. 22, 2009) (internal quotations omitted).

Plaintiffs argue the equitable tolling doctrine is applicable because their "Complaint alleges fraudulent concealment of TILA violations by virtue of the knowingly inaccurate disclosure notices." (Pls. Opp'n at 7:3--4.) Plaintiffs' Complaint, however, fails to assert facts to support allegations of fraudulent concealment or delayed discovery to justify tolling the statute of limitations. Even assuming Plaintiffs' may amend their pleading to allege fraudulent concealment properly, the statute of limitations may be tolled, at best, to May 2008, when Plaintiffs received the eviction notice from Defendant Homecomings. (Compl. at ΒΆ 68.) "Where equitable tolling may be applicable to a federal claim, the 'claim accrues . . . upon awareness of the actual injury, not upon awareness that this injury constitutes a legal wrong.'" Allen v. United Fin. Mortg. Corp., 2010 U.S. Dist. LEXIS 26503, at *4 (N.D. Cal. Mar. 22, 2010) (quoting Lukovsky v. San Francisco, 535 F.3d 1044, 1049 (9th Cir. 2008)). Under the facts alleged in Plaintiffs' Complaint, they would be unable to claim ignorance as to their injury or Defendants' actions after receiving ...

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