This matter came before the court on November 13, 2010, for hearing on: (1) the motion to dismiss or for a more definite statement and to strike filed by defendant American Home Mortgaging Servicing (Doc. No. 31); (2) the motion to dismiss or for a more definite statement filed by defendants Sand Canyon Corporation, formerly known as ("f/k/a") Option One Mortgage Corporation*fn1 , and H&R Block, Inc. (Doc. No. 32); and (3) the motion to dismiss for lack of personal jurisdiction filed by defendant H&R Block, Inc. (Doc. No. 33). Plaintiff Matthew Sarad, proceeding pro se, appeared at the hearing on his own behalf. No appearance was made by plaintiff Nelli Sarad, who is also proceeding pro se. Christina Rovira, Esq. appeared telephonically for defendant American Home Mortgage Servicing, Inc. Bruce T. Bauer, Esq. appeared telephonically for defendants Sand Canyon Corporation, f/k/a Option One Mortgage Corporation, and H&R Block, Inc. Upon consideration of all written materials filed in connection with the motions, the parties' arguments at the hearing, and the entire file, the court concludes that defendants' motions to dismiss must be granted.*fn2
In their single-spaced, fifty-three page complaint (including attached exhibits), plaintiffs allege as follows. Plaintiffs purchased the subject property located at 759 Glen Mady Way in Folsom, California on or about October 27, 2006 for approximately $1,200,000. (Compl. ¶ 3.) They financed the purchase through an adjustable rate "interest only" mortgage loan with defendant Option One Mortgage Corporation secured by a Deed of Trust on the subject property. (Id.) Plaintiffs made a down payment of approximately $242,122 and took out a first mortgage of $754,000 and a second mortgage of $250,000. (Compl. ¶ 51.) In May of 2008, plaintiff Matthew Sarad lost his job. (Id. ¶ 68.) At that time, plaintiffs unsuccessfully sought to refinance the property or obtain a loan modification. (Id. ¶¶ 68, 74.) Plaintiffs have apparently defaulted on the loan, with Notices of Default being recorded against the property on August 1, 2008 and July 13, 2009, reflecting amounts owing as of those dates of $27, 949.94 and $28, 479.62.
Plaintiffs allege that defendants Option One Mortgage Corporation and H&R Block Inc. were national mortgage lenders and that in May of 2008 defendant American Home Mortgage Servicing Inc. acquired Option One Mortgage Corp. from H&R Block Inc.. (Id. ¶ 2.) Plaintiffs complain generally that these defendants engaged on a national level in irresponsible, predatory lending practices which included steering borrowers into costly sub-prime loans with "exploding" adjustable rates.*fn3 Specifically, plaintiffs claim that defendants promised them that they could later refinance their loan to bring down their monthly payment and borrow additional funds using the property as security. (Id. ¶¶ 3, 57.) They also allege that agents of the defendants assured them that both their income and the value of their home would continue "grow." (Id.) Plaintiffs claim that they did not qualify for the loan they were extended but instead entered into the transaction after being offered a "stated income" loan with imaginary income figures provided by the defendants' loan brokers. (Id. ¶ 4.) According to plaintiffs, defendants' agents falsified plaintiffs' loan information and instructed plaintiff Nelli Sarad, who in fact had no income, to manufacture income numbers based on a portion of her husband's income at the time. (Id. ¶ 61.) Defendants also inflated the appraisal of the property to facilitate the making of the loan. (Id. ¶ 66.)
Plaintiffs allege that they informed defendants' agents that they were concerned that they could not afford the property in question, that the offered interest rate was too high and that they could not qualify for the loan. (Id. ¶ 52.) Plaintiffs also informed defendants' agents that it might become important to them that they be able to refinance the property or borrow on its equity in the future. (Id. ¶ 105.) The defendants' agents reassured plaintiffs that they would qualify for a "stated income" loan that would not require verification of income and then inflated the figures provided by plaintiffs in order to make the loan. (Id.) According to plaintiffs, the agents overcame their concerns by assuring them that they could lock in an "interest only" loan for five years which could later be restructured if their income was disrupted or the monthly payments on the mortgage became overwhelming. (Id. ¶ 57.) Plaintiffs claim that defendants' agents charged outrageous and illegal fees in connection with the loan and required them to purchase unnecessary insurance, including pool, spa, well and well pump insurance even though the home had none of these features. (Id. ¶¶ 64-65.)
When plaintiff Matthew Sarad lost his job in May of 2008, plaintiffs' income was greatly reduced. (Id. ¶ 68.) Plaintiffs attempted to take out an equity loan from defendant Option One Mortgage, based upon the approximately $300,000 they had invested in the property by that time, without success. (Id.) In November of 2008 plaintiffs sought a loan modification from defendants H&R Block and American Home Mortgaging Servicing, also without success. (Id. ¶ 74.) In fact, plaintiffs claim that they were "forced under duress" by defendants to sign predatory forbearance and loan modification agreements to avoid accelerated foreclosure proceedings. (Id. ¶ 75.) As a result of defendants' action plaintiffs were required to move out of their home, had their credit ruined and suffered emotional distress. (Id. ¶¶ 106-08.)
Based on these allegations, plaintiffs purport to state sixteen separate causes of action, most alleging violations of California law. Those causes of action are as follows: (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) violation of California Civil Code §§ 1920, 1921; (4) violation of California Civil Code §2823.6; (5) violation of the Unfair Competition Act, California Business & Professions Code § 17200, et seq.; (6) violation of the False Advertising Act, California Business & Professions Code § 17500, et seq.; (7) Constructive Fraud in violation of California Civil Code § 1573; (8) Intentional Misrepresentation in violation of California Civil Code §§ 1709, 1710; (9) Concealment in violation of California Civil Code §§ 1709, 1710; (10) Negligent Misrepresentation in violation of California Civil Code §§ 1709, 1710; (11) Fraud on the Public in violation of California Civil Code § 1711; (12) Rescission pursuant to California Civil Code § 1689; (13) Breach of Fiduciary Duty; (14) Negligence; (15) Breach of the Implied Covenant of Good Faith and Fair Dealing; and (16) Intentional Infliction of Emotional Distress.
In terms of relief, plaintiffs seek declaratory and injunctive relief, rescission of the loan in question, surrender of the deed to the property to them, statutory, compensatory and punitive damages and costs of suit.
Defendants Sand Canyon, f/k/a Option One Mortgage Corporation and H&R Block, Inc. and defendant American Home Mortgage Servicing, Inc. seek dismissal of plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on the grounds that plaintiffs have failed to state any cognizable claim. (Doc. Nos. 31, 32) In this regard, defendants argue that plaintiffs' first claim for violation of TILA is time-barred. In addition, defendants asserts that plaintiffs' TILA claim is not cognizable because residential mortgage transactions such as that at issue here are exempt under TILA and, in any event, plaintiffs have failed to tender. Defendants also contend that plaintiffs' second claim for violation of RESPA is also untimely.*fn4
Finally, defendants argue that none of plaintiffs various state law claims are cognizable. Defendant H&R Block, Inc. also has moved separately for dismissal pursuant to Fed. R. Civ. P. 12 (b)(2) due to lack of personal jurisdiction. (Doc. No. 33.)
Plaintiffs oppose dismissal of their complaint. In their 115-page (including exhibits) opposition brief, they argue that their TILA claim is timely because it was filed within three-years of the purchase of their home. They also contend that the statute of limitations under TILA is subject to equitable tolling where the violations are concealed by the defendants' misrepresentations and are not apparent on their face. Plaintiffs assert that they filed this action within one year of learning that they could not refinance. Plaintiffs argue that they can satisfy any tender requirement through a third party willing to advance them money on their likely recovery against defendants in this action. They contend that TILA does now apply to mortgage loan transactions. With respect to their RESPA claim, plaintiffs argue that it is not barred by the statute of limitations because they did not learn of any RESPA violations until November of 2008 and this action was filed within one year thereafter. Finally, plaintiffs oppose defendant H&R Block's motion to dismiss for lack of personal jurisdiction essentially on the grounds that defendant Option One Mortgage Corp. and H&R Block, Inc. are one in the same.
LEGAL STANDARDS APPLICABLE TO DEFENDANTS' MOTIONS
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the complaint. N. Star Int'l v. Ariz. Corp. Comm'n, 720 F.2d 578, 581 (9th Cir. 1983). "Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege "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). Thus, a ...