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Frison v. WMC Mortgage Corp.

September 29, 2010


The opinion of the court was delivered by: Honorable Larryalanburns United States District Judge


This case concerns a threatened foreclosure on real property. Plaintiff seeks rescission of the deed of trust, an order forbidding foreclosure on the property, damages, costs, and attorney's fees. The complaint identifies claims under the Real Estate Settlement Practices Act (RESPA), 12 U.S.C. §§ 2605 et seq., and the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq., as well as various state claims for violation of Cal. Bus. & Prof. Code § 17200, fraud, and negligent misrepresentation.*fn1 Besides unknown or "Doe" Defendants, the only two Defendants are WMC Mortgage Corporation and Saxon Mortgage Service, Inc.

On the same day the complaint was filed, Plaintiff filed a notice of lis pendens. Defendants then each filed motions to dismiss or for a more definite statement, and Defendant Saxon filed a motion to expunge the notice of lis pendens. Although the complaint originally contained a paragraph purporting to be a qualified written request (QWR) under RESPA, the Court ordered it stricken.

I. The Complaint

Plaintiff took out a refinancing loan on or about October 12, 2004, secured by real property in San Diego County. She alleges that all Defendants, along with an unidentified broker, made misrepresentations during the loan process, caused her to enter into a loan with different terms than she thought she was getting, and failed to provide her with required disclosures. The alleged misrepresentations concern the loan's interest rate, the amount of payments, the amount of equity in the property, and the available loan proceeds. Plaintiff alleges that, as a result, the loan became unaffordable. She argues the effect of all this was to put her into a loan without her "informed consent." She says she told WMC and Saxon she wanted to rescind the loan (Complaint, ¶ 25), but doesn't allege when she did this. She apparently clarifies her allegations about Defendants' roles later, when she says WMC was the original lender, and Saxon acquired the loan (or some unknown rights to the loan) from WMC later, but that Saxon is still liable for misrepresentations. (¶¶ 30--32.)

Plaintiff also made broad allegations of predatory lending practices. (¶ 23.) She apparently mentions these as a way of showing purpose or knowledge, since most of them apparently didn't affect her. She alleges the forms she was provided with are too complicated to understand. (¶ 27.) She also believes Defendants owed fiduciary duties to her. (¶ 29.)

As a result of the alleged misrepresentations and non-disclosures, Plaintiff believes no one owns the loan, and no one has the right to foreclose. (Complaint, ¶ 26.) She also alleges she has suffered financial harm, emotional distress, and medical expenses. (¶ 32.)

A. RESPA Claims

As part of the RESPA claim section, the complaint alleges Defendants failed to respond to certain unspecified qualified written requests, and imposed a late fee without giving notice of loan transfer. This section also alleges generalized wrongdoing.

B. TILA Claims

This section begins with a tacit acknowledgment that the limitations period has run, but argues that because "[a]ll Defendants . . . fraudulently concealed facts upon which the existence of Plaintiff['s] claims is based," she is entitled to equitable tolling.

The only actual TILA claims are set forth in paragraph 46, and allege the interest rate was deceptively presented, the APR was not correctly calculated, and the required payments were not fully disclosed. In Plaintiff's opinion, this "rendered the credit transaction null and void [and] invalidates Defendants' claimed interest" in the property. (¶ 47.)

C. Section 17200 Claim

This claim is generally based on allegations already made. This section of the complaint alleges generally unfair lending, charging unlawful commissions and fees, and deceit.

D. Negligent Misrepresentation Claims

This claim is pleaded in three parts, or "counts," against different Defendants. It reiterates earlier allegations of misrepresentations, and also alleges Saxon misrepresented that it had the right to foreclose on the loan. Plaintiff alleges monetary loss, medical expenses, and emotional distress.

E. Fraud

This claim is also pleaded in three "counts," against different Defendants (including an unnamed broker). Each count alleges misrepresentations generally, and argues Plaintiff suffered harm because she relied on these. The allegations refer to "promises and representations" (¶ 72) referring, apparently, to representations alleged earlier in the complaint. The only additional allegations of false promises or representations are an allegation that the loan yield was insufficient to pay off some of Plaintiff's debts (¶ 71), of "secret intentions not to perform," (¶¶ 72, 74), and of Saxon's misrepresentation that it had the right to foreclose. (¶ 81.) Plaintiff alleged she relied on Defendants' representations to her, and as a result she suffered monetary harm, medical expenses, and emotional distress. This section also contains allegations that Defendants were reputable, and thus Plaintiff was justified in relying on what they told her. (¶ 89.)

II. Motion to Expunge Notice of Lis Pendens

Although a notice of lis pendens is a creature of California state law, under 15 U.S.C. § 1964 state law lis pendens provisions apply in federal court. Ramirez v. SCME Mortg. Bankers, Inc., 2010 WL 2839476, at *5 (S.D.Cal., July 19, 2010). Defendant Saxon asks the Court, pursuant to Cal. Civ. Proc. Code §§ 405.31, 405.32, and 405.34, to expunge the notice Plaintiff recorded on August 11, 2009. The motion is supported by a request for judicial notice of certain loan-related documents.

Under California law, a notice of lis pendens should be expunged if a plaintiff cannot establish his complaint contains a real property claim. Kirkeby v. Superior Court, 33 Cal.4th 642, 647 (2004). "Unlike most other motions, . . . the burden is on the party opposing the motion [to expunge] to show the existence of a real property claim. Id. (citing Cal. Civ. Proc. Code § 405.30). In his opposition to the motion, Plaintiff argues she can establish this.

At the pleading stage, the Court undertakes a limited demurrer-like analysis focusing on whether a viable property claim has been pleaded. Id. at 647--48. For this purpose, a real property claim is a cause of action "which would, if meritorious, affect . . . title to, or the right to possession of, specific real property . . . ." Cal. Civ. Proc. Code § 405.4. The effect is that the party recording the notice must make a showing that he is likely to prevail on the merits. Amalgamated Bank v. Superior Court, 149 Cal. App. 4th 1003, 1011 (Cal. App. 3 Dist. 2007).

Neither the complaint nor Plaintiff's opposition to the motion to expunge differentiate between property claims for lis pendens purposes, and other claims. Here, the only possible property claims are those that seek rescission, seek to prevent the foreclosure sale, seek to quiet title, or otherwise challenge the validity of Defendants' security interest in the property. Plaintiff's claims for monetary damages are not property claims within the meaning of these statutes. The Court rejects Plaintiff's unsupported suggestions that any irregularity in the loan process would entitle her to prevail in a quiet title action.

Saxon requests $2,350 in attorney's fees, which Cal. Civ. Proc. Code § 405.38 says should be awarded unless the Court finds Plaintiff acted with substantial justification or that the imposition of fees and costs would be unjust.

A. Statute of Limitations

The loan agreement was entered into on or around October 12, 2004, and Plaintiff didn't file this action until August 10, 2009, nearly five years later. Saxon therefore argues that both the TILA and RESPA claims are time-barred. Under 28 U.S.C. § 1635(f), rescission as a remedy under TILA becomes unavailable three years after consummation of the loan, when the consumer transfers all her interest in the property, or when the property is sold, whichever occurs first. Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 900 (9th Cir. 2003) (citing 12 C.F.R. § 226.23(a)(3)). Equitable tolling is inapplicable; § 1635(f) completely extinguishes the right of rescission at the end of the 3-year period. McCann v. Quality Loan Serv. Corp., ___ F. Supp. 2d ____, 2010 WL 3118313, at *4 (W.D. Wash., July 21, 2010) (citing Beach v. Ocwen Fed'l Bank, 523 U.S. 410, 412 (1998)).

In her opposition, Plaintiff hasn't attempted to explain why her TILA claim isn't time-barred. She did request expedited discovery and briefing but didn't explain how either would help her show her claims weren't time-barred.

Saxon argues RESPA is subject to two statutes of limitations, as provided under 12 U.S.C. § 2614:*fn2 a one-year limitations period for violation of §§ 2607 and 2608, and a three-year limitations period for violations of § 2605. But these are beside the point here. Plaintiff has raised a RESPA claim only under § 2605, and rescission is unavailable under this section. Permpoon v. Wells Fargo Bank N.A., 2009 WL 3214321, at *11 (S.D.Cal., Sept. 29, ...

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