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Hughes v. Equity Plus Financial

November 15, 2010

LILLIAN HUGHES, PLAINTIFF,
v.
EQUITY PLUS FINANCIAL, ET AL., DEFENDANT.



The opinion of the court was delivered by: Honorable Barry Ted Moskowitz United States District Judge

ORDER GRANTING WACHOVIA'S MOTION TO DISMISS; QUASHING SERVICE ON EQUITY PLUS FINANCIAL; DENYING AS MOOT MOTION TO DISMISS EQUITY PLUS FINANCIAL'S

Defendant Wachovia Mortgage ("Wachovia") (a Division of Wells Fargo Bank, N.A., formerly known as Wachovia Mortgage, FSB, formerly known as World Savings Bank, FSB and named herein as "Golden West Financial, FSB, d/b/a World Savings Bank, FSB, Wachovia, FSB, Wells Fargo, N.A.") has filed a motion to dismiss the Second Amended Complaint for failure to state a claim. Defendant Equity Plus Financial has also filed a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(4), (b)(5), and (b)(6). For the reasons discussed below, Wachovia's motion to dismiss is GRANTED, service of the summons and complaint on Equity Plus Financial is QUASHED, and Equity Plus Financial's motion to dismiss is DENIED AS MOOT.

I. FACTUAL BACKGROUND

On or about November 16, 2006, Plaintiff obtained a loan in the amount of $540,000 from World Savings Bank, FSB (which changed its name in December, 2007, to Wachovia Mortgage, FSB (Wachovia's RJN, Ex. 2)). The purpose of the loan was to refinance Plaintiff's home located at 993 Via Sinuoso, Chula Vista, CA 91910 (the "Property"). The note was secured by a deed of trust on the Property.

Plaintiff claims that she was emotionally distraught during the loan application process and that Defendants, through fraud and concealment, tricked her into entering into a loan she could not actually afford. Plaintiff alleges that defendant Equity Plus Financial ("Equity"), Plaintiff's mortgage broker, inflated her income on the loan application without her knowledge. (SAC ¶ 10.) According to Plaintiff, although her average monthly income for 2005 was $2,008.17, Equity stated that her monthly income was $11,000.00. (SAC ¶ 16.) Equity and World Savings Bank did not ask for proof of Plaintiff's stated income because it would be evidence that Plaintiff was not qualified for the loan. (SAC ¶ 10.) Plaintiff alleges that Equity did not explain the loan's features to her before she agreed to the loan, and that Defendants failed to include accurate initial disclosures and final disclosures. (SAC ¶¶ 11-12.) Plaintiff entered into the loan based on the false representations that she qualified for the loan and Defendants' concealment of the truth. (SAC ¶ 14.)

Additionally, Plaintiff alleges that World Savings Bank paid Equity an undisclosed yield-spread premium ("YSP") in the amount of $5,400 as an incentive to place Plaintiff in a non-conventional "Fixed Rate Pick-A-Payment" loan instead of a conventional but less profitable loan. (SAC ¶ 15.) Under the terms of the note (Wachovia's RJN Ex. 5), interest was to be paid at the yearly rate of 7.7%. The initial monthly payments were in the amount of $2,064.13. The monthly payment was scheduled to change on January 1, 2008, and every twelve months thereafter, until the 121st month, which would be the final payment change.

On or about August 5, 2009, Plaintiff sent a letter of rescission to Wachovia. (SAC ¶ 29.)

Plaintiff's SAC asserts the following claims: (1) intentional misrepresentation (against Equity only); (2) fraudulent concealment (against Equity only); (3) breach of fiduciary duty (against Equity only); (4) constructive fraud (against Equity only); (5) violation of RESPA, 12 U.S.C. § 2607; (6) quiet title; and (7) violation of Cal. Civ. Code § 2923.5 (against Wachovia only).

II. DISCUSSION

A. Wachovia

Wachovia moves to dismiss Plaintiff's claims against it for failure to state a claim. The Court agrees that Plaintiff has failed to state a claim against Wachovia.

Plaintiff's fifth cause of action alleges that the YSP was an unlawful kickback in violation of RESPA, 12 U.S.C. § 2607. In an order filed on July 19, 2010, the Court dismissed Plaintiff's claim under 12 U.S.C. § 2607 on the ground that the claim appeared to be barred by RESPA's one-year statute of limitations. 12 U.S.C. § 2614. Plaintiff's SAC adds some allegations regarding misleading statements by Equity. However, these allegations are not sufficient to show that Plaintiff is entitled to equitable tolling of the limitations period.

According to the SAC, at the time of the transaction, Plaintiff expressed her concern to her mortgage broker regarding the amount of the monthly payment. (SAC ¶ 8.) The agent for the mortgage broker reassured Plaintiff that she would be fine because she had been placed into a three payment option plan, and she could choose the lowest payment option. When Plaintiff saw her first monthly payment amount, Plaintiff asked the agent why the amount was so high, and he reiterated his explanation regarding her ability to choose between three different monthly amounts. (SAC ¶ 17.) Plaintiff did not understand his explanation and was unable to get in touch with him from that time forward. (SAC ¶ ...


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