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Sunil Wadhwa and Lynn Lori Wadhwa v. Aurora Loan Services

February 9, 2011



Plaintiffs Sunil Wadhwa and Lynn Lori Wadhwa brought this action against defendants Aurora Loan Services, LLC, a subsidiary of Aurora Bank, FSB ("Aurora"), Greenpoint Mortgage Funding, Inc., Mortgage Electronic Registration Systems, Inc. ("MERS"), and Marin Conveyancing Corporation, arising out of defendants' allegedly wrongful conduct relating to a loan transaction and subsequent foreclosure on plaintiffs' home. Presently before the court is Aurora and MERS' motion to dismiss plaintiffs' Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Plaintiffs have filed no opposition to the motion.

I. Factual and Procedural Background On or about November 28, 2006, plaintiffs obtained a $734,900 loan from Greenpoint Mortgage Funding, Inc., secured by their property located at 3055 Orbetello Way in El Dorado Hills, California. (Compl. ¶ 19, Ex. B (Docket No. 2).) Plaintiffs defaulted on the loan, and a Notice of Default was recorded in El Dorado County on October 15, 2009. (Id. ¶ 22, Ex. C.) A Notice of Trustee's Sale was recorded on January 21, 2010. (Id. ¶ 24, Ex. E.) The property was sold to Aurora at a trustee's sale on October 18, 2010. (Id. ¶ 25, Ex. F.)

On December 17, 2010, plaintiffs filed their Complaint in this action, alleging claims under the Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C. § 1639, Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, and Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681-1681x, as well as claims for fraudulent misrepresentation, breach of fiduciary duties, unjust enrichment, civil conspiracy, civil violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, quiet title, usury and fraud, and wrongful foreclosure.

II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, --- U.S. ----, ----, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Iqbal, 129 S. Ct. at 1949 (quoting Twombly, 550 U.S. at 556-57) (internal quotation mark omitted).

A. TILA, HOEPA, and RESPA Claims: Statutes of Limitations Plaintiffs bring several claims relating to the origination of their loan, including violations of TILA, HOEPA, and RESPA.

The statute of limitations for a TILA damages claim is one year from the occurrence of a violation. 15 U.S.C. § 1640(e). The "limitations period in [s]section 1640(e) runs from the date of consummation of the transaction . . . ." King v. State of Cal., 784 F.2d 910, 915 (9th Cir. 1986). Here, the alleged failure to provide plaintiffs with adequate TILA disclosures occurred at the signing of the loan in November of 2006, and plaintiffs filed the Complaint in December of 2010.

"[T]he doctrine of equitable tolling may, in the appropriate circumstances, suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action." Id. While the applicability of the equitable tolling doctrine often depends on matters outside the pleadings, Supermail Cargo, Inc. v. United States, 68 F.3d 1204, 1206 (9th Cir. 1995), dismissal may be appropriate when a plaintiff fails to allege facts suggesting that he did not have a reasonable opportunity to discover the violation. See Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 902-03 (9th Cir. 2003); Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 79 (9th Cir. 1996). Here, plaintiffs have alleged no facts to suggest that they did not have a reasonable opportunity to discover the alleged TILA violations.

Because over one year has run, plaintiffs' TILA claim for damages must be dismissed as to Aurora and MERS. HOEPA, which is an amendment to TILA, is also subject to the one-year statute of limitations, 15 U.S.C. § 1640(e), and that claim must be dismissed as well. See Hamilton v. Bank of Blue Valley, ---F. Supp. 2d ----, ----, 2010 WL 4222724, at *15 (E.D. Cal. 2010) ("HOEPA is an amendment of TILA, and therefore is governed by the same remedial scheme and statutes of limitations as TILA.") (internal quotation marks omitted).

A borrower's right to rescind a transaction under TILA expires three years after the closing date. 15 U.S.C. § 1635(f). "[Section] 1635(f) completely extinguishes the right of rescission at the end of the 3-year period," which cannot be tolled. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998); see also Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir. 2002) ("[S]section 1635(f) represents an 'absolute limitation on rescission actions' which bars any claims filed more than three years after the consummation of the transaction." (quoting King, 784 F.2d at 913)). Since more than three years have passed since the closing date, plaintiffs' claim for rescission under TILA must be dismissed as to Aurora and MERS.

As to plaintiffs' RESPA claim, depending on which specific provision of the statute is asserted, a RESPA claim must be made within one to three years after consummation of the loan.

12 U.S.C. § 2614. "The RESPA statute of limitations generally begins to run no later than the date of actual disclosure of actions constituting an alleged violation. Typically, in cases involving loan documents, the statute begins to run when the documents are signed unless evidence is presented to override this assumption." Metcalf v. Drexel Lending Grp., No. 08-CV-00731, 2008 WL 4748134, at *3 (S.D. Cal. Oct. 29, 2008). More than four years have passed since the signing of the loan documents, and plaintiffs have not alleged any facts to support tolling. Thus, plaintiffs' RESPA cause of action is time-barred and the court will dismiss the claim as to Aurora and MERS.

B. FCRA Claim

Plaintiffs allege that defendants violated the FCRA by wrongfully reporting negative information about plaintiffs to one or more credit reporting agencies. (Compl. ΒΆ 92.) Section 1681s-2(a) imposes duties on furnishers of information to credit reporting agencies to ensure that the information ...

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