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Christian Pedersen and Sonika Tinker v. Greenpoint Mortgate Funding

August 26, 2011



On June 8, 2011, the court heard argument on plaintiffs' motion for a preliminary injunction and defendants' motion to dismiss. Holly S. Burgess appeared for plaintiffs, who were present in court; Matthew Learned of McCarthy & Holthus, LLP, appeared telephonically for defendants Aurora Loan Services LLC (Aurora) and Mortgage Electronic Registration Services, Inc. (MERS).

I. Background

On March 8, 2011, plaintiffs filed an action against Aurora and MERS, as well as Greenpoint Mortgage Funding, Inc., Marin Conveyancing Corp., Quality Loan Service Corp., LSI Title Company, Greenpoint Mortgage Funding Trust Mortgage Pass-Through Certificates, Series 2007-ARI, and twenty Doe defendants, alleging violations of the Homeowners Equity Protection Act (HOEPA), 15 U.S.C. § 1639, et seq.; the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601, et seq.; the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq. and Regulation Z § 226.4; fraudulent misrepresentation; breach of fiduciary duty; unjust enrichment; civil conspiracy; RICO; quiet title; usury and fraud; wrongful foreclosure; and breach of trust instruments.

On April 7, 2011, plaintiffs filed a motion for a temporary restraining order, alleging that a trustee's sale of their house was scheduled for April 11, 2011, but that defendants did not have the legal authority to foreclose on plaintiffs' property. ECF No. 9. Although plaintiffs gave defendants notice of their application for a restraining order, defendants did not respond. ECF No. 14. The court denied the application on April 8, 2011.

Defendants Aurora and MERS filed a motion to dismiss and to expunge a lis pendens on April 15, 2011, in tandem with a request for judicial notice. ECF Nos. 16 & 17. Plaintiffs have asked the court to take judicial notice of additional materials in connection with their opposition to the motion to dismiss. ECF Nos. 25-26, 29.

On April 20, 2011, plaintiffs filed a motion for a preliminary injunction and asked the court to take judicial notice of still more documents. ECF Nos. 20-22. Defendants have submitted even more materials as part of their opposition to the request for injunctive relief. ECF No. 27.

On April 20, 2011, defendants Quality Loan Service Corporation and LSI Title Company filed Declarations of Non-Monetary Status under Cal. Civil Code § 2924l. ECF No. 18. On May 18, 2011, plaintiffs filed objections to these declarations. ECF No. 34.

II. Standards For A Motion To Dismiss

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to dismiss a complaint for "failure to state a claim upon which relief can be granted." A court may dismiss "based on the lack of cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Department, 901 F.2d 696, 699 (9th Cir. 1990). A motion to dismiss under this rule may also challenge the sufficiency of fraud allegations under the more particularlized standard of Rule 9(b) of the Federal Rules of Civil Procedure. Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003).

Although a complaint need contain only "a short and plain statement of the claim showing that the pleader is entitled to relief," (Fed. R. Civ. P. 8(a)(2)), in order to survive a motion to dismiss this short and plain statement "must contain sufficient factual matter . . . 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 Atlantic Corporation v. Twombly, 550 U.S. 544, 570 (2007)). A complaint must include something more than "an unadorned, the-defendant-unlawfully-harmed-me accusation" or "'labels and conclusions'" or "'a formulaic recitation of the elements of a cause of action.'" Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555). Determining whether a complaint will survive a motion to dismiss for failure to state a claim is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 129 S.Ct. at 1950. Ultimately, the inquiry focuses on the interplay between the factual allegations of the complaint and the dispositive issues of law in the action. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

In making this context-specific evaluation, this court must construe the complaint in the light most favorable to the plaintiff and accept as true the factual allegations of the complaint. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). This rule does not apply to "'a legal conclusion couched as a factual allegation,'" Papasan v. Allain, 478 U.S. 265, 286 (1986) (quoted in Twombly, 550 U.S. at 555), nor to "allegations that contradict matters properly subject to judicial notice" or to material attached to or incorporated by reference into the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). A court's consideration of documents attached to a complaint or incorporated by reference or matter subject to judicial notice will not convert a motion to dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003); Parks School of Business v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995); compare Van Buskirk v. CNN, 284 F.3d 977, 980 (9th Cir. 2002) (noting that even though court may look beyond pleadings on motion to dismiss, generally court is limited to face of the complaint on 12(b)(6) motion).

III. Requests For Judicial Notice

Defendants ask the court to take judicial notice of a number of documents recorded in Placer County, all relating to the acquisition of and foreclosure on 1977 Green Meadow Lane, Meadow Vista, California. Defendants' Request For Judicial Notice (DRFJN), ECF No. 17, Exs. A-E. Under Rule 201 of the Federal Rules of Evidence, a court may take judicial notice of adjudicative facts "not subject to reasonable dispute" because they are "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Plaintiff does not object to the court's consideration of these documents, most of which are attached to the complaint. These are properly before the court. Champlaie v. BAC Home Loans Servicing, LP, 706 F.Supp.2d 1029, 1040 (E.D. Cal. 2009); Lee v. County of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (court may take judicial notice of matters of public record).

Plaintiffs have asked the court to take judicial notice of several types of information. The first is a decision in a bankruptcy court matter, which they believe supports their position. See In re Salazar, 448 B.R. 814 (Bankr. S.D. Cal. 2011). Second, they have proffered a Consent Order, Stipulation and Consent to Issuance of Consent Order, Amended Order to Cease and Desist, all stemming from proceedings in the federal Office of Thrift Supervision, In the Matter Of Aurora Bank FSB, NE-11-16 and NE-10-33, and a Consent Order and Stipulation and Consent To The Issuance of a Consent Order issued by the Office of Thrift Supervision in In the Matter of MERSCORP, Inc., AA-EC-11-20. Third, they have presented the declaration of Daniel Edstrom, concerning his search for the Trust Agreement, the Prospectus Supplement, the monthly certificateholders' statement and the monthly loan level files related to the Greenpoint Mortgage Funding Trust Mortgage Pass-Through Certificates, Series 2007-AR1. Edstrom avers that he has traced plaintiffs' loan, number 0124382367, and has provided the loan level file from March 25, 2011, which he pasted into a spreadsheet and which, he avers, demonstrates that "the payments on Plaintiffs' loan are being made." ECF No. 29, Declaration of Daniel Edstrom, ¶¶ 12, 15 & Ex. 3.

The court declines to take judicial notice of In re Salazar, supra, as the decision itself is not an adjudicative fact. See FED. R. EV. 201, comment ("'adjudicative facts are those to which the law is applied in the process of adjudication. They are the facts that normally go to the jury in a jury case. They relate to the parties, their activities, their properties, their businesses'"). Nevertheless, to the extent the decision has any bearing on the pending motions, the court will consider it in resolving those motions.

The court will take judicial notice of the various orders and stipulations relating to OTS's orders and decrees involving Aurora Bank and MERS, as these are federal government documents, readily available on the Office of Thrift Supervision's website. See Serrano v. World Savings Bank, 2011 WL 1668631, at *2 (N.D. Cal. May 3, 2011) (government documents not subject to reasonable dispute and so judicially noticeable).

Finally, the court declines to take judicial notice of Daniel Edstrom's declaration and its attached exhibits. While the Greenpoint Mortgage trust document and prospectus may be publicly available on the SEC's website, the court does not find them relevant to the issues posed by the pending motions. Exhibit 3, which Edstrom describes as a manipulated record of the activity in plaintiffs' loan, is not subject to judicial notice: there is nothing else in the record connecting the loan number Edstrom searched to plaintiffs and nothing clearly demonstrating that payments are being made on plaintiffs' loan, as he claims. This information is not subject to accurate and ready determination in light of the record before the court.

IV. The Complaint

As noted, the complaint alleges violations of the Homeowners Equity Protection Act (HOEPA), 15 U.S.C. § 1639 et seq.; the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601, et seq.; the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq. and Regulation Z § 226.4; fraudulent misrepresentation; breach of fiduciary duty; unjust enrichment; civil conspiracy; RICO; quiet title; usury and fraud; wrongful foreclosure; and breach of trust instruments. Many of the allegations in the complaint listed under "Facts Common To All Causes Of Action" are not specific to this action, but are a screed against the mortgage industry and the securitization of mortgages generally.*fn1 Complaint (Compl.) ¶¶ 16-32.

With respect to their case in particular, plaintiffs do allege that on April 17, 2007, Tinker executed a Deed of Trust and security instrument with Greenpoint Mortgage as the lender and Marin Conveyancing as the Trustee. Id. ¶ 38. They identify Greenpoint Mortgage Funding, Inc. as a New York Corporation in the business of banking services; defendant MERS as a business that operates a database and assigned mortgages in violation of California Corporations Code § 191(d); and defendant Aurora as a business engaged in banking services and the servicing of residential mortgages.

Plaintiffs also allege that "the chain of title is hopelessly confused and convoluted" and it reveals "a slew of other illegal actions." Id. ¶ 40. After discussing the alleged problems in the chain of title and the Notice of Default, plaintiffs assert that Tinker called an unidentified "lender/service" to request a loan modification or other means to avoid foreclosure, but that the lender/servicer refused to work with plaintiffs or to disclose any options available to avoid foreclosure. Id. ¶¶ 41-44, 45-46, 48. Instead, while refusing or neglecting to give plaintiffs "the opportunity to cooperate in resolving the debt," the defendants "purposefully deceived plaintiffs that the Mortgage modification was proceeding as planned and deceptively and purposefully wrongfully foreclosed on Plaintiffs' property." Id. ¶¶ 51, 52.

Finally, plaintiffs aver that "[b]ecause it is not clear who was actually in interest at the time of the actions described below, Plaintiffs allege this Cause of Action in the alternative against each of the possible parties at fault." Id. ¶ 65. In connection with their HOEPA cause of action, but realleged in each subsequent cause of action by reference to the preceding paragraphs, plaintiffs ask rescission of the mortgage loan transaction, termination of the mortgage and security interest in the property, return of any money or property paid by plaintiffs; an amount equal to twice the finance charges; relinquishment of the right to retain any proceeds and actual damages. Id. ¶ 64. In their prayer for relief, plaintiffs ask for an order compelling the defendants to transfer legal title in the subject property to plaintiffs, a declaration that defendants have no right or interest in the property, an order enjoining defendants from claiming any interest in the property; and a declaration that the foreclosure is void, among other things. Id. at 28-29.

Plaintiffs' separate causes of action are set forth and analyzed in light of the pending motion, below.

V. The Motion To Dismiss


Plaintiffs allege that defendants' disclosure of the finance charges was improper and that they failed to provide the required notice of the right to rescind the transaction, in violation of 15 U.S.C. § 1601, et seq., and failed to provide accurate TILA disclosures about the amount being financed. Compl. ¶¶ 61, 71-73. They also claim that defendants failed to make the disclosure required under HOEPA, 15 U.S.C. § 1639(A)(1); offered credit to plaintiff Tinker without regard to her ability to pay; and failed to notify her of the right to rescind the transaction. Compl. ¶¶ 56-60. In addition, they aver that the fact that the loan was "actually the proceeds from the sale of securities, and not a loan as it is defined under the laws of California, was a 'material disclosure' which was deliberately and intentionally undisclosed." Id. ¶ 32. They assert that they "first learned" of defendants' actions in September 2010, which should be the trigger date for the statute of limitations. Compl. ¶¶ 67, 77.

Defendants argue that plaintiffs' claims are too vague to satisfy the pleading requirements of Federal Rule of Civil Procedure 8(a)(2) and that the claims are time-barred. Motion To Dismiss (MTD), ECF No. 16-1, at 9-11.*fn2 Plaintiffs counter that they are entitled to equitable tolling and argue, without citation to authority, that when the ground for rescission is fraud or mistake, the statute does not begin to run until the aggrieved party discovers the facts constituting the fraud. Opposition (Opp'n), ECF No. 25 at 12-13.

Under the Truth in Lending Act, 15 U.S.C. §§ 1601, et seq., and its implementing regulations, 12 C.F.R. § 226.1, et seq., a lender must make certain disclosures to a borrower before the consummation of a loan, including the finance charges, the annual percentage rate, and the right to rescind the transaction. 15 U.S.C. § 1638(a) & (b); 12 C.F.R. §§ 226.17(b), 226.23(b); see Yamamoto v. Bank of New York, 329 F.3d 1167, 1169 (9th Cir. 2003). TILA provides causes of action for rescission and damages if the lender does not make the required disclosures.

HOEPA is an amendment to TILA, designed to "combat predatory lending," which applies only to certain high cost loans. In re First Alliance Mortgage Co., 471 F.3d 977, 984 n.1 (9th Cir. 2006); Hamilton v. Bank of Blue Valley, 746 F.Supp.2d 1160, 1179 (E.D. Cal. 2010) (HOEPA is amendment to TILA); 15 U.S.C. §§ 1602(aa) & 1639. To plead a HOEPA violation, a plaintiff must allege facts that the loan is one covered by the statutes. Yulaeva v. Greenpoint Mortgage Funding, Inc., 2010 WL 5394859, at *4 (E.D. Cal. Dec. 21, 2010). Plaintiffs' allegations fall short of this standard.

Both TILA and HOEPA allow for rescission of certain loans and for damages, so long as the borrower acts within specified time periods. Under 15 U.S.C. § 1635(f), if the lender fails to provide notice of rescission rights, the usual three day period is extended to three years from the date of the consummation of the transaction. Under 15 U.S.C. § 1640(e), if the borrower seeks damages from TILA and HOEPA violations, he must file his action within one year of the transaction. Miguel v. Country Funding Corp., 309 F.3d 1161, 1163 (9th Cir. 2002) (rescission); Edstrom v. Ndex West, LLC, 2010 WL 4069482, at *3 (E.D. Cal. Oct. 18, 2010) (damages).

The Ninth Circuit has observed that "the failure to make the required disclosures occurred, if at all, at the time the loan documents were signed." Meyer v. Ameriquest Mortgage, 342 F.3d 899, 902 (9th Cir. 2003); see also King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986). In this case, the loan documents were signed in April 2007, rendering the TILA and HOEPA actions untimely. Compl. ¶ 38.

Plaintiffs argue they are entitled to equitable tolling, based on their threadbare allegation that they did not learn of the violations, because of defendants' fraud, until September 2010. ECF No. 25 at 12-13; Compl. ¶¶ 67, 77. They fail to acknowledge, however, that § 1635(f) is a statute of repose, not a statute of limitations, and as such is not subject to equitable tolling. Beach v. Ocwen Federal Bank, 523 U.S. 410, 412 (1998) ("we . . . hold that § 1635(f) completely extinguishes the right of rescission at the end of the 3-year period"); Lane v. Vitek Real Estate Industries Group, 713 F.Supp.2d 1092, 1099 (E.D. Cal. 2010). Even assuming that plaintiffs' mortgage was subject to rescission, this action comes too late. See Champlaie v. BAC Home Loans Servicing, LP, 706 F.Supp.2d 1029, 1042 (E.D. Cal. 2009).

Plaintiffs may be entitled to equitable tolling for their TILA damages claim, but their complaint as pled is too conclusory to support the assertion. "To establish excusable delay, plaintiffs must show 'fraudulent conduct by the defendant[s] resulting in their concealment of the operative facts, [their] failure . . . to discover the operative facts that are the basis of [their] cause of action within the limitations period, and [their] due diligence . . . until discovery of those facts.'" Edstrom v. Ndex West. LLC, 2010 WL 4069482, at *3 (quoting Federal Election Com'n. v. Williams, 104 F.3d 237, 240-41 (9th Cir. 1996) (emphasis in original)). Plaintiffs' assertion that they did not discover the violations until September 2010 "is insufficient to establish the necessity for equitable tolling under even the pleading standards of Federal Rule of Civil Procedure 8(a)." Lane, 713 F.Supp. at 1100. Plaintiffs will be given leave to amend this portion of their TILA claim, if they are able to do so in light of Federal Rule of Civil Procedure 11.

They will not, however, be given leave to amend their HOEPA damage claims. A high-cost HOEPA loan 'is a consumer credit transaction that is secured by the consumer's principal dwelling, other than a residential mortgage transaction, . . . if . . . the total points and fees payable by a consumer at or before closing will exceed the greater of . . . 8 percent of the total loan amount; or . . . $400.' Id. §1602(aa)(1).

Cunningham v. Nationscredit Financial Services, 497 F.3d 714, 717 (7th Cir. 2007). A residential mortgage transaction is "a transaction in which a . . . deed of trust. . is created or retained against the consumer's dwelling to finance the acquisition . . . of such dwelling." 15 U.S.C. § 1602(w). Nothing in the complaint suggests that the loan at issue in this case was taken to refinance the home at issue or to fund construction. HOEPA does not, therefore, apply to this transaction. Yulaeva v. Greenpoint Mortgage Funding, Inc., 2010 WL 5394859, at *4.


Under the Real Estate Procedures Act, a lender may not charge a borrower fees related to the mortgage other than for services actually performed. 12 U.S.C. § 2607(b); Jensen v. Quality Loan Service Corp., 702 F.Supp.2d 1183, 1194 (E.D. Cal. 2010). Plaintiffs allege, again in conclusory fashion, that "in connection with the mortgage loan to Plaintiffs, Defendants accepted charges for the rendering of real estate services which were in fact charges for other than services actually performed." Compl. ¶ 70. Defendants argue that the claim is too conclusory to survive a motion to dismiss and is barred by RESPA's statute of limitations.

Under 12 U.S.C. § 2614, a claim under § 2607 must be brought within a year after the "date of the occurrence of the violation. . . ." See Brewer v. Indymac Bank, 609 F.Supp.2d 1104, 1117 (E.D. Cal. 2009). As noted above, plaintiff Tinker consummated this real estate loan in April 2007; the instant action, filed in March 2011, is not timely.

Defendants do concede that the RESPA statute of limitations is subject to equitable tolling, but argue that plaintiffs' assertions do not support any such claim. Id. at 1117-18; Yuleva v. Greenpoint Mortgage Funding, Inc. 2009 WL 2880393, at *14 (E.D. Cal. Sept. 3, 2009) (Yuleva I). They are correct: as with plaintiffs' TILA claim, to plead their entitlement to equitable tolling, plaintiffs must do more than claim they were unable to discover the nature of their claim because of defendants' fraud, but rather must allege facts in support of a claim of excusable delay. Brewer, 609 F.Supp.2d at 1117; Edstrom, 2010 WL 4069482, at *3. Plaintiffs will be given leave to amend this claim if they are able, not only to provide specifics about equitable tolling but also to describe the nature of the fees charged and the basis for their claim that those fees did not relate to services performed. Compare Palmer v. GMAC Commercial Mortg., 628 F.Supp.2d 186, 193-94 (D.D.C. 2009) (complaint was adequate, if thin, when plaintiff alleged that excessive fees for the loan must have been for services not provided in light of her credit-worthiness).

C. Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA), 15 U.S. C. §§ 1681, et seq., was enacted in order to ensure that consumer reporting agencies "exercise their grave responsibilities with fairness. . . " 15 U.S.C. § 1681(a)(4). It applies to consumer reporting agencies or users of reported information who wilfully or negligently violate its provisions. Rush v. Macy's New York, 775 F.2d 1554, 1557 (11th Cir. 1985). A "consumer reporting agency" is one that "regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties . . . ." 15 U.S.C. § 1681a(f); Rush, 775 F.2d at 1557. A consumer report is "any . . . communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, general reputation, personal characteristics or mode of living which is used . . . or collected . . . for the purpose of serving as a factor in establishing the consumer's eligibility for . . . credit. . . ." 15 U.S.C. § 1681a(d); Mathis v. LHR, Inc., 2010 WL 316546, at *2 (S.D. Ga. Jan. 26, 2010).

Plaintiffs allege that defendants "wrongfully, improperly, and illegally reported negative credit information", including "an excessive amount of debt into which Plaintiffs were tricked into . . . signing," even though plaintiffs made every payment on time from closing until the time of default; this caused a decline in plaintiffs' credit score. Compl. ΒΆ 79. They describe defendant Aurora as an entity "engaged in the business of banking services and servicing of residential mortgages" and MERS as a business which was "operating a database, assigning mortgages. " Plaintiffs have not alleged any facts suggesting that defendants Aurora or MERS are in the business of compiling consumer credit information and thus subject to FCRA; in fact, their descriptions of these two defendants ...

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