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Mathias Esoimeme v. Wells Fargo Bank; Ndex West LLC

September 1, 2011

MATHIAS ESOIMEME, PLAINTIFF,
v.
WELLS FARGO BANK; NDEX WEST LLC; WORLD SAVINGS BANK; AND DOES 1-100, INCLUSIVE, DEFENDANTS.



ORDER AND FINDINGS AND RECOMMENDATIONS

This case, in which plaintiff is proceeding pro se, is before the undersigned pursuant to Eastern District of California Local Rule 302(c)(21). See 28 U.S.C. § 636(b)(1). On August 23, 2010, defendants Wachovia Mortgage, a division of Wells Fargo Bank, N.A. f/k/a Wachovia Mortgage, FSB, f/k/a World Savings Bank, FSB ("World Savings" or "Wachovia") and Wells Fargo Bank, N.A. ("Wells Fargo") (collectively "Wells Fargo" or the "bank defendants") removed the action to this court from Solano County Superior Court on the ground that plaintiff's complaint alleges federal claims and on the alternative ground that the citizenship of the parties is diverse.*fn1 Dckt. No. 1. Wells Fargo now moves to dismiss and to strike plaintiff's complaint. Dckt. Nos. 7, 8.

I. Background

In this action, plaintiff challenges the origination of a $318,500 refinance loan he entered into with the bank defendants, as well as the procedures defendants followed when foreclosing on plaintiff's home. Specifically, plaintiff alleges that in or around May 2006, he was solicited by World Savings who offered to refinance his residential real property located at 185 Coloma Way in Vallejo, California ("the subject property"). Id. ¶ 10. The subject loan closed in May 2006 as evidenced by the Deed of Trust recorded May 31, 2006 against plaintiff's property. Compl., Ex. C; see also Bank Defs.' Req. for Jud. Notice, Dckt. No. 9, Ex. A.*fn2 Also on May 31, 2006, plaintiff signed an Adjustable Rate Mortgage Note for the subject property. Bank Defs.' Req. for Jud. Notice, Dckt. No. 9, Ex. G.

Plaintiff alleges that World Savings "engaged in wrongful, predatory, and illegal lending practices . . . for the specific, obvious purpose of generating as many sub-prime loans as possible for sale to investors in the United States and abroad." Dckt. No. 1, Ex. A, Compl. ¶ 9. Plaintiff further alleges that World Savings "intentionally used deceptive tactics to induce and convince borrowers to obtain loans that they would not have qualified for under conventional lending practices" and that such practices "resulted in borrowers taking on loans that they obviously were not capable of paying." Id. Plaintiff alleges that he "was one of such victims of defendants' improper marketing and sales effort." Id.

Additionally, plaintiff alleges that World Savings had a conflict of interest in that one of its brokers "was paid a 'yield spread premium' fee (YSP fee) to encourage and steer Plaintiff into a higher rate loan, which was not the loan Plaintiff had initially wished to undertake" and that the conflict interest and the payment of the YSP fee were concealed from plaintiff at the time the loan was made. Id. ¶ 11. Plaintiff contends that at the time of the solicitation and refinance offer, "World Savings assured Plaintiff that the amount of the proposed Subject loan would not exceed $318,500.00" but that "[a]fter loan closing, it was discovered that Plaintiff was clearly, willfully, and intentionally misled and decieved" by World Savings Bank and the broker. Id. ¶ 12. Plaintiff further alleges that he was rushed and pressured "into signing the loan documentation quickly, without any explanation whatsoever of the terms and legal effect of said loan" and without "providing a copy for him to read, study, or understand." Id. ¶ 13. Plaintiff specifically alleges that "[at] no time prior to [or] at time of executing the Subject Loan documentation did defendant provide Plaintiff with any explanation or clarification of the Security Documents and/or other required disclosures for him to read and review, despite Plaintiff's lack of English proficiency" and that he "was intentionally denied the opportunity to seek legal advice without a copy of the 'Loan Docs.'" Id. ¶ 14.

Plaintiff further alleges that World Savings Bank "used related fraudulent appraisers to give a real estate appraisal that would justify the large loan that was made to Plaintiff" and that defendants knew the value of the subject property was far less than the loan amount and intentionally made a loan to plaintiff that was in excess of the value of the subject property. Id. ¶ 15. Plaintiff alleges that he has lost all equity in the subject property due to that deceitful loan transaction and agreement with defendants and that the agreement is void ab initio because of defendants' violation of their disclosure requirements and their duty to refrain from making misleading statements and fraudulent misrepresentations, and because of their predatory lending practices. Id. Plaintiff alleges that he was "wrongfully and unlawfully induced" by World Savings to refinance the subject property and execute the subject loan and security documents. Id. ¶ 16.

Plaintiff also alleges that he was "willfully and intentionally misled and deceived by the deceptive conspiratorial acts, conduct, and misrepresentations of Defendant Wells Fargo who falsely induced plaintiff into believing that said Defendants were assisting Plaintiff with receiving a reasonable and fair 'Loan Modification' agreement of Plaintiff's loan." Id. ¶ 17. Plaintiff alleges that when those false representations were made, Wells Fargo knew the "statements were untrue and no Loan Modification was being processed or produced on behalf of Plaintiff," and that defendants "instead deceptively planned, schemed, and conspired to mislead and deceive Plaintiff by not qualify[ing] or attempting to qualify Plaintiff for a Loan Modification agreement. Id. ¶¶ 17, 18.

According to plaintiff's complaint, "[a]s a result of the non-payment of the Subject Loan, defendant Wells Fargo demanded a non-judicial foreclosure proceeding against Plaintiff without complying with California [law]" and "did not offer to decrease Plaintiff's principle balance to the fair market value," also in violation of California law. Id. ¶ 19. Plaintiff alleges that he "encountered financial difficulties and defaulted on the loan payments to Defendants," and that therefore, on or around July 8, 2009, defendants filed a Notice of Default and Election to Sell Under Deed of Trust, and on July 9, 2009, defendants filed a Notice of Rescission and Declaration of Default and Demand for Sale and Notice of Default and Election to Sell. Id. ¶ 21. Plaintiff alleges that defendants then "intentionally and unlawfully filed a Notice of Trustee's Sale using the aforementioned Notice of Default" on March 25, 2010 without seeking a Loan Modification on behalf of plaintiff or seeking to modify the terms of the subject loan. Id. ¶¶ 21, 22. A foreclosure took place on July 6, 2010. See Wells Fargo's Req. for Jud. Notice, Dckt. No. 9, Ex. H (Trustee's Deed Upon Sale July 13, 2010 and recorded in the Official Records of the Office of the Solano County Recorder on July 19, 2010).

Plaintiff's complaint states the following causes of action against all defendants: (1) predatory lending practices in violation of the Federal Home Ownership Equity Protection Act, 15 U.S.C. § 1637 ("HOEPA"), the Truth in Lending Act, 15 U.S.C. § 1601 ("TILA"), Federal Regulation Z, 12 C.F.R. § 22, California Civil Code section 1632, and California Business and Professions Code section 17500; (2) conspiracy; (3) intentional misrepresentation/deceit (fraud); (4) violations of California Civil Code sections 1916.7, 1920, and 1921; (5) demand for accounting; (6) unfair business practices in violation of California Business and Professions Code section 17200; (7) breach of the implied warranty of good faith and fair dealing; (8) declaratory relief; (9) quiet title; and (10) injunctive relief. Dckt. No. 1 at 12-23.

II. Motion to Dismiss Plaintiff's Complaint

Wells Fargo moves to dismiss plaintiff's complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6) and for failure to state his fraud claims with particularity as required by Rule 9(b). Dckt. No. 7, Mot. to Dismiss ("Mot.") at 2. Wells Fargo also contends that plaintiff's complaint fails to comply with Rule 8 in that the complaint does not present a "short and plain statement" of the claims against defendants.*fn3 Id.

A. Rule 12(b)(6) Standards

To survive dismissal for failure to state a claim pursuant to Rule 12(b)(6), a complaint must contain more than a "formulaic recitation of the elements of a cause of action"; it must contain factual allegations sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "The pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action." Id. (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235- 236 (3d ed. 2004)). "[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, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. Dismissal is appropriate based either on the lack of cognizable legal theories or the lack of pleading sufficient facts to support cognizable legal theories. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

In considering a motion to dismiss, the court must accept as true the allegations of the complaint in question, Hospital Bldg. Co. v. Rex Hosp. Trs., 425 U.S. 738, 740 (1976), construe the pleading in the light most favorable to the party opposing the motion, and resolve all doubts in the pleader's favor. Jenkins v. McKeithen, 395 U.S. 411, 421, reh'g denied, 396 U.S. 869 (1969). The court will "'presume that general allegations embrace those specific facts that are necessary to support the claim.'" Nat'l Org. for Women, Inc. v. Scheidler, 510 U.S. 249, 256 (1994) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)).

Pro se pleadings are held to a less stringent standard than those drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520 (1972); Bretz v. Kelman, 773 F.2d 1026, 1027 n.1 (9th Cir. 1985). However, the court's liberal interpretation of a pro se litigant's pleading may not supply essential elements of a claim that are not plead. Pena v. Gardner, 976 F.2d 469, 471 (9th Cir. 1992); Ivey v. Bd. of Regents of Univ. of Alaska, 673 F.2d 266, 268 (9th Cir. 1982). Furthermore, "[t]he court is not required to accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). Neither need the court accept unreasonable inferences, or unwarranted deductions of fact. W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

A Rule 12(b)(6) motion to dismiss may also challenge a complaint's compliance with Rule 9(b), which provides that "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and other conditions of a person's mind may be alleged generally." See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1107 (9th Cir. 2003). These circumstances include the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations." Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007) (quoting Edwards v. Marin Park, Inc., 356 F.3d 1058, 1066 (9th Cir. 2004)). "In the context of a fraud suit involving multiple defendants, a plaintiff must, at a minimum, 'identif[y] the role of [each] defendant[] in the alleged fraudulent scheme.'" Id. at 765 (quoting Moore v. Kayport Package Express, 885 F.2d 531, 541 (9th Cir. 1989)).

In deciding a Rule 12(b)(6) motion to dismiss, the court may consider facts established by exhibits attached to the complaint. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987). The court may also consider facts which may be judicially noticed, Mullis v. U.S. Bankr. Ct., 828 F.2d at 1388, and matters of public record, including pleadings, orders, and other papers filed with the court. Mack v. South Bay Beer Distribs., 798 F.2d 1279, 1282 (9th Cir. 1986).

A pro se litigant is entitled to notice of the deficiencies in the complaint and an opportunity to amend, unless the complaint's deficiencies could not be cured by amendment. See Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987).

B. Plaintiff's Claims

1. First Claim: Predatory Lending Practices

Plaintiff alleges that all of the defendants engaged in predatory lending practices in violation of the federal Home Ownership Equity Protection Act, 15 U.S.C. § 1637 ("HOEPA"), the Truth in Lending Act, 15 U.S.C. § 1601 ("TILA"), Federal Regulation Z, 12 C.F.R. § 22, California Civil Code section 1632, and California Business and Professions Code section 17500. Compl. ¶ 26. Specifically, plaintiff alleges that World Savings failed to verify plaintiff's ability to repay the subject loan and instead "manufactured facts and figures" that would show that he did; that World Savings "misled and deceived Plaintiff as to the terms and conditions of the said Loan, by failing to fully disclose the terms and conditions of said loan which plaintiff should have known in order to make an informed decision about his ability to make the payment required"; that defendants violated 15 U.S.C. § 1639(h) by lowering their underwriting standards in order to write loans to minority borrowers that were otherwise either financially unacceptable or unduly burdensome and would subject plaintiff and others similarly situated to a high risk of losing their property to foreclosure; and that defendants' predatory lending practices makes the security documents for the loan subject to rescission and justify a judgment for damages. Id. ¶¶ 27-29. Wells Fargo moves to dismiss each of plaintiff's predatory lending claims. Mot. at 2.

a. HOEPA

Wells Fargo argues that Plaintiff's loan is not covered by HOEPA and that, even if it were, the claim is barred by the applicable statute of limitations. Mot. at 14, 21-22.

"In order to be subject to the protections afforded by HOEPA, one of two factors has to be established. Either the annual percentage rate of the loan at consummation must exceed [] more than 10 percent the applicable yield on treasury securities, or the total points and fees payable by the consumer at or before closing has to be greater than 8 percent of the total loan amount, or $400.00." Lynch v. RKS Mortg., Inc., 588 F. Supp.2d 1254, 1260 (E.D. Cal. 2008) (citing 15 U.S.C. § 1602(aa)(1) & (3); 12 C.F.R. § 226.32(a)(1)). Plaintiff's complaint does not allege that his loan is subject to HOEPA, nor does it allege any facts showing that plaintiff's loan meets the specific thresholds necessary for HOEPA to apply.

Moreover, plaintiff's HOEPA claim appears to be barred by the statute of limitations. The loan at issue closed in May 2006, yet plaintiff did not file this action until July 2010, which was more than four years later. The statute of limitations for violations of HOEPA based on failures to provide disclosures prior to the loan closing is one year for affirmative relief and three years for a right to rescind. 15 U.S.C. §§ 1640(e), 1635(f); In re Cmty. Bank of N. Va., 418 F.3d 277, 304-05 (3d Cir. 2005) ("[T]he Court notes that HOEPA is simply a component of TILA, and thus, it is governed by the same statute of limitations.").

In certain circumstances, the doctrine of equitable tolling may "suspend the limitations period," such as when the borrower did not have reasonable opportunity to discover the alleged fraud or nondisclosures that form the basis of plaintiff's TILA claim. King, 784 F.2d at 915; see also Huseman v. Icicle Seafoods, Inc., 471 F.3d 1116, 1120 (9th Cir. 2006) (whether the statute of limitations should be equitably tolled is a factual determination that "focuses on whether there was excusable delay by the plaintiff and may be applied if, despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim.") (quotations and citations omitted); Meyer v. Ameriquest Mortg. Co., 342 F.3d 899, 902 (9th Cir. 2003) (dismissing TILA claim, despite request for equitable tolling, where plaintiff was in possession of all loan documents and did not allege any concealment or other conduct that would have prevented discovery of the alleged TILA violations during the one year limitations period). Since plaintiff has not alleged any facts suggesting that the statutes of limitation should be equitably tolled, plaintiff's HOEPA claim is time barred and should be dismissed. Plaintiff will be granted leave to amend his HOEPA claim only if he can cure these deficiencies.

b. TILA

Wells Fargo next contends that plaintiff's TILA claim is barred by the statute of limitations and that plaintiff's claim for rescission under TILA terminated when the subject property was sold at foreclosure sale. Mot. at 14, 22-23.

Here, plaintiff's purported TILA claim also appears to be barred by the statute of limitations. TILA is intended to protect consumers in credit transactions by requiring "meaningful disclosure of credit terms." 15 U.S.C. § 1601(a). A lender's violation of TILA allows the borrower to seek damages or to rescind a consumer loan secured by the borrower's primary dwelling. Copeland v. Lehman Brothers Bank, FSB, 2010 WL 2817173, at *5 (S.D. Cal. July 15, 2010). However, a plaintiff's damage claims relating to improper disclosures under TILA are subject to a one-year statute of limitations, 15 U.S.C. § 1640(e), which runs from the time the loan transaction is consummated. King v. State of Cal., 784 F.2d 910, 915 (9th Cir. 1986); see also Meyer, 342 F.3d at 902 (failure to make the required disclosures under TILA occurs at the time the loan documents were signed). Rescission claims under TILA "shall expire three years after the date of the consummation of the transaction or upon the sale of the property, whichever occurs first." 15 U.S.C. § 1635(f). The right to rescission under TILA expires three days after the necessary disclosures are provided to the borrower. 15 U.S.C. § 1635(a).

Although equitable tolling of TILA claims may be appropriate "in certain circumstances," and can operate to "suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or non-disclosures that form the basis of the TILA action," King, 784 F.2d at 914-15, when a plaintiff fails to allege facts demonstrating that he could not have discovered the alleged violations by exercising reasonable diligence, dismissal is appropriate. Meyer, 342 F.3d at 902-03 (refusing to apply equitable tolling to TILA claim because the plaintiff was in full possession of all loan documents and did not allege any concealment of loan documents or other action that would have prevented discovery of the alleged TILA violations); see also Hubbard v. Fid. Fed. Bank, 91 F.3d 75, 79 (9th Cir. 1996) (finding that plaintiff was not entitled to equitable tolling of her TILA claim because "nothing prevented [plaintiff] from comparing the loan contract, [the lender's] initial disclosures, and TILA's statutory and regulatory requirements"). Since the loan at issue was consummated on May 31, 2006, but this action was not filed until July 12, 2010, and plaintiff has not alleged any facts supporting equitable tolling of the statute of limitations, plaintiff's TILA claim is barred by the statute of limitations.

Moreover, because the subject property was sold at the trustee's sale on July 9, 2010, any right of rescission plaintiff may have had expired upon the sale of the property. Additionally, § 1635(b) requires that the borrower tender to the lender any money received from the lender in order to complete a rescission. 15 U.S.C. § 1635(b); Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1173 (9th Cir. 2003) (TILA rescission claim dismissed because no showing that tender had occurred or that the borrower had the capacity to repay the principal borrowed); LaGrone v. Johnson, 534 F.2d 1360, 1362 (9th Cir. 1974) (loan rescission conditioned on the borrower's tender of funds given the lender's non-egregious TILA violations). Here, plaintiff fails to ...


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