The opinion of the court was delivered by: Hayes, Judge:
The matters before the Court are the Motions to Dismiss filed by Defendants Lender Processing Services, Inc. ("Lender Processing Services"), U.S. Bank National Association ("U.S. Bank"), Credit Suisse Financial Corporation ("Credit Suisse"), Select Portfolio Servicing, and Mortgage Electronic Registration Systems (collectively, "moving Defendants"). (ECF Nos. 97, 100).
On May 4, 2011, Plaintiffs, proceeding pro se, filed the "First Amended Verified Complaint" ("First Amended Complaint"), which is the operative pleading. (ECF No. 90). The First Amended Complaint alleges that, on August 15, 2007, Plaintiffs "entered into a contractual agreement ... borrowing $840,000 from lender Credit Suisse Financial Corporation refinancing the real property commonly known as 7421-7423 Draper Avenue, La Jolla, California...." Id. at 2. "The core of this action arises out of a breach of contractual agreement between Plaintiffs ... and lender Defendant Credit Suisse Financial Corporation, followed by an invalid and flawed non-judicial foreclosure on the subject property, and subsequent wrongful and invalid assignments recorded on Subject Property title." Id. at 2-3. The First Amended Complaint alleges that "[a]ll ... named Defendants participated in improperly alleging an incorrect debt of $896,843.86 as owing on the subject property when Plaintiff only borrowed $840,000, and faithfully performed all the required covenants of the Subject Loan Agreement making well over $100,100 in timely payments until ... Defendants instructed and advised Plaintiffs to stop making monthly payments." Id. at 3. The First Amended Complaint alleges that the "foreclosing Notice of Trustee Sale, was recorded by unauthorized party Defendant Quality Loan Service," and "Defendant Jay Gafner, as auctioneer and an unidentified 'highest bidder' acted wrongfully as agents for Defendants in proceeding with the public auction sale after being put on constructive notice of a fraudulent sale transaction by Plaintiff Sean Park." Id.
The First Amended Complaint alleges seventeen causes of action against all Defendants: (1) violation of the Truth in Lending Act ("TILA"); (2) violation of California's Rosenthal Fair Debt Collection Practices Act ("RFDCPA"); (3) violation of the Fair Debt Collection Practices Act ("FDCPA"); (4) wrongful foreclosure; (5) violation of the Real Estate Settlement Procedures Act ("RESPA"); (6) breach of fiduciary duty; (7) fraud -- intentional misrepresentation; (8) fraud -- negligent misrepresentation; (9) violations of California Business and Professions Code § 17200; (10) breach of contract -- promissory estoppel; (11) breach of the implied covenant of good faith and fair dealing; (12) conversion; (13) violation of California Civil Code § 2923.5; (14) quiet title; (15) injunctive relief; (16) rescission; and (17) accounting. The First Amended Complaint alleges federal question subject matter jurisdiction pursuant to 28 U.S.C. § 1331. Plaintiffs seek damages, injunctive relief and declaratory relief.
On May 24, 2011, Defendants Sundance LLC and Daniel Grois filed an Answer to the First Amended Complaint. (ECF No. 96).
On May 26, 2011 and May 27, 2011, the moving Defendants filed the Motions to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), and a Request for Judicial Notice. (ECF Nos. 97, 100).
On June 22, 2011, Plaintiffs filed oppositions to the Motions to Dismiss. (ECF Nos. 102, 103, 104). Plaintiffs contend that the Motions to Dismiss should be denied, or alternatively, that Plaintiffs should be granted leave to amend the First Amended Complaint.
On June 28, 2011, the moving Defendants filed reply briefs. (ECF Nos. 105, 106).
Federal Rule of Civil Procedure 12(b)(6) permits dismissal for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Dismissal under Rule 12(b)(6) is appropriate where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). To sufficiently state a claim to relief and survive a Rule 12(b)(6) motion, a complaint "does not need detailed factual allegations" but the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to dismiss, a court must accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal, --- U.S. ----, 129 S. Ct. 1937, 1950 (2009). However, a court is not "required to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). "In sum, for a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quotations omitted). "Courts have a duty to construe pro se pleadings liberally." Bernhardt v. Los Angeles County, 339 F.3d 920, 925 (9th Cir. 2003) (citation omitted).
B. Request for Judicial Notice
"A district court ruling on a motion to dismiss may consider documents whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading." Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998) (quotation omitted). Also, "a district court ruling on a motion to dismiss may consider a document the authenticity of which is not contested, and upon which the plaintiff's complaint necessarily relies." Id. at 706.
The moving Defendants request that the Court take judicial notice of the documents executed by Plaintiff and relating to the property at issue, including the Deed of Trust, the Notice of Default, the Notice of Trustee's Sale, the Corporate Assignment of Deed of Trust, and the Trustee's Deed Upon Sale. (ECF No. 100-1). Plaintiffs do not oppose the Request for Judicial Notice.
The First Amended Complaint either references or necessarily relies upon each of the documents which are attached to the Request for Judicial Notice. The authenticity of the documents has not been challenged. Accordingly, the Request for Judicial Notice is granted.
Plaintiffs allege each of the seventeen causes of action against each of the Defendants. Each of the moving Defendants move for the dismissal of each cause of action.
Plaintiffs allege that Defendants violated TILA, 15 U.S.C. §§ 1601, et seq., and seek damages, and "rescission of the Subject Loan [and] an order requiring Defendants ... to terminate any security interest in the Subject Property." (ECF No. 90 at 19).
The moving Defendants move for the dismissal of the TILA claim for damages on the basis that the statute of limitations has expired. The moving Defendants move for the dismissal of the TILA claim for rescission on the basis that Plaintiffs have failed to adequately allege tender.*fn1
a. TILA Claim for Damages
Damages claims under TILA must be brought "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). "[A]s a general rule the limitations period starts at the consummation of the transaction." King v. California, 784 F.2d 910, 915 (9th Cir. 1986). "[E]quitable tolling may be applied if, despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim." Santa Maria v. Pacific Bell, 202 F.3d 1170, 1178 (9th Cir. 2000) (citation omitted). Generally, a litigant seeking equitable tolling of a limitations period bears the burden of establishing entitlement to equitable tolling. Pace v. DiGuglielmo, 544 U.S. 408, 418 (2005). Where a plaintiff alleges TILA violations during initial disclosures, equitable tolling is not appropriate if "nothing prevented [plaintiff] from comparing the loan contract, [the] initial disclosures, and TILA's statutory and regulatory requirements." Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 70 (9th Cir. 1996) (citing King, 784 F.2d at 915).
The First Amended Complaint alleges that Plaintiffs obtained the loan on August 15, 2007. Plaintiffs filed this lawsuit on July 26, 2010, nearly three years after the loan transaction was consummated. Accordingly, Plaintiffs' TILA claim for damages is barred by the one-year statute of limitations, unless equitable tolling applies. In their opposition brief, Plaintiffs state that "[t]he statute of limitations to recover Plaintiffs' damages under TILA may be equitably tolled." (ECF No. 103 at 17). However, the First Amended Complaint does not adequately allege facts indicating that, "despite all due diligence, [Plaintiffs were] unable to obtain vital information bearing on the existence of [their] claim." Santa Maria, 202 F.3d at 1178. Because Plaintiffs fail to adequately allege the availability of equitable tolling, Plaintiffs' claim for damages pursuant to TILA is barred by the statute of limitations.
b. TILA Claim for Rescission
In order to ultimately prevail on a TILA rescission claim, the borrower will be obligated to tender the property the borrower received from the creditor under the loan. See 15 U.S.C. § 1635(b); 12 C.F.R. § 226.23(d); cf. Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1173 (9th Cir. 2003) (holding that "courts [are] free to exercise equitable discretion to modify rescission procedures."). "By far, the majority of Courts to address the issue recently have required that borrowers allege an ability to tender the principal balance of the subject loan in order to state a claim for rescission under TILA." Garcia v. Wachovia Mortg. Corp., 676 F. Supp. 2d 895, 901 (2009) (collecting cases). This rule is in recognition of the principle that "[e]quity will not interpose its remedial power in the accomplishment of what seemingly would be nothing but an idly and expensively futile act, nor will it purposely speculate in a field where there has been no proof as to what beneficial purpose may be subserved through its intervention." Karlsen v. Am. Sav. & Loan Ass'n, 15 Cal. App. 3d 112, 118 (1971) (quotation omitted); see also Garza v. Am. Home Mortg., No. CV 08-1477, 2009 WL 188604, at *5 (E.D. Cal. Jan. 27, 2009) ("The complaint fails to hint that [plaintiff] is able to fulfill her [tender] obligations under 15 U.S.C. § 1635(b) and 12 C.F.R. § 226.23(d). Rescission is an empty remedy without [plaintiff's] ability to pay back what she has received.").
Plaintiffs allege that the loan amount was $840,000. Plaintiffs allege: "As soon as Defendants meet their required obligations, ... Plaintiffs are ready and able to tender whatever remaining mortgage debt has been judicially determined. If for any reason Plaintiffs cannot tender the full amount due, Plaintiffs have several qualified buyers ready to submit letters of intent to this ... Court." (ECF No. 90 at 19).
Plaintiffs do not allege any specific facts related to the "qualified buyers." Plaintiffs do not otherwise allege specific facts as to how Plaintiffs would be able to able to tender the loan proceeds. Even construing the First Amended Complaint liberally, the Court finds that Plaintiffs' allegations are insufficient to plausibly show an ability to tender. See Iqbal, 129 S. Ct. at 1950.
The Motions to Dismiss are granted as to the first cause of action for violation of TILA.
2. Fair Debt Collection Practices Acts
The second and third causes of action allege violations of the FDCPA, 15 U.S.C. §§ 1692, et seq., and the RFDCPA, Cal. Civ.Code § 1788, et seq.
The moving Defendants move for the dismissal of the FDCPA and RFDCPA claims on the basis that "foreclosing on a Deed of Trust does not invoke the statutory protections" of the FDCPA and RFDCPA. (ECF No. 100 at 16).
The FDCPA and RFDCPA prohibit debt collectors from engaging in abusive, deceptive and unfair practices in the collection of consumer debts. See 15 U.S.C. § 1692; Cal. Civ. Code § 1788.1. A defendant must be a "debt collector" to be liable pursuant to the FDCPA and the RFDCPA. Heintz v. Jenkins, 514 U.S. 291, 294 (1995); see also Cal. Civ. Code § 1788.2(c). "The legislative history of section 1692a(6) indicates conclusively that debt collector does not include ... a mortgage servicing company, or an assignee of a debt, as long as the debt was not in default at the time it was assigned." Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th Cir. 1985).
The FDCPA and RFDCPA do not apply to foreclosure activities. See Walker v. Equity 1 Lenders Group, Case No. 09cv325 WQH (AJB), 2009 WL 1364430 at *7 (S.D. Cal. May 14, 2009) ("The activity of foreclosing on [a] property pursuant to a deed of trust is not the collection of a debt within the meaning of the FDCPA or the RFDCPA.") (quotation omitted); Champlaie v. BAC Home Loans Servicing, LP, 706 F. Supp. 2d 1029, 1054-55 (E.D. Cal. 2009) ("Foreclosure on a property as security on a debt is not debt collection activity encompassed by the Rosenthal Act."); Hulse v. Ocwen Fed. Bank, FSB, 195 F. Supp. 2d 1188, 1204 (D. Or. 2002) ("Foreclosing on a trust deed is distinct from the collection of the obligation to pay money. The FDCPA is intended to curtail objectionable acts occurring in the process of collecting funds from a debtor.... Payment of funds is not the object of the foreclosure action. Rather, the lender is foreclosing its interest in the property."); but see Austero v. Aurora Loan Servs., Inc., Case No. C-11-490, 2011 WL 1585530, at *9 (N.D. Cal Apr. 27, 2011) (holding that "[w]here the claim arises out of debt collection activities beyond the scope of the ordinary foreclosure process, however, a remedy may be available under the Rosenthal Act") (quotation omitted).
The First Amended Complaint alleges:
Defendants' actions constitute a violation of the [RFDCPA], in that they took and threatened to take actions prohibited by law, including, without limitation: an illegal auction falsely stating the amount of the debt; increasing the amount of the debt by including amounts not permitted by law or contract; improperly foreclosing on the Subject Property; and using unfair and unconscionable means in an attempt to collect a debt. (ECF No. 90 at 21-22; see also id. at 24 (same, with respect to FDCPA)).
To the extent the First Amended Complaint alleges violations of the FDCPA and RFDCPA related to the ordinary foreclosure process, the acts do not apply because the allegations are not related to collection activities. To the extent Plaintiffs allege Defendants acted outside of the scope of the ordinary foreclosure process, the First Amended Complaint fails to adequately allege how each Defendant constitutes a ...