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Bradley L. Hall v. Mortgage Investors Group

September 16, 2011



This matter comes before the Court on Defendants BAC Home Loan Servicing, LP ("BAC"), Mortgage Electronic Registration Systems, Inc. ("MERS") and Recontrust Company, N.A.'s ("Recontrust") (collectively "Defendants") Motion to Dismiss (Doc. #9, 27) Plaintiff Bradley Hall's ("Plaintiff") Complaint (Doc. #1), pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendants also move to expunge a recorded lis pendens (Doc. #9). Plaintiff opposes only the Motion to Dismiss (Doc. #18).*fn1

For the reasons set forth below, Defendants' Motion to Dismiss and Motion to Expunge are granted in their entirety.


This action arises out of a non-judicial foreclosure of real property located at 3013 Latham Lane in El Dorado Hills, California ("Subject Property"). See Plaintiff's Complaint, Doc. #1 ("Comp."), ¶¶ 1, 18, 19. Sometime in 2007, Plaintiff borrowed $279,500.00 from non-moving defendant Mortgage Investors Group, which was secured by the Subject Property. Id. at ¶¶ 44, 48. Plaintiff subsequently defaulted on the loan, and various defendants began the foreclosure process. Id. at ¶¶ 18, 19, 49.

Plaintiff alleges that he is "the victim of fraud, unlawful and predatory lending [practices,] and an underlying conspiracy to commit fraud." Comp. at ¶ 18. Plaintiff seeks relief based on alleged wrongful acts by Defendants during the loan origination process and Defendants' failure to "work with Plaintiff in any reasonable way to avoid foreclosure during the time of [Plaintiff's] financial difficulties." Id. at ¶ 55.

Defendant Recontrust moved to join the Motion to Dismiss (Doc. #27) on July 15, 2011, which Plaintiff did not oppose. Accordingly, this Court considers the pending Motion to Dismiss and Motion to Expunge as filed by all Defendants.


A. Legal Standard

A party may move to dismiss an action for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). In considering 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). Assertions that are mere "legal conclusions," however, are not entitled to the assumption of truth. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To survive a motion to dismiss, a plaintiff needs to plead "enough facts to state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. Dismissal is appropriate where the plaintiff fails to state a claim supportable by a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

Upon granting a motion to dismiss for failure to state a claim, the court has discretion to allow leave to amend the complaint pursuant to Federal Rule of Civil Procedure 15(a). "Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . that the complaint could not be saved by amendment." Eminence Capital, L.L.C. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

B. Judicial Notice

In this case, both parties submit requests for judicial notice. Generally, the Court may not consider material beyond the pleadings in ruling on a motion to dismiss for failure to state a claim, unless the material is attached to, or relied on by, the complaint, or the court takes judicial notice of matters of public record, provided the facts are not subject to reasonable dispute. E.g., Sherman v. Stryker Corp., 2009 WL 2241664 at *2 (C.D. Cal. Mar. 30, 2009) (citing Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) and FED. R. EVID. 201).

Plaintiff filed an "Exhibit Index to the Complaint," attaching the Deed of Trust, Substitution of Trustee, Notice of Default, and Notice of Trustee's Sale (Doc. #7, Exhibits A-D), and Defendants also request that this Court take judicial notice of these same documents. See Defendants' Request for Judicial Notice ("Defs.' RJN"), Doc. #9-2, Exhibits A, D, B, & E, respectively. As Plaintiff did not object to Defendants' request, and because he relies on these documents in his Complaint, this Court will grant Defendants' request and take judicial notice of the Deed of Trust, Substitution of Trustee, Notice of Default, and Notice of Trustee's Sale (Defs.' RJN, Exhibits A, D, B, & E) in accordance with Federal Rule of Evidence 201.

Plaintiff also included a request for judicial notice in his Opposition to Defendants' Motion to Dismiss, asking this Court to consider two consent orders entered by federal agencies and signed by various MERS personnel (Doc. #18, Exhibits A, B). These documents are irrelevant to the pending motion to dismiss, and this case, and therefore, Plaintiff's request as to Exhibits A and B to his Opposition is denied. See FED. R. EVID. 201.

Defendant further requests that this Court take judicial notice of the Assignment of Deed of Trust, a second Notice of Trustee's Sale (recorded April 20, 2011), and a lis pendens (recorded April 11, 2011). Defs.' RJN, Exhibits C, F, & G. Because Plaintiff did not object to Defendants' request, and Federal Rule of Evidence 201 authorizes consideration of the proffered documents, this Court grants Defendants' requests for judicial notice.

C. Motion to Dismiss*fn2

1. Federal Claims for Relief

a. Breach of Security Instrument under HOEPA

Plaintiff alleges Defendants failed to provide proper disclosures to Plaintiff when the loan at issue was consummated and engaged "in a pattern and practice of extending credit to Plaintiff without regard to his ability to pay . . . ," in violation of the Home Owners' Equity Protection Act ("HOEPA"). Comp. at ¶¶ 66-70.

HOEPA is a section of the Truth in Lending Act ("TILA") which contains specific disclosure requirements and minimum standards for residential mortgage loans. See 15 U.S.C § 1639. To state a cognizable claim, a "[p]laintiff must allege facts supporting a conclusion that HOEPA applies to the loan at issue . . . ." Marks v. Chicoine, 2007 WL 160992 at *8 (N.D. Cal. Jan. 18, 2007) (citing 15 U.S.C. § 1602). For a loan to be subject to HOEPA, a plaintiff must establish:

Either the annual percentage rate of the loan at consummation must exceed by 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 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) and 12 C.F.R. § 226.32(a)(1)).

Defendants correctly point out that Plaintiff has failed to plead any facts in his Complaint demonstrating that HOEPA applies to the loan at issue in this case. Defs' MTD at pg. 4-6; see also Von Brincken v. Inc., et al., 2011 WL 2621010 at *3 (E.D. Cal. June 30, 2011). Plaintiff only alleges that he was "required to pay excessive fees, expenses, and costs which exceeded more than 10% of the amount financed," and Plaintiff did not direct this Court to any other allegations in his Complaint that support his theory that HOEPA applies in this case. See Comp. at ¶ 64; Opp. at pg. 8. Because Plaintiff has failed to plead sufficient facts to substantiate his breach of security instrument claim, this cause of action is dismissed without prejudice.

Defendants also point out that Plaintiff's claim is barred by TILA's one-year statute of limitations for damages and three year statute of limitations for rescission, applicable to HOEPA claims, as Plaintiff's loan was executed in June 2007 and he did not file his complaint until April 2011, nearly four years later. Defs' MTD at pg. 5-6. Plaintiff acknowledges his HOEPA claim was filed outside of the statute of limitations, but argues that equitable tolling applies to extend the limitations period because he "had no way to know his statute of limitations [sic] started to run from the time of the loan." Opp. at pg. 6.

In the Ninth Circuit, "[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) (citing Holmberg v. Armbrecht, 327 U.S. 392, 397 (1946)). Importantly:

[E]quitable tolling does not depend on any wrongful conduct by the defendant to prevent plaintiff from suing.

Instead it focuses on whether there was excusable delay by the plaintiff. If a reasonable plaintiff would not have known the existence of a possible claim within the limitations period, then equitable tolling will serve to extend the statute of limitations for filing suit until plaintiff can gather what information he needs.

Id. (citing Thelen v. Marc's Big Boy Corp., 64 F.3d 264, 268 (7th Cir. 1995)) (other citations omitted).

In his Opposition, Plaintiff simply asks that this Court "exercise its discretion and equitable power and toll the statute of limitations." Opp. at pg. 6. Plaintiff's Complaint is devoid of facts demonstrating that he exercised due diligence in attempting to uncover information regarding his claims or that it was reasonable for Plaintiff to not have known of the existence of his claim, explaining why Plaintiff did not point this Court to his complaint to support the request in his Opposition to toll the statute of limitations. See Opp. at pg. 6-8; Comp. at ¶ 89 (merely alleging "Plaintiff first learned of the actions of Defendants . . . in March 2011. Any applicable statute of limitations should run from this date."). Plaintiff's conclusory statements lack the requisite factual specificity to withstand Defendants' Motion to Dismiss. Compare Von Brincken v. Mortgageclose, et al., 2011 WL 2621010 at *2-3 (E.D. Cal. June 30, 2011) (finding an identical HOEPA claim, filed by Plaintiff's counsel, was barred by the statute of limitations and that Plaintiff had failed to plead facts supporting the application of equitable tolling in his second amended complaint). Accordingly, Plaintiff's claim for "Breach of Security Instrument" under HOEPA is dismissed, with leave to amend.

b. Violations of RESPA

Plaintiff alleges that Defendants violated the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. ยง 2607, by "accept[ing] charges for the rendering of real estate services which were in fact charges for other ...

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