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Catarino Mendoza v. Wilmington Finance


September 21, 2011




Plaintiff Catarino Mendoza ("Plaintiff") commenced this action 21 on December 20, 2010, seeking damages, declaratory, and injunctive 22 relief for claims arising out of a 2005 mortgage agreement. ECF 23 No. 1 ("Compl."). Plaintiff filed a First Amended Complaint 24 ("FAC") on February 11, 2011. ECF No. 7 ("FAC"). Now before the 25 Court are a Motion to Dismiss and a Motion to Strike Plaintiff's 26 FAC brought by Defendants Mortgage Electronic Registration Systems, 27 Inc. ("MERS") and Vericrest Financial, Inc. ("Vericrest") 28 (collectively "Movants"). ECF Nos. 37 ("Mot. to Dismiss"); ("Mot. to Strike"). Plaintiff filed an Opposition to both motions 2 and Movants filed a Reply. ECF Nos. 42 ("Opp'n"), 43 ("Reply").

For the following reasons, the Court GRANTS Movants' Motion to 4 Dismiss, dismissing all claims against Movants WITH PREJUDICE, and 5 DENIES Movants' Motion to Strike as moot.


The following allegations are taken from Plaintiff's FAC. Plaintiff is a resident of San Bruno, California. FAC ¶ 1. Around 10 February 9, 2005, Plaintiff entered into two loan repayment and 9 security agreements with defendant Wilmington Finance 12 ("Wilmington"). Id. ¶ 3. MERS is the "current mortgage 13 nominee/beneficiary" of the loan. Id. ¶ 10. Plaintiff does not 14 allege any facts concerning Vericrest other than that it was 15 "another mortgage lender." Id. ¶ 11.

Under the loan, Plaintiff borrowed $584,000 to refinance his 17 personal residence in San Bruno. Id. ¶¶ 3, 4. The terms of the 18 loan included an initial two-year fixed interest rate of 6.5 19 percent followed by an adjustable rate based on the six-month LIBOR 20 index plus 6.25 percent. Id. ¶ 4. Plaintiff states that the loan 21 will eventually adjust to 12.5 percent, bringing Plaintiff's 22 monthly payment from $3,691.28 to $6,232.79, which he characterizes 23 as "extreme payment shock." Id. ¶ 4. In addition, the loan has a 24 two-year prepayment penalty requiring Plaintiff to pay six months 25 advance interest if he makes a full prepayment or partial 26 prepayment of more than 20 percent of the original principal amount 27 in any twelve-month period. Id. ¶ 29. 28

Plaintiff alleges that Defendants designed the loan such that negative amortization would occur, making foreclosure inevitable. 2 Id. ¶ 15. Plaintiff alleges that the loan was underwritten without 3 proper due diligence because Wilmington failed to adequately verify 4 Plaintiff alleges that a forensic audit of Plaintiff's loan 6 documents revealed legal violations in the handling and processing 7 of Plaintiff's loan, giving rise to a number of his causes of 8 action. Id. ¶ 37. While Plaintiff does not claim to be unable to 9 speak English, he does state that English is not his primary 10 language and that he "does not have comprehensive English reading or writing skills" or "an adequate command of the English 12 language." Id. ¶ 31. Plaintiff alleges that he was unable to 13 understand many of the provisions and terms of the loan agreement 14 because documentation was not provided to him in his native 15 language. Id. ¶¶ 31, 117.

17 and other Defendants: (1) declaratory relief; (2) injunctive 18 relief; (3) failure to perfect interest in the deed of trust under 19 California Commercial Code § 9313 ("failure to perfect"); (4) 20 breach of California's covenant of good faith and fair dealing 21 § 1601 ("TILA"); (6) violation of the Real Estate Settlement 23 California Civil Code §§ 1918-1921; (8) violation of California 25 1916.7(a)(4)(B); (10) violation of California Civil Code § 2932.5; (13) fraud; (14) unfair and deceptive acts and practices ("UDAP"); Plaintiff's income. Id. ¶ 32. 5

Plaintiff brings eighteen causes of action against the Movants ("bad faith"); (5) violation of the Truth in Lending Act, 15 U.S.C. 22 Procedures Act, 12 U.S.C. §§ 2601-17 ("RESPA"); (7) violation of 24 Civil Code § 1916.7(b)(2); (9) violation of California Civil Code § 26 (11) violation of California Civil Code § 1632; (12) rescission;

(15) breach of fiduciary duty; (16) unconscionability; (17) 2 predatory lending under California Business and Professions Code § 3 Defendant AIG, formerly known as Wilmington Finance, 5 previously brought a Motion to Dismiss the FAC. ECF No. 22. On 6 June 6, 2011, the Court granted AIG's motion, dismissing all claims 7 against AIG with prejudice. ECF No. 34 ("June 6, 2011 Order").

17200 ("UCL"); and (18) quiet title. Id. at ¶¶ 47-157. 4


12(b)(6) "tests the legal sufficiency of a claim." Navarro v. 12

A motion to dismiss under Federal Rule of Civil Procedure

Block, 250 F.3d 729, 732 (9th Cir. 2001). "Dismissal can be based 13 on the lack of a cognizable legal theory or the absence of 14 sufficient facts alleged under a cognizable legal theory."

1988). "When there are well-pleaded factual allegations, a court 17 should assume their veracity and then determine whether they 18 plausibly give rise to an entitlement to relief." Ashcroft v. 19

Iqbal, 129 S. Ct. 1937, 1950 (2009). However, "the tenet that a 20 court must accept as true all of the allegations contained in a 21 complaint is inapplicable to legal conclusions. Threadbare 22 recitals of the elements of a cause of action, supported by mere 23 conclusory statements, do not suffice." Id. (citing Bell Atl. 24 Corp. v. Twombly, 550 U.S. 544, 555 (2007)). The allegations made 25 in a complaint must be both "sufficiently detailed to give fair 26 notice to the opposing party of the nature of the claim so that the 27 party may effectively defend against it" and "sufficiently 28 plausible" such that "it is not unfair to require the opposing Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. party to be subjected to the expense of discovery." Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir. 2011). 3 4

Plaintiff concedes that his first, second, third, seventh, 6 eighth, ninth, tenth, eleventh, twelfth, sixteenth, and eighteenth 7 causes of action should be dismissed. Opp'n at 3. This leaves two 8 federal causes of action -- TILA and RESPA -- and five state law 9 causes of action -- breach of good faith and fair dealing, fraud, argue that all of these claims are time-barred by the applicable 12 statutes of limitation, as they accrued upon consummation of the 13 loan agreement more than six years ago.*fn1 Mot. to Dismiss at 9-13.

Plaintiff does not dispute the fact that these claims are time-15 barred, but asks the Court to apply the doctrine of equitable 16 tolling to these claims. Opp'n at 4. Citing to the Court's June 6, 2011 Order, Movants counter that equitable tolling is 18 inappropriate. Mot. to Dismiss at 9-13. For the reasons set forth 19 in the Court's prior order and the reasons set forth below,

The statute of limitations for TILA damages claims is one year. 15 U.S.C. § 1640(e). The statute of limitations for RESPA is one year "from the date of the occurrence of the violation." 12 U.S.C. § 2614. The statute of limitations for non-insurance bad faith claims is four years. Cal. Civ. Proc. Code § 337(1). The statute 24 of limitations for fraud is three years from the time the plaintiff either discovers the facts giving rise to the fraud or could have 25 discovered such facts with reasonable diligence. April Enters., Inc. v. KTTV, 147 Cal. App. 3d 805, 827-28 (Ct. App. 1983). The 26 statute of limitations for claims brought under California's Unfair Competition Law ("UCL") is four years. Cal. Bus. & Prof. Code § 17208. The statute of limitations for breach of fiduciary duty is four years from the breach or the time where the plaintiff could 28 have discovered the facts concealed through reasonable diligence. Cal. Civ. Proc. Code § 343.



UDAP, breach of fiduciary duty, and predatory lending. Movants matters outside the pleadings, so it is rarely appropriate to grant 4 a Rule 12(b)(6) motion to dismiss (where review is limited to the 5 complaint) if equitable tolling is at issue." Huynh v. Chase "Generally, the applicability of equitable tolling depends on Manhattan Bank, 465 F.3d 992, 1003-04 (9th Cir. 2006). However, a 7 motion to dismiss based on the statute of limitations may be 8 granted "if the assertions of the complaint, read with the required 9 liberality, would not permit the plaintiff to prove that the 10 statute was tolled." Vernon v. Heckler, 811 F.2d 1274, 1278 (9th Cir. 1987) (citation and quotations omitted). "Equitable tolling 12 may be applied if, despite all due diligence, a plaintiff is unable 13 to obtain vital information bearing on the existence of his claim." 14

(overruled on other grounds by Socop-Gonzalez v. Immigration and 16 Regarding Plaintiff's TILA claim, the Supreme Court has held 18 that TILA's rescission remedy is completely extinguished at the end 19 of the three-year limitations period and is not subject to 20 equitable tolling. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 413 21TILA, his claim is barred. A TILA claim for damages under 15 23 U.S.C. § 1640(e), however, may be subject to equitable tolling, 24 suspending the limitations period "until the borrower discovers or 25 had reasonable opportunity to discover the fraud or nondisclosures 26 that form the basis of the TILA action." King v. California, 784 27 F.2d. 910, 915 (9th Cir. 1986). Plaintiff contends that equitable 28 tolling is appropriate because loan documents were not provided to Santa Maria v. Pacific Bell, 202 F.3d 1170, 1178 (9th Cir. 2000) 15 Naturalization Serv., 272 F.3d 1176, 1194 (9th Cir. 2000)). 17 1998). Therefore, to the extent Plaintiff seeks rescission under

Plaintiff in his native language. Opp'n at 6. The Court rejected 2 this same argument in its prior order. June 6, 2011 Order at 6-7. "nothing prevented the plaintiff from comparing the disclosures 5 made with the disclosures required under TILA." Glaser v. 6 May 5, 2011); see also Romero v. Mortgage Co., 2011 U.S. Dist. Plaintiff's TILA claim fails as a matter of law. 10

equitable tolling is consistent with RESPA's purpose of ensuring 12 disclosure of settlement costs and eliminating kickbacks and 13 referral fees. Opp'n at 6-7. The Court addressed this same 14 argument in its June 6, 2011 Order and found that equitable tolling 15 was not appropriate. June 6, 2011 Order at 8. Accordingly, 16

As for Plaintiff's remaining state law causes of action, 18 equitable tolling "halts the running of the limitations period so 19 long as the plaintiff uses reasonable care and diligence in 20 attempting to learn the facts that would disclose the defendant's 21 fraud or other misconduct." Sagehorn v. Engle, 141 Cal. App. 4th 22 452, 460 (Ct. App. 2006) (citation and quotations omitted). "To 23 establish that equitable tolling applies, a plaintiff must prove 24 the following elements: fraudulent conduct by the defendant 25 resulting in concealment of the operative facts, failure of the 26 plaintiff to discover the operative facts that are the basis of its 27 cause of action within the limitations period, and due diligence by 28 the plaintiff until discovery of those facts." Id. at 460-61

Moreover, equitable tolling is inappropriate where, as here, Advantage Fin., 2011 U.S. Dist. LEXIS 52692, at *13-14 (N.D. Cal. 7 LEXIS 69673, at *9 (N.D. Cal. June 28, 2011). Accordingly, 9

With respect to Plaintiff's RESPA claim, Plaintiff argues that Plaintiff's RESPA claim fails as a matter of law.

(citation and quotations omitted). 2

Plaintiff's only allegation of fraudulent conduct resulting in 3 concealment is that loan documents were provided to him in English, 4 for which he does not have "comprehensive . . . reading or writing 5 skills." See FAC ¶¶ 31-32; Opp'n at 6-7. As the Court held in its 6 prior order, this argument fails as a matter of law. June 6, 2011 Order at 8-9. Further, Plaintiff "failed to exercise due diligence 8 by seeking help from a person capable of understanding the loan 9 documents before he signed them." Id. at 9. Accordingly, 10

Plaintiff's remaining state law causes of action fail as a matter of law. 12

The Court thus finds that even when the FAC is read liberally and the facts pleaded are assumed to be true, Plaintiff cannot, as 14 a matter of law, prove equitable tolling of the respective statute 15 of limitations. Therefore, the Court DISMISSES, WITH PREJUDICE, 16 the remaining causes of action brought against Movants. 17


For the foregoing reasons, the Court GRANTS Movants' Motion to Dismiss and DISMISSES, WITH PREJUDICE, all causes of action brought 4 against Defendants Mortgage Electronic Registration Systems, Inc. 5 and Vericrest Financial, Inc. in Plaintiff Catarino Mendoza's First Amended Complaint. Further, the Court DENIES Defendants Mortgage Electronic Registration Systems, Inc. and Vericrest Financial, Inc.'s Motion to Strike as moot. 9 10



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