Plaintiff challenges the foreclosure and imminent trustee's sale of her home in a complaint raising thirteen causes of action: (1) violation of the Homeowner's Equity Protection Act; (2) violation of the Real Estate Settlement Procedures Act (RESPA); (3) violation of the Truth In Lending Act (TILA); (4) violation of the Fair Credit Reporting Act; (5) fraudulent misrepresentation; (6) breach of fiduciary duties; (7) unjust enrichment; (8) civil conspiracy; (9) civil RICO violations; (10) quiet title; (11) usury and fraud; (12) wrongful foreclosure; and (13) breach of security interest. She names the following defendants: Ampro Mortgage; Liberty Title Company: Mortgage Electronic Registration Systems, Inc. (MERS); J.P. Morgan Chase Bank; U.S. Bank; Wamu Mortgage Pass Through Certificate for WMALT Series 2006-AR8 Trust (WAMU); California Reconveyance Company (CRC); and Does 1-20.
Defendants MERS, JPMorgan Chase Bank, US Bank National Association as Trustee for WAMU (erroneously sued as U.S. Bank), Wamu Mortgage Pass Through Certificate for WMALT Series 2006-AR8 Trust), and California Reconveyance Company have filed a motion to dismiss for failure to state a claim. (ECF No.8).*fn1 Plaintiff has opposed the motion and defendants have filed a reply. The court submitted this motion on the pleadings.
Plaintiff has also filed a motion for a preliminary injunction, which sought to enjoin the trustee's sale of the property set for October 31, 2011. Defendants opposed the motion and plaintiff replied. This, too, was submitted on the pleadings.
Because the viability of the motion for injunctive relief depends on the viability of the complaint, the court considers the motion to dismiss first.
I. 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).
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, 556 U.S. 662, 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 of 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).
Defendants have asked the court to take judicial notice of a number of documents recorded in Placer County, all relating to the acquisition of and foreclosure on 8800 Ridge Road, Newcastle, California, which is the property at issue. ECF No. 9 (RFJN). 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. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (court may take judicial notice of matters of public record). In connection with her opposition to the motion to dismiss, approximately three months after she filed the complaint, plaintiff has filed a number of exhibits, which she denominates "exhibits to the complaint." See generally ECF No. 13 (Plaintiff's Exhibit Index). These documents do not correspond to the exhibits that are in fact attached to the complaint nor are they mentioned in the body of the complaint. As plaintiff has not otherwise requested that the court take judicial notice of these documents and shown that they are appropriate subjects of such notice, the court declines to consider them in connection with the motion to dismiss.
On June 9, 2006, plaintiff Paula Tilley and her husband Michael Tilley executed two deeds of trust, one in the amount of $622,000 and the second in the amount of $78,000, both relating to the property described as 8800 Ridge Road, Newcastle. RFJN Exs. 1 & 2. The first deed of trust identified the Tilleys as the borrowers; Ampro Mortgage, a division of United Financial Mortgage Corp., as the lender; Liberty Title Company as the trustee; and MERS as the nominee for the lender and the lender's successors and assigns, as well as the beneficiary under the security interest. Id., Ex. 1. The second deed of trust identified the Tilleys as the borrowers, Ampro Mortgage as both the lender and trustee, and MERS as the lender's nominee and the beneficiary of the deed of trust. Id., Ex. 2. The deeds of trust grant the power to the trustee. Id., Exs. 1 & 2. In addition, both notify the borrowers that the note or a partial interest in the note, plus the deed of trust, could be sold without prior notice to the borrower. Id. Finally, the deeds provided that the lender had the option to appoint a successor trustee by an instrument executed by the lender and recorded in the county recorder's office. Id. These deeds were recorded in the Placer County Recorder's Office on June 15, 2006.
On November 3, 2009, Deborah Brignac, Vice President of MERS, signed an assignment of the deed of trust, assigning the deed and the note to U.S. Bank National Association, as trust for WAMU Mortgage Pass Through Certificate, for WMALT Series 2006-AR8; this was recorded in Placer County on November 10, 2009 at 9:21:29 a.m. RFJN, Ex. 3. On November 10, 2009, at 9:21:33 a.m., the Recorder's Office recorded a substitution of trustee, substituting California Reconveyance Company (CRC) as trustee. This was signed on November 3, 2009, by Deborah Brignac, identified as Vice President of U.S. Bank National Association, as trustee for the WAMU Mortgage Pass-Through Certificate, by JP Morgan Chase Bank, as attorney-in-fact. RFJN at 4. On November 10, 2009, at 9:21:36 a.m., CRC recorded a Notice of Default and Election To Sell, signed on November 3, 2009, by Silvia Freeberg, Assistant Secretary of CRC. RFJN, Ex. 5.
CRC recorded a Notice of Trustee's Sale on March 11, 2010; this was signed by Deborah Brignac as Vice President. RFJN, Ex. 6. CRC recorded a second Notice of Trustee's Sale on March 31, 2011. RFJN, Ex. 7. This was signed by James Tolliver, Assistant Secretary of CRC.
A. HOEPA and TILA (First and Third Causes of Action)
Plaintiff alleges that defendants failed to make certain disclosures required by the Homeowner Equity Protection Act (HOEPA), 15 U.S.C. §§1639, et seq., including the right to rescind the transaction, the right not to complete the transaction, and the correct amount being financed, and that the defendants extended credit to plaintiff without regard to her ability to pay. Compl. ¶¶ 65-67, 69-70. She also alleges that defendants violated the Truth in Lending Act (TILA), 15 U.S.C. §§ 160a, et seq. and Regulation Z by failing to disclose various charges connected to the financing of the loan and by calculating the annual percentage rate based on the improper amounts. Compl. ¶¶ 87-89. Plaintiff alleges that as a result of these failures, she has the right to rescind the loan and to a termination of the security interest in the property, as well as a return of all monies paid in connection with the transaction. Compl. ¶¶ 71, 73. The complaint also alleges that plaintiff did not learn of these violations until January 2011.
Defendants argue that any claims for rescission or cancellation of the loan are time barred, that they are not the proper defendants for any such claims because the record shows that Ampro Mortgage was the originating lender with the duty to disclose, and that plaintiff has not tendered the loan proceeds, a necessary prerequisite to rescission. Defendants' Motion To Dismiss (MTD) at 9-11. Plaintiff counters that she is entitled to equitable tolling of the claims, that these defendants are liable because of the allegations of fraud and conspiracy, and that tender should not be required because defendants' actions are void rather than merely voidable. Opp'n at 10-11.
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," and 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 showing 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). Plaintiff's allegations fall short of this standard; although she suggests that the loan was predatory and made without regard to her ability to pay, she provides no factual support for her conclusory claim. This is insufficient to meet her pleading requirements. Enriquez v. Countrywide Home Loans, FSB, F.Supp.2d , 2011 WL 3861402, at *3 (D. Haw. Aug. 31, 2011).
Plaintiff's TILA claim is similarly conclusory: she says only that "[d]efendants failed to provide accurate TILA disclosures and understated the amount being financed," without describing the omitted disclosures. Compl. ¶ 70. This is insufficient to survive a motion to dismiss. Compare Champlaie v. BAC Home Loans Servicing, LP, 706 F.Supp.2d 1029, 1051 (E.D. Cal. 2009).
There are additional problems with plaintiff's TILA and HOEPA claims. 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 June 2006, rendering the TILA and HOEPA actions untimely. Compl. ¶ 19.
There is no equitable tolling of any rescission claim: § 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 plaintiff's mortgage was subject to rescission, this action comes too late. See Champlaie, 706 F.Supp.2d at 1042.
Plaintiff may be entitled to equitable tolling for her TILA and HOEPA damages claims, but the 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 Comm'n v. Williams, 104 F.3d 237, 240-41 (9th Cir. 1996) (emphasis in original)). Plaintiff's assertion that she did not discover the violations until January 2011 "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.
Finally, plaintiff contends that these defendants are liable for these violations even though they were not the original lenders because of the fraud and civil conspiracy allegations contained elsewhere in the complaint. She provides absolutely no explanation as to how these defendants' alleged participation in the fraud as alleged in the complaint makes them liable for the alleged nondisclosures. Moreover, as discussed more fully below, plaintiff's conspiracy cause of action is itself inadequately pleaded.
Plaintiff will be given leave to amend this portion of the damage claims, if she is able to do so in light of ...