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Armando A. Lobato v. Acqura Loan Services; Castle Peak 2010-1 Loan Trust

February 23, 2012

ARMANDO A. LOBATO
PLAINTIFF,
v.
ACQURA LOAN SERVICES; CASTLE PEAK 2010-1 LOAN TRUST, BY U.S. BANK TRUST, NATIONAL ASSOCIATION, NOT IN ITS INDIVIDUAL CAPACITY BUT SOLELY AS OWNER TRUSTEE; T.D. SERVICES COMPANY; YOLANDA YVETTE LEGRAND; DOES 1 THROUGH 50 INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Hayes: Judge:

ORDER

The matter before the Court is the Motion to Dismiss (ECF No. 3) filed by Acqura Loan Services, Castle Peak 2010-1 Loan Trust, and Yolanda Yvette Legrand.

I. Procedural Background

On October 31, 2011, Plaintiff Armando A. Lobato initiated this action by filing a Complaint in the Superior Court of California for the County of San Diego. (ECF No. 1-2). November 8, 2011, Defendants Acqura Loan Services ("Acqura"), Castle Peak 2010-1 Loan Trust ("Castle"), and Yolanda Yvette Legrand ("Legrand") removed the matter to this Court. (ECF No. 1). On November 28, 2011, Defendants Acqura, Castle, and Legrand filed a Motion to Dismiss. (ECF No. 3). On December 12, 2011, Plaintiff filed an Opposition. (ECF No. 4).

On December 16, 2011, Defendants Acqura, Castle, and Legrand filed a Reply. (ECF No. 5).

II. Allegations of the Complaint

Plaintiff is the owner of property located at 10918 Ivy Hill Drive 33, San Diego, CA 92131. On November 7, 2006, Plaintiff executed an adjustable rate note on the property for $384,000. (ECF No. 1-2 at ¶ 11). On November 7, 2006, Plaintiff executed a deed of trust on the property which listed Mortgage Lenders Network USA Inc. as the lender and Mitchell L. Heffeman as trustee. Id. at ¶¶ 16-17. On March 16, 2011, T.D. Services Company executed a "Notice of Default and of Election to Sell Under Deed of Trust" on behalf of the beneficiary. Id. at ¶20. The notice of default stated that Plaintiff owed payments to Castle. Id. On September 20, 2011, a notice of trustee's sale was recorded against the property by T.D. Services Company. Id. at ¶ 23. On October 18, 2010, a substitution of trustee was recorded against the property adding T.D. Services Company as trustee. Id. at ¶ 24. Yolanda Legrand notarized the substitution of trustee. Id. The substitution of trustee was fraudulent. Id. The property was sold pursuant to trustees' sale. Id. at ¶ 26.

Plaintiff asserts the following claims: (1) violation of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1611 et seq.; (2) violation of the Real Estate Settlement and Procedures Act ("RESPA"), 12 U.S.C. § 2605 et seq.; (3) violation of 15 U.S.C. § 1602 et seq., the Home Ownership and Equity Protection Act ("HOEPA"); (4) violation of the Federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692; (5) breach of fiduciary duty; (6) breach of the covenant of good faith and fair dealing; (7) fraud; (8) violation of Cal. Civil Code § 2923.6; (9) violation of Cal. Civil Code § 2923.5 and Cal. Code Civ. P. § 2015.5; (10) quiet title; and (11) violation of Cal. Bus. & Prof. Code § 17200. Plaintiff seeks compensatory, punitive, and statutory damages, injunctive relief, attorney's fees, cancellation of the sale and restitution.

III. Discussion

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). Federal Rule of Civil Procedure 8(a) provides: "A pleading that states a claim for relief must contain ... a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). 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, 556 U.S. 662, 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); see, e.g., Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 683 (9th Cir. 2009) ("Plaintiffs' general statement that Wal-Mart exercised control over their day-to-day employment is a conclusion, not a factual allegation stated with any specificity. We need not accept Plaintiffs' unwarranted conclusion in reviewing a motion to dismiss."). "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).

1. TILA - First Claim HOEPA - Third Claim

Plaintiff's first claim for violation of TILA alleges that Defendants "have refused and continue to refuse to validate or otherwise make a full accounting and the required disclosures as to the true finance charges and fees." (ECF No. 1-2 at ¶ 30). Plaintiff alleges that Defendants "have improperly retained funds belonging to Plaintiff in amounts to be determined." Id. Plaintiff alleges that Defendants have failed to "disclose the status of ownership of the loans." Id. Plaintiff seeks rescission or cancellation of the loan and compensatory damages, attorney fees, and punitive damages. Plaintiff's third claim for violation of HOEPA alleges that the loan was "placed in violation of the HOEPA as it was placed and administered and otherwise utilized without regard to Plaintiff's income or cash flow and with the intention of inducing a default." Id. at ¶ 44.

a. Statute of Limitations

Defendants Acqura, Castle, and Legrand seek to dismiss Plaintiff's first claim for violation of TILA on the grounds that the claim is barred by the statute of limitations and Plaintiff is not entitled to rescission without valid tender. Defendants Acqura, Castle, and Legrand seek to dismiss Plaintiff's third claim for violation of HOEPA on the grounds that the claim is barred by the statute of limitations.

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). "HOEPA is simply a component of TILA, and thus, it is governed by the same statute of limitations." Tanuvasa v. F.D.I.C., Case No. CV 09-02795 DDP (AGRx),2009 WL 3108568 at * 3 (C.D. Cal. Sept. 23, 2009). "[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 Federal Bank, 91 F.3d 75, 70 (9th Cir. 1996) (citing King, 784 F.2d at 915).

The Complaint alleges that Plaintiff obtained the subject loan on November 7, 2006. Plaintiff did not file this lawsuit until October 31, 2011, approximately five years after the transaction was consummated. Accordingly, Plaintiff's TILA claim for damages is barred by the one-year statute of limitations.*fn1 Plaintiff's HOEPA claim is also barred by the one-year statute of limitations. The Court concludes that Plaintiff's claims under TILA and HOEPA are barred by the statute of limitations.

b. TILA Claim for Rescission

In order to prevail on a TILA rescission claim, the borrower is 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); see also 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 Mortgage 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 Assn., 15 Cal. App. 3d 112, 117 (1971); see also Garza v. Am. Home Mortgage, 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.").

In this case, Plaintiff alleges that the loan amount was $384,000. Plaintiff has failed to allege any facts which would demonstrate an ability to tender the principal balance of the loan. The Court concludes that the Complaint fails to allege sufficient facts to support a claim for rescission under TILA.Plaintiff's first claim for violations of TILA and Plaintiff's third claim for violation of HOEPA are dismissed as to Defendants Acqura, Castle, and Legrand.

2. RESPA - Second Claim

Plaintiff alleges that Defendants "placed loans for the purpose of unlawfully increasing or otherwise obtaining yield spread fees and sums in excess of what would have been lawfully earned." (ECF No. 1-2 at ¶ 37). Plaintiff alleges that Defendants Acqura and T.D. Services Company "violated the requirements of [12] U.S.C. § 2605(b) [regarding notice by transferor of loan servicing at time of transfer] in that the servicing contract or duties there under were transferred or hypothecated without the ...


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