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Ronal Vargas, et al v. Hsbc Bank Usa

September 10, 2012


The opinion of the court was delivered by: Hon. Roger T. Benitez United States District Judge


Presently before the Court is the joint motion to strike and motion to dismiss of Defendants HSBC Bank USA, N.A., Litton Loan Servicing, LP, and Ocwen Loan Servicing, LLC. For the reasons stated below, the motion to strike is denied. The motion to dismiss is granted in part, with leave to amend.


On September 27, 2011, Plaintiffs Ronal Vargas and Maria Vargas (husband and wife) filed suit against Defendants HSBC Bank U.S.A, National Association ("HSBC Bank"); Litton Loan Servicing, LP ("Litton"); and Ocwen Loan Servicing, LLC ("Ocwen") in the Central District of California. Defendants filed a motion to dismiss. Plaintiffs filed an amended complaint. Thereafter, the United States District Court for the Central District of California transferred the case to this Court, based on improper venue.

Plaintiffs allege in the First Amended Complaint ("Complaint") that in September 2006, Plaintiffs obtained a loan for $480,000 to purchase real property in Chula Vista, California (FAC ¶ 1.) A promissory note in favor of the lender, Bridgefield Mortgage Corporation*fn1 (formerly known as ResMAE Mortgage Corporation), was executed along with a deed of trust. On April 11, 2008, a notice of default was recorded reflecting HSBC as Trustee of the loan and the amount of $20,127.22 due.

According to the Complaint, in March 2009, Plaintiffs initiated loan modification negotiation efforts with Litton to reduce the total amount of their mortgage. (FAC ¶ 20.) After three months of negotiation, Litton offered Plaintiffs a trial plan, effective July 1, 2009. After collecting Plaintiffs' first trial plan payment, Litton rejected their second payment. (FAC ¶ 21.) Following multiple attempts by Plaintiffs to reinstate the cancelled trial plan, the modification was re-approved, effective January 1, 2010. (FAC ¶ 24.) After collecting five modified payments, Litton denied the loan modification.

In the Complaint, Plaintiffs allege three federal claims for relief and a number of ancillary state law claims: (1) violation of 15 U.S.C. § 1641(g) (The Helping Families Save Their Homes Act of 2009); (2) violation of 12 U.S.C. § 2605 (Real Estate Settlement Procedures Act); (3) violation of 15 U.S.C. § 1692e (Fair Debt Collection Practices Act); (4) negligence; (5) quasi contract; (6) California Business and Professions Code Section 17200; (7) accounting; (8) quiet title; (9) breach of contract; (10) breach of implied covenant of good faith and fair dealing; and

(11) declaratory relief.



This is a frivolous motion. Defendants first move to strike the Complaint as untimely filed. Defendants argue that under the 2009 amendments to Fed. R. Civ. P. Rule 15(a), Plaintiffs have 21 days to file an amended complaint without leave of court. That is correct. However, Defendants assert that the time period for amending ran out on November 11, 2011. Defendants are apparently unaware that November 11, 2011 was a federal holiday (Veterans' Day) during which federal courts were closed for business.*fn2 Overlooking that, Defendants charge that when the amended Complaint was filed on November 14, 2011, it was three days late. But under Fed. R. Civ. P. 6(a)(1)(C), which governs computing time for motions, if the last day of the period is a Saturday, Sunday, or a legal holiday, the period continues to run until the end of the next day that is not Saturday, Sunday, or a legal holiday. Thus, when the Plaintiffs timely filed their amended Complaint on November 14, 2011, it was timely. Curiously, although this plain error was pointed out in Plaintiffs' opposition brief, defense counsel have done nothing to withdraw their flawed motion to strike.*fn3 The motion to strike is denied.


Defendants request the court take judicial notice of documents in support of their motion to dismiss. Plaintiffs request judicial notice in support of their opposition. "In deciding whether to dismiss a claim under Fed. R. Civ. P. 12(b)(6), a court may look beyond plaintiff's complaint to matters of public record." Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995); Fed. R. Evid. 201(b). Thus, the Court will take judicial notice of the existence of documents identified by Defendants and Plaintiffs. The Court does not, however, take judicial notice of facts asserted within the documents that are disputed. Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir. 2001).


Next, Defendants attack the three federal claims for relief under Fed. R. Civ. P. 12(b)(6), whereupon dismissal is appropriate if the complaint fails to state a plausible claim for relief on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556-57 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (requiring plaintiff to plead factual content that provides "more than a sheer possibility that a defendant has acted unlawfully"). Under this standard, dismissal is appropriate if the complaint fails to state enough facts to raise a reasonable expectation that discovery will reveal evidence of the matter complained of, or if the complaint lacks a cognizable legal theory under which relief may be granted. Twombly, 550 555-56.

In resolving a Rule 12(b)(6) motion, a court generally cannot consider material outside the complaint. Branch v. Tunnel, 14 F.3d 449, 453-54 (9th Cir. 1994). However, a court may still consider exhibits attached to the complaint. Id. A court may treat such a document as "part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). In addition, "[a] court may . . . consider certain materials -- documents attached to the complaint, documents incorporated by reference in the complaint, or matters of judicial notice -- without converting the motion to dismiss into a motion for summary judgment." Id. However, judicial notice of adjudicative facts are only taken when they are "not subject to reasonable dispute." Id.

A. Violation of TILA (15 U.S.C. § 1641(g)) Against HSBC Bank

For its fifth claim for relief, Plaintiffs allege that Defendant HSBC violated 15 U.S.C. § 1641(g) of the Truth in Lending Act ("TILA") by failing to provide Plaintiffs written notice within 30 days after HSBC was assigned the original promissory note. Plaintiffs also allege that they never received notice of the date of any assignment. Under § 1641(g), a creditor that is the new owner or assignee of a debt must notify the borrower in writing of such transfer no later than 30 days after the date on which a mortgage loan is sold or otherwise transferred. Significantly, TILA's "notice requirement" clause was added in 2009. Pub. L. No. 111-22, 123 Stat. 1632.

Defendants move to dismiss for failure to state a claim arguing this subsection did not exist when the note was sold to HSBC in 2007. In support of their argument, Defendants rely on the truth of matters contained in a judicially noticeable document, the "Notice of Default." The Notice of Default reflects HSBC Bank as the trustee and Mortgage Electronic Registration Systems as the beneficiary of the note, at the time it was filed with the San Diego Recorder's Office on April 14, 2008. The problem with Defendants' argument is that it requires the Court to prematurely decide a genuine issue of material fact: if and when HSBC became Plaintiffs' "creditor."*fn4 Defendant's second argument, that the claim is time-barred by the one-year statute of limitations on TILA claims, is likewise premature. Without deciding the factual issue of when HSBC became a creditor, one cannot say when the statue of limitations began to run. Even if it were undisputed as to when HSBC became a creditor, neither party has addressed the question of whether § 1641(g) has retroactive application, whether § 1641(g) imposes a continuing duty on a creditor, or whether the statute of limitations may be tolled.

The gist of Plaintiffs' Complaint is that they do not know when, if ever, the note was transferred to HSBC, but they do know that HSBC took actions as if it were their creditor. On summary judgment or at trial, it may well become clear that HSBC did not violate § 1641(g) or that the claim is time-barred. But at this point, Plaintiffs have plausibly pled a claim for relief. Defendants' motion to dismiss this claim is denied.

B. Violation of RESPA (12 U.S.C. § 2605(e)) Against Litton

In their sixth claim for relief, Plaintiffs allege that Defendant Litton violated the Real Estate Settlement Procedures Act ("RESPA") when Litton failed to respond to a qualified ...

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