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Angel R. Mcgowan, Et. Al v. World Savings


December 10, 2012


The opinion of the court was delivered by: Carolyn K. Delaney United States Magistrate Judge


This action arises from a residential mortgage loan obtained by plaintiffs and originated by defendant in September 2007 for property located in Vacaville, CA. Dkts. 16, 11 at 6, 23. Plaintiffs proceed pro se in this action, which was referred to the undersigned by E.D. Cal. L.R. 302(c)(21), pursuant to 28 U.S.C. § 636(b)(1). Pending before the court is defendant Wells Fargo Bank, N.A.'s ("Wells Fargo") motion to dismiss. Dkt. 10. The motion was originally noticed for hearing on November 7, 2012 and subsequently reset by the court for hearing on November 28, 2012. Dkts. 10, 15. Plaintiff filed a timely opposition to the motion on November 5, 2012 . Dkt. 16.

At hearing, plaintiff Angel McGowan appeared before the court on behalf of both plaintiffs*fn1 and Kenneth Franklin appeared telephonically for defendant. Upon review of the documents in support of and in opposition to the motion, upon hearing the arguments of plaintiff and counsel, and good cause appearing therefor, THE COURT FINDS AS FOLLOWS:


On September 26, 2007, plaintiffs refinanced their existing home loan and entered into an adjustable rate mortgage loan agreement ("the Note") with World Savings Bank, FSB ("World Savings") for a loan in the amount of $330,000.00. Dkt. 1 at 21, 49. Subsequently, World Savings changed its name to Wachovia Mortgage, FSB and then to Wells Fargo Bank Southwest, N.A. before merging with Wells Fargo Bank, N.A. in November, 2009. Dkt. 10 at 9. Plaintiffs defaulted on the loan in August 2011, leading to the foreclosure of the property and a sale by trustee in November 2011. Dkt. 10 at 9.*fn2

The complaint alleges violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., and the California Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, et seq., along with claims of breach of contract and of the covenant of good faith and fair dealing. See Dkt. 1 at 20-21. Specifically, plaintiffs allege that Wells Fargo failed to disclose the actual interest rate on the Note, such that plaintiffs were unaware that they would not be building equity in their property during the time they held the loan. See Dkt. 1 at 20. Plaintiffs further allege that because of the "extremely onerous prepayment penalty" imposed by the terms of the Note, they were not able to rid themselves of the loan once they could no longer afford the payments. Id at 39.

Plaintiffs initiated this suit in the Superior Court of Solano County on July 10, 2012. Dkt. 1 at 20. Wells Fargo removed the action to federal court on September 17, 2012 pursuant to federal question and diversity jurisdiction. See 28 U.S.C. §§ 1441(b), 1331, 1332; Dkt. 1. The instant motion followed.


In considering a motion to dismiss for failure to state a claim upon which relief can be granted, the court must accept as true all of the factual allegations contained in the complaint, Erickson v. Pardus, 551 U.S. 89, 94 (2007), and construe the pleading in the light most favorable to the plaintiff, see Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).

In order to avoid dismissal for failure to state a claim a complaint must contain more than "bare assertion[s]," "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). In other words, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Furthermore, a claim upon which the court can grant relief has facial plausibility. Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. In ruling on a motion to dismiss pursuant to Rule 12(b), the court "may generally consider only allegations contained in the pleadings, exhibits attached to the complaint, and matters properly subject to judicial notice." Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 899 (9th Cir. 2007).

TILA Claims

Claims brought under TILA are subject to a one year statute of limitations period.

15 U.S.C. § 1640(e). The time limit begins from the date on which the plaintiff had the opportunity to discover the violation. Meyer v. Ameriquest Mort. Co., 342 F.3d 899, 902 (9th Cir. 2003) (plaintiff had opportunity to discovery TILA violation when loan was originated or when plaintiff possessed all loan documents). The loan at issue here was originated on September 26, 2007 and the instant litigation was commenced in state court on July 10, 2012. Dkt. 1 at 20. Plaintiffs do not allege that Wells Fargo failed to provide them with any of the required loan documentation, such as disclosures or the terms of repayment, at the time they signed the Note. Rather, they point to all of the documentation they received from Wells Fargo, characterize it as "misleading" and "confusing," and claim that such documentation violated TILA on its face. See Dkt. 16 at 11, 12, 17 (emphasis added). By plaintiffs' own admission, they were immediately aware of the alleged violation when the loan was originated - as they possessed all the required documentation at that time - and had until September 26, 2008 to bring a TILA claim. See Meyer, 342 F.3d at 902. That time has long since passed and there is no legal basis allowing the claim to go forward nearly four years after the statute of limitations has expired.*fn3 Thus, plaintiffs' TILA claims are barred by the statute of limitations.

State Law Claims

Plaintiffs allege claims of unlawful, unfair, and fraudulent business practices under the UCL. Dkt. 1 at 38-45; see Cal. Bus. & Prof. Code § 17200. They further allege breach of contract and of the covenant of good faith and fair dealing. Id at 41-44. All of these state law claims arise from the same set of operative facts regarding the terms of plaintiffs' home mortgage loan. Defendant moves to dismiss all such claims on the grounds that they are preempted by the federal Home Owners' Loan Act ("HOLA"). Dkt. 10 at 2.

The charter of defendant's predecessor, Wachovia Mortgage, FSB, demonstrates that at the time the loan at issue was originated, defendant was a federal savings bank regulated by the Office of Thrift Supervision ("OTS"). Dkt. 11 at 29-31.*fn4 The OTS, under the authority of HOLA, has promulgated regulations occupying the entire field of lending for federal savings associations. See Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008) (intending to give federal lending associations maximum lending flexibility in accordance with a uniform federal scheme of regulation and without regard to state laws purporting to regulate their credit activities); see also Bank of America v. City and County of San Francisco, 309 F.3d 551, 560-61 (9th Cir. 2002).*fn5 All of plaintiffs' claims under § 17200 relate to disclosures, advertising practices, the terms of credit (including amortization of loans), and adjustments to the interest rate.*fn6 These types of claims are all preempted by 12 C.F.R. § 560.2(a)-(b)(4), (9), (10).*fn7 Plaintiffs make no attempt, in either their opposition or at hearing, to plead a cause of action or other theory which overcomes this preemption.*fn8 Accordingly, all of these claims should be dismissed.

Plaintiffs' contract claims are similarly preempted by HOLA. The breach of contract claim alleges that defendant failed to apply monthly payments toward the principal loan balance as required by the Note. See Dkt. 1 at 42. And plaintiffs' claims under the implied covenant of good faith and fair dealing concern negative amortization and the terms under which the loan would be paid off. Id at 43. Because these claims directly relate to the terms by which a federal savings association extends credit, these, too, are preempted by HOLA. See 12 C.F.R. § 560.2(b)(4) (state laws purporting to impose requirements regarding the terms of credit are preempted).*fn9

Defendant NDeX West, LLC

Defendant NDeX West LLC ("NDeX West"), the remaining defendant in this action, did not join in Wells Fargo's motion to dismiss (dkt. 10). Nor did NDeX West move separately to dismiss the complaint. Though NDeX West consented to the removal of this action to federal court (dkt. 2), a review of the removal petition shows that NDeX West was never properly served with the complaint.*fn10 Nonetheless, the arguments made on behalf of Wells Fargo are equally applicable to NDeX West, as the claims against the two defendants are identical. See Silverton v. Dep't of Treasury, 644 F.2d 1341, 1345 (9th Cir. 1981) (court may enter sua sponte dismissal as to defendants who have not moved to dismiss where such defendants are in a position similar to that of moving defendants or where claims against such defendants are integrally related). Accordingly, the TILA and state law claims against NDeX West should also be dismissed.

As discussed herein, plaintiffs' TILA claims are barred by the statute of limitations and all of their state law claims are preempted by HOLA. The motion to dismiss should be granted and all of plaintiffs' claims against all defendants should be dismissed.


Accordingly, IT IS HEREBY ORDERED that the defendant's request for judicial notice (dkt. 11) is granted; and


1. Defendant's motion to dismiss (dkt. 10) be GRANTED;

2. All defendants be DISMISSED WITH PREJUDICE; and

3. This action be closed.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any reply to the objections shall be served and filed within fourteen days after service of the objections. The parties are advised that failure to file objections within the specified time may waive the right to appeal the District Court's order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

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