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Mary Miller v. Wholesale America Mortgage


March 23, 2013


The opinion of the court was delivered by: United States District Judge Jon S. Tigar


This matter came before the court on March 21, 2013 for hearing on Plaintiff‟s Motion to Remand and Defendants‟ Motion to Dismiss. Having considered the papers filed by the parties, as 16 well as the arguments presented at the hearing, and good cause appearing, and for the reasons 17 stated below, the court now DENIES Plaintiff‟s Motion to Remand, and GRANTS IN PART and 18


Defendants‟ Motion to Dismiss, without prejudice. Plaintiff has leave to 19 amend her complaint within twenty-one days to establish a viable federal claim. Absent such a 20 claim, this Court is likely to remand Plaintiff‟s remaining state-law claims to state court. 21

I. Background

A. Factual History

Plaintiff Mary Miller purchased her Novato home in March 2006, financing the purchase 24 with a loan originated by Defendant Wholesale America Mortgage, Inc. ("Wholesale"). Second 25 Amended Complaint ("SAC"), ¶¶ 12-13. Plaintiff alleges, and for the purposes of a motion to 26 dismiss, this Court assumes, that the Truth in Lending Act ("TILA") Statement Plaintiff received 27 understated the APR on Plaintiff‟s loan by 4.9580%, and understated the finance charges 28 associated with Plaintiff‟s loan by $1,144.42. SAC, ¶¶ 40-41.

On March 10, 2011, an Assignment of Deed of Trust was recorded in the Marin County 2 recorder‟s office, listing Wholesale as a grantor and Aurora Loan Services, LLC ("Aurora") as the 3 grantee. SAC, ¶ 26. A Notice of Default, initiating foreclosure proceedings, was filed on March 4 Aurora informed Plaintiff that they were now the servicer of the loan and that U.S. Bank National 6 Association was now the owner of the loan.*fn1

28, 2011, listing Aurora as the beneficiary of Plaintiff‟s loan. SAC, ¶ 27. In February 2012, 5 Plaintiff brought an action in Marin County Superior Court on May 25, 2012, seeking to enjoin a scheduled foreclosure sale of her property. Complaint, Civ-1202426. Her complaint 9 named Wholesale, Aurora, U.S. Bank National Association, Lehman Brothers Holdings, Inc., 10

Secured Asset Securities Corporation and Does 1-50 as Defendants. Id. Plaintiff asserted claims 11 under TILA, the federal Home Ownership and Equity Protection Act, and several state common

B. Procedural History

law rights of action. Id. Five days later, the Marin County Superior Court issued a temporary 13 restraining order ("TRO") enjoining the foreclosure sale, pending a hearing scheduled for July 13, 14

The same day that the Superior Court issued the TRO, Defendants Aurora and U.S. Bank National Association, as Trustee for Lehman XS Trust Mortgage Pass-Through Certificates, Series 17 2006-GPI (together, "the Removing Defendants") removed the action to this Court. Dkt. No. 1. 18

The Removing Defendants argue that this court has federal question jurisdiction over the alleged 19 federal causes of action, and supplemental jurisdiction over the remaining state-law claims 20 because they arise out of the same "nucleus of operative facts." Dkt. No. 1. Plaintiff filed a 21

Motion to Remand, which the Court now considers. Dkt. No. 14. 22

The Removing Defendants have moved to dismiss three times. Dkt. Nos. 5, 19 & 36. The motion to dismiss, which seeks to dismiss Plaintiff‟s Second Amended Complaint. Dkt. No. 36. 2

The first cause of action in the SAC alleges that Defendants have violated TILA, and the second 3 through sixth causes allege California statutory and common law claims. 4

District courts must remand at any time that "it appears that the district court lacks subject

II. Motion to Remand

6 matter jurisdiction." Federal courts have subject matter jurisdiction "when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar, Inc. v. Williams, 482 U.S. 386, 391 (1987). If a court has original jurisdiction over one claim in a case, it may exercise "supplemental jurisdiction" over "all other claims that are so related to claims in the 9 action within such original jurisdiction that they form part of the same case or controversy." 28 10 U.S.C. s 1367(a). 11

Plaintiff does not dispute that this Court has federal question jurisdiction over her federal cause of action, or that it may properly exercise supplemental jurisdiction over her remaining 13 claims. Instead, she provides a bare quotation from 40235 Washington Street Corp. v. Lusardi, 14

976 F.2d 587, 589 (9th Cir. 1992) stating that, "[i]n proceedings in rem or quasi in rem, the forum 15 first assuming custody of the property at issue has exclusive jurisdiction to proceed." Plaintiff 16 omits the context surrounding this quotation. The 40235 Washington Street Corp. court was 17 applying Colorado River abstention, in which district courts abstain from hearing certain cases 18 that would interfere with a pending state court proceeding. Id. at 588; see also Colorado River 19

Water Conservation Dist. v. U.S., 424 U.S 800, 818 (1976). In 40235 Washington Street Corp., a 20 district court stayed a federal proceeding because there was already a different state court 21 proceeding had already assumed jurisdiction over the same property. 976 F.2d at 588. In this 22 case, there is no currently pending state court action with which this Court might interfere. 23

Defendants removed this case from state court in May, and the Colorado River doctrine does not 24 apply. 25

Plaintiff‟s motion to remand is DENIED.

III. Motion to Dismiss Count One of Plaintiff's Complaint

In the SAC‟s first cause of action, Plaintiff alleges that Defendants violated TILA by

3 misrepresenting the APR and finance charges in the TILA disclosure statement. ¶¶ 42-49. The 4

Removing Defendants move to dismiss this count because Plaintiff has not established that there is 5 a viable basis for assignee liability, and because Plaintiff‟s claim is time-barred. Dkt. No. 36. 6

TILA, and its implementing regulations, require creditors to provide accurate disclosures

A.Legal Standard

8 to borrowers, including accurate descriptions of the APR and finance charges associated with a loan. See 15 U.S.C. §§ 1605, 1606 & 1638(a); 12 C.F.R. §§ 226.4, 226.18 & 226.22. Plaintiffs may bring TILA actions against the original creditor‟s assignee only if "the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement." 15 11

U.S.C. § 1641(a). TILA also has a one-year statute of limitations which runs "from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). "The occurrence of the violation" is the time 13 the loan transaction is consummated. See King v. State of California, 784 F.2d 910, 915 (9th 14 Cir.1986). 15

"Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable 16 legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela 17 Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir.2008). For purposes of a motion to dismiss, "all 18 allegations of material fact are taken as true and construed in the light most favorable to the 19 nonmoving party." Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). 20

However, "[w]hile a complaint attacked by a Rule 12(b)(6) motion to dismiss does not 21 need detailed factual allegations, a Plaintiffs' obligation to provide the "grounds‟ of his 22

"entitle[ment] to relief‟ requires more than labels and conclusions, and a formulaic recitation of the 23 elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). 24

"To be entitled to the presumption of truth, allegations in a complaint or counterclaim may not 25 simply recite the elements of a cause of action, but must contain sufficient allegations of 26 underlying facts to give fair notice and to enable the opposing party to defend itself effectively." 27 28

Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) cert. denied, 132 S. Ct. 2101 (U.S. 2012). 2

"The factual allegations that are taken as true must plausibly suggest an entitlement to relief, such 3 that it is not unfair to require the opposing party to be subjected to the expense of discovery and 4 continued litigation." Id. To survive a motion to dismiss, a pleading must allege "enough fact to 5 raise a reasonable expectation that discovery will reveal evidence" to support the allegations. 6

"Dismissal with prejudice and without leave to amend is not appropriate unless it is clear Twombly, 550 U.S. at 556. v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003). In the absence of factors such as "undue 9 delay, bad faith or dilatory motive," leave to amend should be freely given. Foman v. Davis, 371 10 U.S. 178, 182 (1962). However, the district court's discretion to deny leave to amend is broader 11 where the plaintiff has previously filed an amended complaint. Miller v. Yokohama Tire Corp., 12 358 F.3d 616, 622 (9th Cir.2004). 13 on de novo review that the complaint could not be saved by amendment." Eminence Capital, LLC

B. Discussion

Since the Removing Defendants are not Plaintiff‟s original creditors, Plaintiff must allege 16 facts sufficient to meet the specific standard for assignee liability: the violation must be "one that 17 is apparent on the face of the disclosure statement." 16 U.S.C. § 1641(a). While the Ninth 18

Circuit has not interpreted this language, other circuits and courts within this district have 19 interpreted this requirement to only allow assignee liability for "violations that a reasonable person 20 can spot on the face of the disclosure statement or other assigned documents." See, e.g., Taylor v. 21

Quality Hyundai, Inc., 150 F.3d 689, 694 (7th Cir.1998); Ananiev v. Aurora Loan Services, LLC, 22

2012 WL 2838689 (N.D. Cal. July 10, 2012). This interpretation acknowledges that TILA 23 imposes a higher bar for assignee liability than original creditor liability, respecting the statutory 24 presumption of meaningful variation. See Sosa v. Alvarez-Machain, 542 U.S. 692, 711 n.9 25

Plaintiff‟s SAC does not satisfy this requirement. Plaintiff asserts only that Defendants‟

(2004). 26

TILA violations are "clear on their face." Dkt. No. 37. This conclusory allegation merely recites the elements of the cause of action without alleging specific facts explaining how the inaccuracy 2 of the disclosures would have been apparent to the assignees on the face of the assigned 3 documents. Therefore, the SAC is insufficient to maintain a claim against the Removing 4

Plaintiff‟s TILA claim is also subject on its face to a statute of limitations defense.*fn2 Since

6 the loan transaction was consummated in 2006, TILA‟s limitations period expired six years ago.

To avoid application of the statute of limitations, Plaintiff alleges that her claim is subject to

Defendants for TILA violations. 5 equitable tolling. Dkt. No. 36.

Once again, however, Plaintiff‟s SAC fails to plead adequate facts in support of her claim.

The Court will equitably toll a TILA claim "in situations where, despite all due diligence, the 10 party invoking equitable tolling is unable to obtain vital information bearing on the existence of 11 the claim." Cervantes v. Countrywide Home Loans, Inc., 656 F.3d 1034, 1045 (9th Cir. 2011)

(quoting Socop--Gonzalez v. I.N.S., 272 F.3d 1176, 1193 (9th Cir.2001) (internal quotation marks 13 omitted). Where "plaintiffs have not alleged circumstances beyond their control that prevented 14 them" from learning information bearing on their claim, "plaintiffs have not stated a basis for 15 equitable tolling." Cervantes, 656 F.3d at 1045-46; see also Hubbard v. Fidelity Fed. Bank, 91 16 F.3d 75, 79 (9th Cir.1996) (per curiam) (declining to toll TILA's statute of limitations when 17 "nothing prevented [the mortgagor] from comparing the loan contract, [the lender's] initial 18 disclosures, and TILA's statutory and regulatory requirements"). 19

Here, Plaintiff maintains that Defendants actively concealed the alleged TILA violations 20 from her and that she has only recently learned of the violations. SAC, ¶ 46. As with her assignee 21 liability claim, however, this allegation does little more than recite the legal requirements for 22 equitable tolling. To maintain a cause of action seven years after TILA‟s limitations period has 23 expired, a plaintiff must allege specific facts showing that she exercised due diligence in obtaining 24 information about her loan payments, but was prevented from doing so by forces beyond her 25 26 control. In particular, Plaintiff must demonstrate how, even after receiving mortgage bills for 2 many years, she was unlikely to discover that her loan was subject to a higher APR and finance 3 charges than had been previously disclosed. See Cabrera v. Long Beach Mortg., 2011 WL 4 1113467 at *3 (N.D. Cal. Mar. 25, 2011) (dismissing as time-barred a TILA claim brought two 5 years after plaintiff had experienced "extreme payment shock" at paying a higher-than-anticipated 6 interest rate). Plaintiff has not done so.

In short, the SAC fails to allege sufficient facts to maintain a viable claim under TILA against the Removing Defendants. Therefore, the Court GRANTS IN PART Defendants‟ Motion to Dismiss Plaintiff‟s Second Amended Complaint, as it applies to Plaintiff‟s first cause of action. 9

Plaintiff has leave to amend her complaint within twenty-one days of this order to state an 10 adequate TILA claim. Plaintiff is advised that the court is unlikely to grant further opportunities 11 to amend.

IV. Supplemental Jurisdiction over State Law Claims

14 which arise under state law.*fn3 The only jurisdiction this Court might exercise over those claims is 15 supplemental jurisdiction, pendent from Plaintiff‟s single federal claim,*fn4 which the court has now 16 dismissed. Because the court has granted Plaintiff leave to amend her complaint to cure her 17 defective TILA claim, the court need not not address the validity of Plaintiff‟s state law claims 18 now, since it is unlikely that the Court will retain jurisdiction of this case if Plaintiff is unable to 19 plead a viable federal claim. 20

When she amends her complaint, Plaintiff should take the opportunity to re-examine her Defendants also move to dismiss the SAC‟s second through fifth causes of action, all of state law claims in light of the objections raised in this motion, and make any amendments or 2 corrections that she thinks advisable. The court will evaluate the adequacy of the state law claims 3 if and when the need arises. 4

V. Conclusion

Plaintiff‟s motion to remand is DENIED. Defendant‟s motion to dismiss is GRANTED in 6 part and DENIED in part. Plaintiff has leave to amend her complaint within twenty-one days of 7 this order.


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