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Kilpatrick v. U.S. Bank, N.A.

United States District Court, S.D. California

March 24, 2014

JOHN KILPATRICK, et al., Plaintiffs,
US BANK, NA, et al., Defendants.


THOMAS J. WHELAN, District Judge.

On July 13, 2012, Plaintiffs John Kilpatrick and Cheryl Berglund commenced this action against Defendants U.S. Bank, NA, Morgtage Electronics Registration Systems, Inc. ("MERS"), and Wells Fargo Bank, NA, doing business as America's Servicing Company ("ASC"). Defendants now move to dismiss Plaintiffs' First Amended Complaint ("FAC") for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). Plaintiffs oppose.

The Court decides the matter on the papers submitted and without oral argument. See Civ. L.R. 7.1(d.1). For the following reasons, the Court GRANTS Defendants' motion to dismiss.


On or around November 20, 2006, Plaintiffs purchased real property located in San Diego, California by borrowing from Family Lending Services, Inc. ("FLS"). A recorded deed of trust secured this loan. (FAC 3:12-23, 5:15-18.) FLS purportedly securitized the loan and "claimed to transfer" Plaintiffs' deed of trust to the Bank of America Funding Corporation 2007-2 Trust. (Id.) U.S. Bank acted as trustee to that Trust and retained Wells Fargo Bank, NA, which did business as ASC to service the loan. (Id.) MERS was the "nominee mortgagee of the underlying mortgages." (Id. at 3:24-27.)

Plaintiffs made their mortgage payments until "around March 2010." (FAC 6:16-17.) When Mr. Kilpatrick's pay was reduced, Plaintiffs contacted ASC to request a loan modification. (Id. at 6:17-18.) A representative of ASC told Plaintiffs that they qualified for a loan modification under the "Making Home Affordable Program", [2] but that they needed to miss their next two payments before applying. (Id. at 5:23-24, 6:16-22.) Plaintiffs relied on this "misrepresentation" and missed their next two mortgage payments. (Id. at 6:23-25.) ASC sent Plaintiffs a letter, dated "May 16, 2013 [sic]" informing them that they were delinquent in the amount of $3, 984.86, the sum of two mortgage payments.[3] (Id. at 6:26-7:1.) ASC sent a second letter, dated June 15, 2010, informing Plaintiffs that ASC may be able to assist Plaintiffs with loan modification. (Id. at 7:1-3.) Plaintiffs submitted the requested documents to ASC, and ASC denied the request for a loan modification in a letter dated August 6, 2010. (Id. at 7:5-6.) When they received this denial, Plaintiffs called ASC and "were told to reapply again." (Id. at 7:7-8.) Plaintiffs reapplied, and the requests were denied again. (Id. at 7:8-9.) "The same scenario was played by Defendant ASC over and over again, until Plaintiffs' home was foreclosed on June 08, 2010." (Id. at 7:8-10.) In its denial letters-dated March 11, 2011, July 19, 2011, and May 31, 2012-ASC informed Plaintiffs that "they service Plaintiffs' loan on behalf of an investor that has not given them the contractual authority to modify' their loan." (Id. at 7:11-14.) Through purported misrepresentations, Defendants allegedly caused a "wrongful non-judicial foreclosure of Plaintiffs' home which took place on June 08, 2012." (Id. at 7:19-20.)

On July 13, 2012, Plaintiffs commenced this action. Then on September 26, 2013, Plaintiffs amended their complaint, asserting claims for: (1) declaratory relief; (2) negligence; (3) violation of 15 U.S.C. § 1641(g); (4) violation of California Business and Professions Code §§17200 and 17500; (5) accounting; and (6) wrongful foreclosure and to set aside the trustee's sale. Plaintiffs assert their first, fourth and sixth claims against all of the defendants; their second and fifth claims against only U.S. Bank and ASC; and their third claim solely against U.S. Bank. Defendants now move to dismiss the FAC for failure to state a claim. Plaintiffs oppose.


The court must dismiss a cause of action for failure to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint. Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). The court must accept all allegations of material fact as true and construe them in light most favorable to the nonmoving party. Cedars-Sanai Med. Ctr. v. Nat'l League of Postmasters of U.S. , 497 F.3d 972, 975 (9th Cir. 2007). Material allegations, even if doubtful in fact, are assumed to be true. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). However, the court need not "necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Warren v. Fox Family Worldwide, Inc. , 328 F.3d 1136, 1139 (9th Cir. 2003) (internal quotation marks omitted). In fact, the court does not need to accept any legal conclusions as true. Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009).

"While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds' of his entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555 (internal citations omitted). Instead, the allegations in the complaint "must be enough to raise a right to relief above the speculative level." Id . Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Iqbal , 556 U.S. at 678 (citing 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." Id . "The plausibility standard is not akin to a probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id . A complaint may be dismissed as a matter of law either for lack of a cognizable legal theory or for insufficient facts under a cognizable theory. Robertson v. Dean Witter Reynolds, Inc. , 749 F.2d 530, 534 (9th Cir. 1984).


A. Plaintiffs' Third Claim Is Time-Barred.

The statute of limitations for a claim for damages based on a violation of 15 U.S.C. § 1641(g) is one year after the occurrence of the violation. 15 U.S.C. § 1640(e). Because 15 U.S.C. § 1641(g) allows a creditor thirty days in which to provide notice to the borrower of a transfer or assignment, the statute of limitations begins to run after those thirty days have expired.

Defendants contend that Plaintiffs' claim for violation of 15 U.S.C. § 1641(g) is time-barred. (Defs.' Mot. 12:11-16.) Plaintiffs allege that the assignment transferring rights under the deed of trust was recorded on September 8, 2010. (FAC 12:15-18.) Therefore, absent equitable tolling, the statute of limitations began to run on October 8, 2010 at the latest. See 15 U.S.C. § 1640(e). ...

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