Opinion
No. C 10-04427 CRB.
February 14, 2011
ORDER GRANTING MOTION TO DISMISS
Plaintiff Annaleine Reynolds fell behind on her monthly mortgage payments and her lenders moved to foreclose on her home. Plaintiff then hired a company to do a "forensic audit" of her loan documents. After getting the results, she brought this suit. Before a motion to dismiss could be considered by the Court, Plaintiff filed a first amended complaint ("FAC") alleging fourteen causes of action, two of which involve federal statutes. Three of the four Defendants have filed a motion to dismiss all of Plaintiff's claims. Because Plaintiff's federal claims are time-barred, the Court DISMISSES the case against the three moving defendants, with prejudice.
It is unclear from the papers whether or not Plaintiff is still living in the home.
I. BACKGROUND
Plaintiff entered into a $488,000 adjustable rate mortgage in April 2007. FAC ¶ 3, Ex. 1. This was the last of several times Plaintiff had refinanced the property. Req. for Judicial Notice, Ex. A-D. The initial monthly payment was $1,630.83, which was not even enough to cover the interest on the loan. FAC ¶ 3. The loan had a negative balance cap, which required that when the balance of the loan reached 115% of the remaining principal, the monthly payment would rise to cover all of the interest accruing. Id., Ex. 1. The interest rate on this mortgage would adjust every year after the first 120 payments were made.Id. On June 4, 2010, Plaintiff was sent a notice of default. Req. for Judicial Notice, Ex. G. A notice of trustee's sale was recorded on Sept. 10, 2010. Id., Ex. H.
Defendants have moved for judicial notice of eight documents labeled Exhibits A-H. Req. for Judicial Notice at 2-4. These documents were all recorded in the Contra Costa County Recorder Office and thus the Court may properly notice them. See Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001) (court may take judicial notice of matters of public record).
Plaintiff filed this action on September 30, 2010. Compl. at 1. She amended that complaint on November 19, 2010. FAC at 1. There are four Defendants: Dave Applegate, CEO of GMAC Mortgage, LLC; Adam Lankford, President of Executive Trustee Services, LLC; R.K. Arnold, President and CEO of Mortgage Electronic Registration Systems, Inc.; and Doug Naidus, CEO of MortgageIT, Inc. Only Applegate, Lankford, and Arnold have moved to dismiss.
Plaintiff has received an extension of time to serve Defendant Naidus. See dckt. no. 36.
II. LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the claims alleged in a complaint. Ileto v. Glock, Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003). Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." "Detailed factual allegations" are not required, but the Rule does call for sufficient factual matter, accepted as true, to "state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). According to the Supreme Court, "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. at 1949-50. In determining facial plausibility, whether a complaint states a plausible claim is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.
III. DISCUSSION
Plaintiff's federal causes of action are as follows.
A. Claim 3: Truth in Lending Act ("TILA")
TILA claims for damages have a one year statute of limitations beginning "from the date of the occurrence of the violation," while TILA claims seeking rescission have a three-year statute of limitations. 15 U.S.C. § 1640(e). "The occurrence of the violation" is widely understood as the time the loan transaction is consummated. See, e.g., King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986); Rosal v. First Federal Bank of California, 671 F. Supp. 2d 1111, 1122 (N.D. Cal. 2009). In this case, the loan was signed in April 2007. FAC ¶ 3, Ex. 1. The Plaintiff filed this lawsuit on September 30, 2010. As the lawsuit was filed more than three years after the loan was signed, Plaintiff is barred by the statute of limitations.
Plaintiff could really only be asking for damages, as TILA does not allow rescission for residential mortgages, nor does it allow rescission for refinancing. 15 U.S.C. § 1635(e)(1)-(2).
Plaintiff argues that her claim could be saved by equitable tolling. She alleges that all statutes of limitations "relating to disclosures and notices required . . . were tolled due to Defendants' failure to effectively provide the required disclosures and notices." FAC ¶ 162. Equitable tolling of civil damages claims under TILA may suspend the limitations period until the borrower discovers or had a reasonable opportunity to discover the fraud or nondisclosures. See King, 784 F.2d at 915. "Equitable tolling may be applied if, despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of [his] claim." Gomez v. Wachovia Mortgage Corp., No. 09-cv-02111, 2010 U.S. Dist. LEXIS 3799, at *12 (N.D. Cal. Jan. 19, 2010) (citing Santa Maria v. Pacific Bell, 202 F.3d 1170, 1178 (9th Cir. 2000)). "The doctrine is not available to avoid the consequences of one's own negligence and does not apply when a late filing is due to claimant's failure to exercise due diligence in preserving his legal rights." Hensley v. United States, 531 F.3d 1052, 1058 (9th Cir. 2008) (citations omitted).
Plaintiff's argument for allowing equitable tolling here fails. She argues that she was unable to learn of Defendants' failure to disclose documents because Defendants failed to turn over the required documents. FAC ¶ 162. But Plaintiff does not say why due diligence could not have revealed the violation earlier. For example, the Complaint alleges that Plaintiff's rate adjusted for the first time in May 2007. Id. ¶ 3. Plaintiff had a reasonable opportunity to discover the fraud or nondisclosures then. In addition, courts have routinely rejected the argument that the "discovery" of violations through an audit are enough to toll the statute of limitations. See, e.g., Lee v. U.S. Bank, No. C 10-1434, 2010 U.S. Dist. LEXIS 66182, at *15-*16 (N.D. Cal. June 30, 2010); Sanchez v. Greenpoint Mortgage Funding, Inc., No. 09 CV 2005, 2010 U.S. Dist. LEXIS 45398, at *7-*8 (S.D. Cal. May 10, 2010). Therefore, Plaintiff's claim under TILA is barred by the statute of limitations.
B. Claim 4: Real Estate Settlement Procedures Act ("RESPA")
Plaintiff's RESPA claim is also barred by the statute of limitations. Plaintiff does not specify which section of RESPA she sues on but the most generous statute of limitations under RESPA is three years. The loan was signed in April 2007, which means the statute of limitations has expired. See FAC ¶ 3, Ex. 1.
RESPA causes of action under § 2605 are governed by a three-year statute of limitation. See 12 U.S.C. § 2614; Rosal, 671 F. Supp. 2d at 125. RESPA claims under § 2607 are governed by a one-year statute of limitation. See 12 U.S.C. § 2614.
The Ninth Circuit has not addressed whether equitable tolling is available under RESPA, and district courts have reached different conclusions. See, e.g., Brewer v. Indymac Bank, 609 F, Supp. 2d 1104, 1118 (E.D. Cal. 2009); Kay v. Wells Fargo Co., 247 F.R.D. 572, 578 (N.D. Cal. 2007). Even so, Plaintiff has not requested equitable tolling on this claim, and, for the same reasons that apply to her TILA claim, no tolling is appropriate. C. Claim 8: Rescission
Plaintiff asks for rescission of her loan, citing TILA, RESPA, fraudulent concealment, and general public policy. FAC ¶ 217. As already discussed, Plaintiff's claims under TILA and RESPA are time-barred.
IV. CONCLUSION
For the foregoing reasons, the Court GRANTS the Motion to Dismiss filed by the three served Defendants. The federal claims against those Defendants are therefore dismissed with prejudice. The Court declines to exercise supplemental jurisdiction as to Plaintiffs' remaining state law claims against the moving Defendants, and therefore dismisses those claims as well. If Plaintiff wishes, she may pursue relief on her state law causes of action in state court.
IT IS SO ORDERED.
Dated: February 14, 2011