Opinion
MEMORANDUM AND ORDER RE: MOTIONS TO DISMISS
WILLIAM B. SHUBB, District Judge.
Plaintiffs Mike Matracia and Heidi K. Matracia bring this action against defendants JP Morgan Chase Bank, NA ("JP Morgan"), Chase Home Finance, LLC ("Chase"), First American Loanstar Trustee Services, LLC ("Loanstar"), First American Title Insurance Company ("FATCO"), and Comerica Bank California, arising from defendants' allegedly wrongful conduct related to a residential loan. Loanstar and FATCO now move to dismiss the First Amended Complaint ("FAC") for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6), (Docket No. 52), as does JP Morgan for itself and as successor in interest to Chase. (Docket No. 54.)
I. Factual and Procedural Background
In December of 2007, plaintiffs obtained a loan from JP Morgan, secured by their residence at 1659 Bunting Way in Lincoln, California. (FAC ¶¶ 1, 18, Ex. B (Docket Nos. 39, 41).) Plaintiffs have defaulted on their loan and notices of default and trustee's sale have been filed, although a foreclosure sale has not yet occurred. (Id. ¶¶ 16, 18, Exs. C, G.)
On January 21, 2011, plaintiffs filed the instant action. The court granted defendants' motion to dismiss the Complaint on May 12, 2011, (Docket No. 27), and plaintiffs then amended their complaint. Plaintiffs' FAC alleges claims against JP Morgan and Comerica under (1) the Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C. § 1639, (2) the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617, and (3) the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, and against all defendants under (4) the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681-1681x, as well as claims for (5) fraudulent misrepresentation, (6) breach of fiduciary duties, (7) unjust enrichment, (8) civil conspiracy, (9) civil violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968, (10) quiet title, (11) usury and fraud, (12) wrongful foreclosure, and (13) breach of trust instrument.
II. Discussion
On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes , 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer , 468 U.S. 183 (1984); Cruz v. Beto , 405 U.S. 319, 322 (1972). "To 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.'" Ashcroft v. Iqbal, ___ U.S. ____, ____ , 129 S.Ct. 1937, 1949 (2009) (quoting Bell A. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). This "plausibility standard, " however, "asks for more than a sheer possibility that a defendant has acted unlawfully, " and "[w]here a complaint pleads facts that are merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of entitlement to relief.'" Iqbal , 129 S.Ct. at 1949 (quoting Twombly , 550 U.S. at 556-57).
A. TILA, HOEPA, and RESPA Claims
A borrower's right to rescind a transaction under TILA expires three years after the consummation of the transaction. 15 U.S.C. § 1635(f). "[Section] 1635(f) completely extinguishes the right of rescission at the end of the 3-year period, " which cannot be tolled. Beach v. Ocwen Fed. Bank , 523 U.S. 410, 412 (1998); see also Miguel v. Country Funding Corp. , 309 F.3d 1161, 1164 (9th Cir. 2002) ("[S]ection 1635(f) represents an absolute limitation on rescission actions' which bars any claims filed more than three years after the consummation of the transaction." (quoting King v. California , 784 F.2d 910, 913 (9th Cir. 1986)).
Here, the loan was consummated in December of 2007, (see FAC ¶ 18, Ex. B), and this action was commenced in January of 2011. Accordingly, the three-year statute of limitations has run and the court will dismiss the TILA rescission claim.
The statute of limitations for a TILA damages claim is one year from the occurrence of a violation. 15 U.S.C. § 1640(e). The "limitations period in [s]ection 1640(e) runs from the date of consummation of the transaction." King , 784 F.2d at 915. "[T]he doctrine of equitable tolling may, in the appropriate circumstances, suspend the limitations period until the borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the basis of the TILA action." Id . While the applicability of the equitable tolling doctrine often depends on matters outside the pleadings, Supermail Cargo, Inc. v. United States , 68 F.3d 1204, 1206 (9th Cir. 1995), dismissal may be appropriate when a plaintiff fails to allege facts suggesting that he did not have a reasonable opportunity to discover the violation. See Meyer v. Ameriquest Mortg. Co. , 342 F.3d 899, 902-03 (9th Cir. 2003); Hubbard v. Fidelity Fed. Bank , 91 F.3d 75, 79 (9th Cir. 1996).
Here, plaintiffs have not alleged facts suggesting that they did not have a reasonable opportunity to discover the TILA violations. Plaintiffs have included cursory allegations throughout the FAC that they did not learn of any violations until May of 2010, and thus any applicable statute of limitation should run from this date. However, the FAC does not allege that they were somehow unable to compare the allegedly improper disclosures in the loan documents with the required disclosures under TILA, nor do plaintiffs explain why they could not have learned of the alleged violations within the statutory period. See Von Brincken v. Mortgageclose.Com, Inc., No. 2:10-CV-2153 JAM KJN, 2011 WL 2621010, at *3 (E.D. Cal. June 30, 2011). Accordingly, the court will dismiss the TILA damages claim. HOEPA, which is an amendment to TILA, is also subject to the TILA's statute of limitations, and that claim will be dismissed as well. See Hamilton v. Bank of Blue Valley , 746 F.Supp.2d 1160, 1179 (E.D. Cal. 2010) (O'Neill, J.).
Plaintiffs also allege that defendants violated RESPA, 12 U.S.C. § 2607, because defendants "excepted [sic] charges for the rendering of real estate services which were in fact charges for other than services actually performed." (FAC ¶ 59.) "The primary ill that § 2607 is designed to remedy is the potential for unnecessarily high settlement charges... caused by kickbacks, fee-splitting, and other practices that suppress price competition for settlement services. This ill occurs, if at all, when the plaintiff pays for the [tainted] service, typically at the closing." Jensen v. Quality Loan Serv. Corp. , 702 F.Supp.2d 1183, 1195 (E.D. Cal. 2010) (Wanger, J.) (quoting Snow v. First Am. Title Ins., Co. , 332 F.3d 356, 359-60 (5th Cir. 2003)) (second alteration in original). A § 2607 claim may be brought within one year from the date of the occurrence of the violation. 12 U.S.C. § 2614. "Barring extenuating circumstances, the date of the occurrence of the violation is the date on which the loan closed." Solano v. Am.'s Servicing Co., No. 2:10-cv-02426 GEB GGH, 2011 WL 1669735, at *3 (E.D. Cal. May 3, 2011) (quoting Ayala v. World Sav. Bank, FSB , 616 F.Supp.2d 1007, 1020 (C.D. Cal. 2009)) (internal quotation marks omitted).
Here, more than three years have passed since the loan was made. As discussed above, plaintiffs do not allege why they could not have discovered the alleged violation within the one-year statutory period. Therefore, plaintiffs have not shown that equitable tolling applies to their claim. Furthermore, the claim itself is devoid of factual support for the conclusory allegation that defendants violated RESPA, and it is thus insufficient to state a claim against defendants. Thus, the court will dismiss plaintiffs' RESPA claim.
B. FCRA Claim
Section 1681s-2(a) of the FCRA imposes duties on furnishers of information to credit reporting agencies to ensure that the information provided is accurate, but there is no private right of action for violations. 15 U.S.C. § 1681s-2(d); Nelson v. Chase Manhattan Mortg. Corp. , 282 F.3d 1057, 1059-60 (9th Cir. 2002). However, there is a private right of action for violations of § 1681s-2(b), which imposes a duty of reinvestigation on furnishers of information upon notice of a dispute regarding the information. 15 U.S.C. § 1681s-2(d); Nelson , 282 F.3d at 1059-60. To succeed on such a claim, plaintiffs must allege that they had a dispute with a credit reporting agency regarding the accuracy of an account, that the credit reporting agency notified the furnisher of the information, and that the furnisher failed to take the remedial measures outlined in the statute. 15 U.S.C. § 1681s-2(b).
Here, plaintiffs have failed to allege any of these facts. Accordingly, the court will dismiss the FCRA claim.
C. Fraudulent Misrepresentation and "Fraud and Usury" Claims
In California, the essential elements of a claim for fraud are "(a) a misrepresentation (false representation, concealment, or nondisclosure); (b) knowledge of falsity (or scienter'); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage." In re Estate of Young , 160 Cal.App.4th 62, 79 (4th Dist. 2008) (quoting Lazar v. Super. Ct. , 12 Cal.4th 631, 638 (1996)) (internal quotation marks omitted).
Plaintiffs allege that JP Morgan concealed the fact that the note would be converted into a Mortgage-Backed Security Investment Trust and that JP Morgan, Loanstar, and FATCO filed documents with the Placer County Recorder's Office even though they had no interest in the note. (FAC ¶¶ 68-69.) Both alleged misrepresentations rely on the theory that securitization of a loan somehow removes the lender's ability to foreclose. This theory has been roundly rejected. See, e.g., Lane v. Vitek Real Estate Indus. Grp. , 713 F.Supp.2d 1092, 1099 (E.D. Cal. 2010) (Shubb, J.) (collecting cases); Upperman v. Deutsche Bank Nat'l Trust Co., Civil Action No. 01:10-cv-149, 2010 WL 1610414, at *2 (E.D. Va. Apr. 16, 2010) ("There is no legal authority that the sale or pooling of investment interests in an underlying note can relieve borrowers of their mortgage obligations or extinguish a secured party's rights to foreclose on secured property."). Accordingly, plaintiffs have failed to allege any misrepresentation or resulting reliance and damages, and the court will dismiss plaintiffs' fraudulent misrepresentation claim.
To the extent plaintiffs attempt to state a claim for "usury and fraud, " the claim also fails. The elements of a claim for usury are: "(1) The transaction must be a loan or forbearance; (2) the interest to be paid must exceed the statutory maximum; (3) the loan and interest must be absolutely repayable by the borrower; and (4) the lender must have a willful intent to enter into a usurious transaction." Ghirardo v. Antonioli , 8 Cal.4th 791, 798 (1994).
Here, plaintiffs do not make allegations about the loan's actual interest rate. They allege that "[t]he formula break' a reference to end these laws was exceeded by a factor in excess of 10 contrary to the applicable law." (FAC ¶ 121.) Plaintiffs, however, fail to sufficiently allege how the interest actually exceeded the statutory maximum rate. Accordingly, the court will dismiss this claim.
D. Breach of Fiduciary Duties Claim
The elements of a breach of fiduciary duty claim are (1) existence of a fiduciary relationship; (2) breach of the fiduciary duty; and (3) damage proximately caused by that breach. Roberts v. Lomanto , 112 Cal.App.4th 1553, 1562 (3d Dist. 2003). "Absent special circumstances' a loan transaction is at arms-length and there is no fiduciary relationship between the borrower and lender.'" Rangel v. DHI Mortg. Co., No. CV F 09-1035 LJO GSA , 2009 WL 2190210, at *3 (E.D. Cal. July 21, 2009) (quoting Oaks Mgmt. Corp. v. Super. Ct. , 145 Cal.App.4th 453, 466 (4th Dist. 2006)). Plaintiffs have not alleged that any special circumstances existed.
Because plaintiffs have not alleged the existence of a fiduciary relationship, as required to state a claim, see Roberts , 112 Cal.App.4th at 1562, the court will dismiss this claim.
E. Unjust Enrichment Claim
Unjust enrichment is not itself an independent claim for relief. McKell v. Wash. Mut., Inc. , 142 Cal.App.4th 1457, 1490 (2d Dist. 2006). The court therefore construes plaintiffs' purported claim for unjust enrichment as an attempt to plead a claim for relief giving rise to a right of restitution. A party is required to make restitution "if he or she is unjustly enriched at the expense of another. A person is enriched if the person receives a benefit at another's expense." McBride v. Boughton , 123 Cal.App.4th 379, 389 (1st Dist. 2004) (quoting First Nationwide Savings v. Perry (1992) 11 Cal.App.4th 1657 , 1662 (6th Dist. 1992) (internal quotation mark and citation omitted). Because plaintiffs fail to adequately plead facts plausibly suggesting that any of defendants' enrichment was unjust, (see FAC ¶¶ 80-85), their claim for unjust enrichment will be dismissed.
F. Civil Conspiracy Claim
Civil conspiracy itself is not an independent claim for relief. Applied Equip. Corp. v. Litton Saudi Arabia Ltd. , 7 Cal.4th 503, 510-11 (1994). Rather, civil conspiracy is a "legal doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration." Id . Standing alone, a conspiracy does no harm and engenders no tort liability. It must be activated by the commission of an actual tort. Von Brincken, 2011 WL 2621010, at *6. Accordingly, as the court is dismissing all other claims in the FAC upon which plaintiffs' conspiracy claim could possibly be based, the court will dismiss this claim.
G. Civil RICO Claim
Plaintiffs' ninth cause of action asserts that defendants have violated RICO through committing violations of federal law involving mortgage lending, bank regulations, consumer credits, mail fraud, and bank fraud. (FAC ¶¶ 96-97.) Liability under the civil RICO statutes requires the conduct of an enterprise through a pattern of racketeering activity. Miller v. Yokohama Tire Corp. , 358 F.3d 616, 620 (9th Cir. 2004). Racketeering activity includes any act which is indictable under certain provisions of Title 18 of the United States Code. See 18 U.S.C. § 1961(1)(b).
To properly plead a RICO violation for civil damages, a plaintiff must show that the defendants, through two or more acts constituting a pattern, participated in an activity affecting interstate commerce. Sanford v. MemberWorks, Inc. , 625 F.3d 550, 557 (9th Cir. 2010). The heightened pleading requirements of Rule 9(b) apply to civil RICO fraud claims. Mostowfi v. i2 Telecom Int'l, Inc., 269 F.Appx. 621, 623 (9th Cir. 2008) (citing Edwards v. Marin Park, Inc. , 356 F.3d 1058, 1066 (9th Cir. 2004)). In addition, Rule 9(b) "may apply to claims-that although lacking fraud as an element-are grounded' or sound' in fraud." Id . (quoting Vess v. Ciba-Geigy Corp. , 317 F.3d 1097, 1103-04 (9th Cir. 2003)). A claim is "grounded in fraud" when it alleges a unified course of fraudulent conduct. Id . Rule 9(b) requires that when "alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). The Ninth Circuit has held that "to avoid dismissal for inadequacy under Rule 9(b), [the] complaint would need to state the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation.'" Edwards , 356 F.3d at 1066 (quoting Alan Neuman Prods., Inc. v. Albright , 862 F.2d 1388, 1393 (9th Cir. 1989)).
In the present case, plaintiffs have failed to state with particularity the circumstances constituting fraud and have therefore failed to meet the heightened pleading requirements of Rule 9(b). Plaintiffs' claim is grounded in fraud, as plaintiffs allege that defendants engaged in a pattern of racketeering activity with the objective of perpetrating fraud. (FAC ¶ 93.) However, plaintiffs make only vague statements referring to laws allegedly broken by defendants without actually explaining how those laws were broken or pleading the "time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentation[s]." Edwards , 356 F.3d at 1066. Accordingly, the court will dismiss this claim.
H. Quiet Title Claim
The purpose of a quiet title action is to establish one's title against adverse claims to real property. A basic requirement of an action to quiet title is an allegation that plaintiffs "are the rightful owners of the property, i.e.[, ] that they have satisfied their obligations under the Deed of Trust." Kelley v. Mortg. Elec. Registration Sys., Inc. , 642 F.Supp.2d 1048, 1057 (N.D. Cal. 2009). California Code of Civil Procedure section 761.020 states that a claim to quiet title requires: (1) a verified complaint, (2) a description of the property, (3) the title for which a determination is sought, (4) the adverse claims to the title against which a determination is sought, (5) the date as of which the determination is sought, and (6) a prayer for the determination of the title. Cal. Civ. Proc. Code § 761.020. Plaintiffs fail to allege the nature of the adverse claims and fail to identify the date as of which the determination is sought. Plaintiffs also have failed to allege that they are the rightful owners of the property. Accordingly, the court will dismiss this claim.
I. Wrongful Foreclosure Claim
Wrongful foreclosure is an action in equity, where a plaintiff seeks to set aside a foreclosure sale. See Karlsen v. Am. Sav. & Loan Ass'n , 15 Cal.App.3d 112, 117 (2d Dist. 1971). Plaintiffs have not pled that a foreclosure sale has taken place in this case. Without such a foreclosure sale, plaintiffs cannot maintain a cause of action in equity to set aside a wrongful foreclosure. Accordingly, the court will dismiss the wrongful foreclosure claim.
J. Breach of Trust Instrument Claim
In support of their claim for breach of the trust agreement, plaintiffs allege that Loanstar filed the Notice of Default before it was substituted as trustee. (FAC ¶ 138.) However, Loanstar recorded the notice of default "[a]s agent for the current beneficiary, " (FAC Ex. C), which arguably renders the notice proper under California Civil Code section 2924(a)(1), which authorizes the beneficiary, trustee, or their agents to record the notice of default. Cal. Civ. Code § 2924(a)(1). Even if the notice was problematic, by the time the Notice of Sale was filed, Loanstar was properly substituted as trustee. (FAC Exs. D, G.) Once the substitution was recorded, Loanstar "succeed[ed] to all the powers, duties, authority, and title granted and delegated to the trustee named in the deed of trust." Cal. Civ. Code § 2934a(a)(4). Because the Notice of Default was properly filed by an agent of the trustee or beneficiary, Loanstar assumed the trustee's powers upon the recording of the substitution.
Plaintiffs also allege that defendants breached the trust instrument by failing to follow the provisions regarding notice of acceleration and notice to cure. (FAC ¶ 139.) Plaintiffs attached the recorded Notice of Default to their FAC, which clearly states that plaintiffs could bring their account into good standing by paying the past-due amounts no later than five days before the foreclosure sale. (FAC Ex. C.) The Deed of Trust contained an acceleration clause, (id. Ex. B), and the Notice of Default was therefore allowed to contain a notice of acceleration. Because the text of the Notice of Default contradicts plaintiffs' claim that defendants failed to inform them of the possibility of acceleration and their right to cure, the court will dismiss plaintiffs' claim for breach of trust instrument. See Thomas v. Fed. Nat'l Mortg. Ass'n, 408 F.Appx. 122, 122 (9th Cir. 2011) (affirming dismissal of claim for improper notice of default when notice, attached to complaint, clearly satisfied requirements of Deed of Trust).
IT IS THEREFORE ORDERED that Loanstar and FATCO's motion to dismiss and JP Morgan and Chase's motion to dismiss be, and the same hereby are, GRANTED.
Plaintiffs may file an amended complaint within twenty days of the date of this Order, if they can do so consistent with this Order.