Guebara v. Saxon Mortgage, et al

Filing 22

FINDINGS and RECOMMENDATIONS signed by Magistrate Judge John F. Moulds on 5/2/11: Recommending that defendant's motion to dismiss be granted and this action be dismissed. Objections to F&R due within fourteen days. (Kaminski, H)

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IN THE UNITED STATES DISTRICT COURT
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FOR THE EASTERN DISTRICT OF CALIFORNIA
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ANTHONY GUEBARA,
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Plaintiff,

No. CIV 2:11-cv-0427-MCE-JFM (PS)

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vs.
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SAXON MORTGAGE, et al.,
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Defendants.

FINDINGS & RECOMMENDATIONS

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On April 28, 2011, the court held a hearing on defendant Saxon Mortgage’s
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(“Saxon’s”) motion to dismiss. Plaintiff appear in pro per. Joshua M. Bryan appeared for Saxon.
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Upon review of the motion and the documents in support and opposition, and good cause
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appearing therefor, THE COURT MAKES THE FOLLOWING FINDINGS:
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FACTUAL AND PROCEDURAL BACKGROUND
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On August 8, 2006, plaintiff obtained a mortgage secured by real property located
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in Stockton, CA (“the Property”). It is unclear from which entity plaintiff obtained the mortgage:
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he initially alleges that he obtained it from Saxon, see Compl.¶ 7, but later alleges that he
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obtained it through Decision One Mortgage (not a defendant in this action), id. ¶ 32. Liberally
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construed (and partially based on statements contained in plaintiff’s opposition), it appears that
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plaintiff obtained a mortgage through Decision One Mortgage and attempted to obtain a loan
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modification through Saxon. Plaintiff does not state the time period during which he attempted

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to obtain a loan modification.

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On March 24, 2009, plaintiff received a notice of default and notice of intent to
foreclosure.
On September 17, 2010, plaintiff filed a complaint in the San Joaquin County

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Superior Court against Saxon, Quality Loan Service and Doe Defendants I-X for (1) declaratory

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relief; (2) injunctive relief; (3) damages under the Truth in Lending Act (“TILA”), 15 U.S.C.

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§§ 1601 et seq., and the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601 et

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seq.; (3) reformation of contract; (4) quiet title; and, alternatively, (5) to set aside wrongful

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foreclosure proceedings.

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Plaintiff’s complaint is premised on claims of securities fraud. He alleges that his

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because his mortgage has been illegally bundled, sold and resold by defendants numerous times,

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none of the defendants own the title to the Property and, as such, none have the legal right to

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initiate foreclosure proceedings on the Property.

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On February 15, 2011, Saxon removed this action in light of plaintiff’s TILA and

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RESPA claims. On February 22, 2011, Saxon filed a motion to dismiss and a motion to strike.

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On March 29, 2011, plaintiff filed an opposition to both motions. Saxon has not filed a reply.

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STANDARDS

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The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal

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sufficiency of the complaint. N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir.

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1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901

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F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege “enough facts to state a claim to

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relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct.

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1955, 1974 (2007). Thus, a defendant’s Rule 12(b)(6) motion challenges the court’s ability to

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grant any relief on the plaintiff’s claims, even if the plaintiff’s allegations are true.
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In determining whether a complaint states a claim on which relief may be granted,

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the court accepts as true the allegations in the complaint and construes the allegations in the light

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most favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v.

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United States, 915 F.2d 1242, 1245 (9th Cir. 1989).

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The court is permitted to consider material properly submitted as part of the

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complaint, documents not physically attached to the complaint if their authenticity is not

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contested and the complaint necessarily relies on them, and matters of public record. Lee v. City

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of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Matters of public record include

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pleadings and other papers filed with a court. Mack v. South Bay Beer Distributors, 798 F.2d

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1279, 1282 (9th Cir. 1986). The court need not accept as true conclusory allegations,

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unreasonable inferences, or unwarranted deductions of fact. Western Mining Council v. Watt,

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643 F.2d 618, 624 (9th Cir. 1981).

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DISCUSSION

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Saxon seeks dismissal of plaintiff’s complaint on numerous grounds. The court,

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however, will address only those arguments as they relate to plaintiff’s federal claims brought

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pursuant to TILA, 15 U.S.C. §§ 1601 et seq., and RESPA, 12 U.S.C. §§ 2601 et seq. Saxon

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argues that plaintiff’s TILA claim is barred by the statute of limitations. Saxon also argues that

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plaintiff’s RESPA claim is untimely and/or the allegations are inapplicable to it because it was

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not the originator of the loan.

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A.

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Federal Claims
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TILA
A plaintiff may bring an action for damages, rescission or both under TILA. Here,

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plaintiff speaks only generally of TILA disclosure violations without specifying a remedy.

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Nonetheless, were plaintiff to pursue either damages or rescission, the TILA claim is barred by

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the statute of limitations and, thus, should be dismissed with prejudice.

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a.

Damages

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An action for damages under TILA must be brought within one year of the

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violation. 8 U.S.C. § 1640(e). A TILA violation occurs on “the date of consummation of the

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transaction,” King v. California, 784 F.2d 910, 915 (9th Cir. 1986), and “consummation” means

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“the time that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. §

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226(a)(13). Accordingly, defendants argue that the claim for damages is time-barred. The

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doctrine of equitable tolling, however, may “suspend the limitations period until the borrower

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discovers or had reasonable opportunity to discover the fraud or nondisclosures that form the

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basis of the TILA action.” King, 784 F.2d at 915.

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The complaint alleges that the loan was obtained on August 8, 2006, making

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August 8, 2007 the deadline for commencing a TILA damages action. The current suit was not

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filed until September 17, 2010. Although Ninth Circuit has held that equitable tolling for

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damages may be appropriate “in certain circumstances,” plaintiff has not alleged any facts that

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would justify tolling in this case. King, 874 F.2d at 915; see also Meyer v. Ameriquest Mtg. Co.,

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342 F.3d 899, 902 (9th Cir. 2003) (dismissing equitable tolling of TILA claim because plaintiff

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did not allege any actions that would have prevented discovery of alleged TILA violations and

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was in full possession of all loan documents).

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b.

Rescission

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Rescission claims “shall expire three years after the date of the consummation of

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the transaction or upon the sale of the property, whichever occurs first,” 15 U.S.C. § 1635(f).

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Where the creditor fails to provide to the consumer a notice of right to rescind and all material

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disclosures, TILA implementation Regulation Z provides that “the right to rescind shall expire

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three years after consummation, upon transfer of all of the consumer’s interest in the property, or

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upon sale of the property, whichever occurs first.” 12 C.F.R. § 226.23.

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Again, the complaint alleges that the loan transaction was consummated on
August 8, 2006, making August 8, 2009 the deadline for commencing a TILA rescission claim.
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This action was filed beyond the three-year time period. There are no facts to justify equitable

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tolling.

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2.

RESPA
Saxon also seeks dismissal of plaintiff’s RESPA claim on the ground that it is

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inapplicable to Saxon and/or barred by the statute of limitations. In this claim, plaintiff contends

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Saxon violated RESPA’s provision prohibiting illegal kickbacks. See 12 U.S.C. § 2607.

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Plaintiff asserts that when Saxon allegedly sold plaintiff’s mortgage, it received back-end fees,

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which Saxon did not disclose pursuant to RESPA.

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a.

Applicability of RESPA to Saxon

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Saxon first argues that because a violation of 12 U.S.C. § 2607 necessarily implies

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that it must have occurred prior to or in the process of closing plaintiff’s mortgage, Saxon cannot

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be held liable because it did not originate plaintiff’s loan.

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Congress enacted RESPA to control real estate settlement costs by “insur[ing] that

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consumers throughout the Nation are provided with greater and more timely information on the

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nature and costs of the settlement process and are protected from unnecessarily high settlement

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charges caused by certain abusive practices that have developed in some areas of the country.” 12

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U.S.C. § 2601(a). To effectuate these objectives, RESPA requires advance disclosure of

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settlement costs, the elimination of kickbacks or referral fees, and a reduction of the amount that

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buyers are required to place in escrow accounts for taxes and insurance. Id. § 2601(b).

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Plaintiff alleges violation of Section 8 of RESPA which sets forth the

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anti-kickback provision. This section applies only to settlement services and prohibits kickbacks

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which are “incident to or a part of a real estate settlement service....” Id. § 2607(a). Section 8

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also prohibits fee splitting “of any charge made or received for the rendering of a real estate

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settlement service.” 26 U.S.C. § 2607(b).

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In order to state a claim under RESPA, plaintiff must establish that the alleged
back-end fees at issue constitute charges rendered at or in relation to settlement. See Eisenberg
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v. Comfed Mortgage Co. Inc., 629 F. Supp. 1157, 1159 (D. Mass.1986) (granting summary

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judgment for defendant after finding that a mortgage origination fee was not a “settlement

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service” within the purview of RESPA). Settlement services are those services necessary to

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close the loan (i.e., close escrow). According to HUD, “ [s]ettlement means the process of

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executing legally binding documents regarding a lien on property that is subject to a federally

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related mortgage loan. This process may be called ‘closing’ or ‘escrow’ in different

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jurisdictions.” 24 C.F.R. § 3500.2.

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Where the fees or charges at issue are imposed after settlement, RESPA is
inapplicable. For example, in Greenwald v. First Fed. Sav. & Loan Ass'n, 446 F.Supp. 620, 625

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(D. Mass. 1978), aff'd, 591 F.2d 417 (1st Cir. 1979), the district court found that RESPA was

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inapplicable to the banks’ payment of interest on escrow deposits. The court explained that such

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payments were “obviously” not part of settlement as defined under RESPA because they “can

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continue long after closing of the mortgage transaction during the entire life of the mortgage, ...”

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Id.; see also Adamson v. Alliance Mortgage Co., 861 F.2d 63, 65-66 (4th Cir. 1988) (finding that

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under the Truth in Lending Act disclosure requirements, fees charged at the end of the loan need

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not be disclosed), overruled on other grounds by Busby v. Crown Supply, Inc., 896 F.2d 833 (4th

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Cir. 1990).

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Here, plaintiff alleges Saxon received back-end fees when it resold plaintiff’s

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mortgage. Since Saxon’s alleged receipt of back-end fees obtained through the purported

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reselling of plaintiff’s mortgage was not an event that occurred prior to or at settlement, the fees

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are not “incurred” at the time of settlement services and, thus, are not protected by RESPA.

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b.

Statute of Limitations

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Alternatively, Saxon argues that plaintiff’s RESPA claim is barred by the statute

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of limitations. RESPA imposes either a one-year or a three-year statute of limitations depending

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on the violation alleged. 12 U.S.C. § 2614 (proscribing a one-year statute of limitations for

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violations of Sections 2607 and 2608 and a three-year statute of limitations for violations of
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Section 2605). Because plaintiff’s RESPA claim can only arise out of the loan origination,

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which occurred more than three years before plaintiff filed the instant action, plaintiff's claim is

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barred by the statute of limitations. As discussed above, plaintiff is not entitled to equitable

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tolling because he has failed to allege specific facts showing why he could not bring his suit

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within the limitations period.

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Plaintiff counters that the statute of limitations should run when Saxon allegedly

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sold plaintiff’s loan. This argument fails. Not only is it an incorrect understanding of the law,

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but there is also no legal support for this proposition. For the reasons discussed, RESPA’s

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applicability in the scenario at issue concluded once “settlement” was reached.

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Accordingly, plaintiff’s RESPA claim should also be dismissed with prejudice.
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State Law Claims
Because plaintiff’s complaint does not – and, indeed, cannot – state a valid cause

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of action arising under either TILA or RESPA, the court lacks subject matter jurisdiction over the

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remaining claims.

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Accordingly, IT IS HEREBY RECOMMENDED that

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1. Defendant’s motion to dismiss be granted; and

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2. This action be dismissed.

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These findings and recommendations are submitted to the United States District

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Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen

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days after being served with these findings and recommendations, any party may file written

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objections with the court and serve a copy on all parties. Such a document should be captioned

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“Objections to Magistrate Judge’s Findings and Recommendations.” Any response to the

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objections shall be filed and served within fourteen days after service of the objections. The

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parties are advised that failure to file objections within the specified time may waive the right to

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appeal the District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

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DATED: May 2, 2011.

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