McDonnell et al v. Bank of America, N.A. et al

Filing 34

ORDER signed by Judge Kimberly J. Mueller on 6/14/13 ORDERING that Defendants' MOTION to Dismiss 23 is GRANTED; and This CASE is CLOSED.(Mena-Sanchez, L)

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IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF CALIFORNIA

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DIANE C. MCDONNELL and
JERRY D. FREY,

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Plaintiffs,
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v.
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BANK OF AMERICA, et al.,
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Defendants.
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______________________________)

No. 2:12-CV-0096 KJM EFB
ORDER

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Defendants Bank of America and Recontrust Company, joined by defendant

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Greentree Servicing, Inc. (collectively, defendants), have filed a motion to dismiss plaintiffs’

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First Amended Complaint (FAC). The court submitted the matter on the papers and now

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GRANTS the motion to dismiss.

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I. BACKGROUND

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On December 6, 2011, plaintiffs filed a complaint in Calaveras County Superior

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Court, alleging violations of the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq.; the

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Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601, et seq; the Equal Credit

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Opportunity Act (ECOA), 15 U.S.C. § 1691; and the Fair Credit Reporting Act, 15 U.S.C.

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§§ 1681-1681x, all stemming from the acquisition of and foreclosure on 5691 McCauley Road,

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Valley Springs, California. ECF No. 1-1.
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Defendants removed the case to this court on January 12, 2012, and on January

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25, 2012, filed the instant motion to dismiss. ECF No. 7. In their opposition, plaintiffs

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acknowledged the shortcomings of their complaint but argued they should be given leave to

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amend so they could overcome the deficiencies of the claims as pleaded. ECF No. 10. The court

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granted the motion, noting that the complaint failed to tie the defendants to the loan origination

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and failed to plead any basis for equitable tolling of the time barred claims. ECF No. 20.

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Plaintiffs filed their First Amended Complaint on October 18, 2012. They allege

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that in March 2005, they entered into a loan with Countrywide Home Loans (Countrywide),

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Bank of America’s predecessor, and “had no reason to question the loan’s legality, as Plaintiffs

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assumed the Bank was regulated by the government.” FAC, ECF No. 21 ¶¶ 2, 10. In 2007, they

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obtained a second loan, also with Countrywide, and “were under the belief that the lenders

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complied with the Trust [sic] in Lending Act, Real Estate Settlement Procedures Act, Equal

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Credit Opportunity Act, Fair Credit Reporting Act, and all the applicable regulations.” ECF No.

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21 ¶¶ 3-4. Plaintiffs “were ill-prepared for understanding the financial shortcomings of the

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original loan” and did not understand the problems with it until they had a “Forensic Mortgage

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Analysis Report” prepared for their loan, in June 2011. ECF No. 21 ¶¶ 6, 8. Defendant

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Recontrust recorded a Notice of Trustee’s Sale, setting the sale for December 8, 2011. ECF No.

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21 ¶ 5.

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The FAC includes five causes of action, identified as: (1) TILA violation;

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(2) RESPA violation; (3) ECOA violation; (4) breach of contract; and (5) Injunction. ECF No.

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21 ¶¶ 16-27.

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Defendants Bank of America and Recontrust have filed a motion to dismiss,

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which defendant Greentree Servicing has joined. ECF Nos. 23, 25. Plaintiffs have filed an

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opposition and defendants have replied. ECF Nos. 27, 31.

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II. STANDARDS FOR A MOTION TO DISMISS

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Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to

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dismiss a complaint for “failure to state a claim upon which relief can be granted.” A court may

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dismiss “based on the lack of cognizable legal theory or the absence of sufficient facts alleged

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under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.

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1990).

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Although a complaint need contain only “a short and plain statement of the claim

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showing that the pleader is entitled to relief,” FED. R. CIV. P. 8(a)(2), in order to survive a motion

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to dismiss this short and plain statement “must contain sufficient factual matter . . . to ‘state a

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claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

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(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint must include

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something more than “an unadorned, the-defendant-unlawfully-harmed-me accusation” or

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“‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action.’” Id.

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(quoting Twombly, 550 U.S. at 555). Determining whether a complaint will survive a motion to

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dismiss for failure to state a claim is a “context-specific task that requires the reviewing court to

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draw on its judicial experience and common sense.” Id. at 679. Ultimately, the inquiry focuses

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on the interplay between the factual allegations of the complaint and the dispositive issues of law

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in the action. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

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In making this context-specific evaluation, this court must construe the complaint

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in the light most favorable to the plaintiff and accept as true the factual allegations of the

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complaint. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). This rule does not apply to “‘a legal

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conclusion couched as a factual allegation,’” Papasan v. Allain, 478 U.S. 265, 286 (1986)

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(quoted in Twombly, 550 U.S. at 555), nor to “allegations that contradict matters properly subject

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to judicial notice” or to material attached to or incorporated by reference into the complaint.

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Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). A court’s

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consideration of documents attached to a complaint or incorporated by reference or matter of
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judicial notice will not convert a motion to dismiss into a motion for summary judgment.

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United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Parks Sch. of Bus. v. Symington,

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51 F.3d 1480, 1484 (9th Cir. 1995); compare Van Buskirk v. Cable News Network, Inc., 284 F.3d

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977, 980 (9th Cir. 2002) (noting that even though court may look beyond pleadings on motion to

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dismiss, generally court is limited to face of the complaint on 12(b)(6) motion).

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III. ANALYSIS

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Defendants argue that plaintiffs have failed to link Countrywide’s alleged

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violations to defendants, as the allegations that Bank of America is Countrywide’s successor in

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interest is not sufficient to impose liability on them. They also argue that the TILA, RESPA and

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ECOA claims are time-barred and the complaint does not state a claim for breach of contract

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against Bank of America. The court need not determine whether Bank of America can be held

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liable for claims relating to Countrywide’s handling of loans in this case, as it concludes that the

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statute of limitations has run on these claims.
A. TILA, RESPA, ECOA and the Statute of Limitations

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Plaintiffs allege they did not receive the required Truth in Lending disclosures in

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a timely fashion, that the disclosures were not in a “reasonable, understandable form” and the

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percentage rate calculations were incorrect. ECF No. 21 ¶¶ 14-15. They also allege that they

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were not timely provided with the good-faith estimate required by RESPA, the loan failed to

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comply with 24 C.F.R. § 3500.7(a), and they did not timely receive notice of the transfer of the

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Note and Deed of Trust from Countrywide to Bank of America, in violation of 24 C.F.R.

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§ 3500.21(d)(C)(d). Their claim under the ECOA is based on the lender’s failure to provide

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notice of the disposition or status of the loan before closing and to give them a copy of the

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appraisal.
TILA and Regulation Z require a lender to calculate and disclose a number of

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terms of a loan agreement before the loan is consummated. 15 U.S.C. §§ 1601, et seq.; 12

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C.F.R. § 226.1, et seq. Failure to do so allows a borrower to bring suit to rescind the loan and

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recover damages from the lender. 15 U.S.C. §§ 1635, 1640.

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Title 15 U.S.C. § 1635(f) provides, in pertinent part: “An obligor’s right of

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rescission shall expire three years after the date of consummation of the transaction or upon sale

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of the property, whichever occurs first . . . .” 15 U.S.C. § 1640(e) provides: “Any action under

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this section [creating a claim for damages] may be brought . . . within one year from the date of

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occurrence of the violation . . . .” The Ninth Circuit has held that any failure to disclose as

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required by TILA occurs when the loan documents are signed. Meyer v. Ameriquest Mortg. Co.,

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342 F.3d 899, 902 (9th Cir. 2003). In this case, the loan documents were signed in 2005 and

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2007. (Compl. ¶ 21.) The statute presumptively had run on plaintiffs’ claims by 2008 as to the

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first Deed of Trust and 2010 as to the Second Deed of Trust.

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RESPA requires a lender to provide “a good faith estimate of the amount or range

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of charges for specific settlement services,” 12 U.S.C. § 2604(c), 24 C.F.R §3500.7(a), and to

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provide notice to the borrower when the loan servicer changes, 12 U.S.C. § 2605(b)(1), 24

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C.F.R. §3500.21(d)(1)(I). RESPA contains a one-year and a three-year statute of limitations,

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depending on the violation alleged. Kim v. BAC Home Loans Servicing, LP, No. CV 10-00527,

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2011 WL 2457660, at *6 (D. Haw. June 15, 2011). Title 12 U.S.C. § 2614 provides that any

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violation of section 2605 must be brought within three years of the date of the occurrence, but

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does not discuss violations of section 2604.1 Whether the one- or three-year statute applies to a

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claim for failure to provide a good faith estimate, the claim arose with the origination of either

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the first or second loan and has now run.
The claim that defendants failed to give notice of the change in loan servicers is

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barred by RESPA’s three-year statute of limitations. Bank of America assumed Countrywide

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Courts have generally held that this section does not create a private right of action.
See, e.g., Labuanan v. U.S. Bank Nat’l Ass’n, 773 F. Supp. 2d 900, 910 (D. Haw. 2011); Lucero
v. Diversified Inv. Inc., No. 09cv1742 BTM (BLM), 2010 WL 3463607, at *4 (S.D. Cal. Aug.
31, 2010)
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Financial Corporation in July 2008. Allstate Ins. Co. v. Countrywide Fin. Corp., 842 F. Supp. 2d

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1216, 1221 (C.D. Cal. 2012); Pendolino v. BAC Home Loans Servicing, LP, No. 10 C 5916,

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2011 WL 3022265, at *2 n.3 (N.D. Ill. July 22, 2011). Under Section 2605(b)(2)(A) & (B), the

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notice should have been provided, at the latest, by August 2008. The complaint, filed in

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December 2011, was not timely.

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Under the Equal Credit Opportunity Act, a creditor shall notify an applicant thirty

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days after receiving an application “concerning the creditor’s approval of, counteroffer to, or

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adverse action on the application,” 15 U.S.C. § 1691(d)(1), 12 C.F.R. § 202.9(a)(1)(i), and “shall

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promptly furnish an applicant, upon written request by the applicant . . ., a copy of the appraisal

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report used in connection with the applicant’s application for a loan . . . .” 15 U.S.C. § 1691(e);

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Swartz v. City Mortg., Inc.,

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2012). At the time plaintiffs applied for the loans, in 2005 and 2007, the statute of limitations

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for violations of ECOA was two years, which also ran before plaintiffs filed their complaint.

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15 U.S.C. § 1691e(f) (2007).2

F. Supp. 2d

, 2012 WL 5987571, at *16 (D. Haw. Nov. 28,

Although the three-year right to rescind created by TILA is not subject to

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equitable tolling, the one-year limitation for TILA damage claims may be tolled. See Beach v.

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Ocwen Federal Bank, 523 U.S. 410, 412 (1998); McOmie-Gray v. Bank of Am. Home Loans,

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667 F.3d 1325, 1329 (9th Cir. 2012). Equitable tolling also applies to RESPA and apparently to

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ECOA claims as well. Blaylock v. First Am. Title Ins. Co., 504 F. Supp. 2d 1091, 1106-07

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(W.D. Wa. 2007) (RESPA); Hafiz v. Greenpoint Mortg. Funding, Inc., 652 F. Supp. 2d 1039,

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1045 (N.D. Cal. 2009) (ECOA).
“‘When a complaint is otherwise time-barred on its face, the plaintiff must allege

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specific facts explaining the failure to learn the basis for the claim within the statutory period

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The statute was amended in 2010 to increase the statute of limitations to five years, but
this change does not revive a previously barred claim. Cabrera v. Countrywide Home Loans,
Inc., No. C 11–4869 SI, 2013 WL 1345083, at *4 (N.D. Cal. Apr. 2, 2013); 15 U.S.C. § 1691e(f)
(2010).
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rather than relying on generalities.’” Pedersen v. Greenpoint Mortg. Funding, Inc.,

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N.A., No. 11–CV–208 YGR, 2012 WL 691790, at *3 (N.D.Cal. Mar. 2, 2012)). Plaintiffs have

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alleged only that they were “not sophisticated enough” and so had no reason to believe there had

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been any violations. This is not sufficient support for a claim of equitable tolling.

, 2012 WL 4510854, at *5 (E.D. Cal. Sept. 30, 2012) (quoting Abels v. Bank of America,

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B. Breach of Contract

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Plaintiffs allege that they asked Bank of America to provide a certified copy of

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the original note to insure that the Bank had properly purchased the note, but that Bank of

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America refused to comply with their request. ECF No. 21 ¶ 23. Defendants argue that this

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claim has nothing to do with a contract or its breach. In opposition, plaintiffs argue that under

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RESPA, a loan servicer must respond to certain inquiries. Neither of plaintiffs’ theories is

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viable.
“‘A cause of action for damages for breach of contract is comprised of the

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following elements: (1) the contract, (2) plaintiff's performance or excuse for nonperformance,

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(3) defendant's breach, and (4) the resulting damages to plaintiff.’” Durell v. Sharp Healthcare,

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183 Cal. App. 4th 1350, 1367 (2010) (quoting Careau & Co. v. Sec. Pacific Bus. Credit, Inc.,

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222 Cal. App. 3d 1371, 1388 (1990) (emphasis omitted)). There are four requirements for the

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formation of a valid contract in California: (1) parties capable of contracting; (2) their mutual

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consent; (3) a lawful object; and (4) sufficient consideration. Tenet Healthsystem Desert, Inc. v.

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Fortis Ins. Co., Inc., 520 F. Supp. 2d 1184, 1193 (N.D.Cal. 2007) (citing CAL. CIV.CODE

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§§ 1550, 1565). Plaintiffs’ complaint suggests neither that a contract was formed nor that, once

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formed, it was breached. Nor does it appear that this claim – that they asked defendant to

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provide some information and defendant refused – can be amended to state a breach of contract

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claim.

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Under 12 U.S.C. § 2605(e)(1)(A), “[i]f any servicer of a federally related
mortgage loan receives a qualified written request [QWR] from the borrower ... for information
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relating to the servicing of such loan, the servicer shall provide a written response

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acknowledging receipt of the correspondence within 20 days .... unless the action requested is

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taken within such period.” After receiving a QWR, a servicer must either make “appropriate

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corrections in the account of the borrower” or, after conducting an investigation, explain why the

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servicer believes the borrower's account is correct or why information responsive to the request

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is not available, and then refer the borrower to a person who may provide assistance to the

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borrower. 12 U.S.C. § 2605(e)(2). To state a RESPA claim for the failure to respond to a QWR,

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a party must allege that he was damaged as the result of the servicer's failure to respond. Lal v.

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Am. Home Servicing, Inc., 680 F. Supp. 2d 1218, 1223 (E. D. Cal. 2010). A letter or request that

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does not relate to the servicing of the loan is not a QWR. Medrano v. Flagstar Bank, FSB, 704

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F.3d 661, 667-68 (9th Cir. 2012). Courts have held that a request for a copy of the note is not a

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QWR under RESPA. See, e.g., Barocio v. Bank of America, N.A., No. C 11–5636 SBA, 2012

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WL 3945535, at *7 (N.D. Cal. Sep. 10, 2012); Lindsey v. Meridas Capital, Inc., Civil No.

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11–00653 JMS/KSC, 2012 WL 488282, at *5 (D. Haw. Feb. 14, 2012). Defendants’ response to

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plaintiffs’ request for a certified copy of the note does not establish a RESPA claim, nor could it.

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C. Injunction

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As plaintiffs’ request for injunctive relief is based on the viability of their other

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claims, it too must be dismissed.

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In seeking to file a first amended complaint plaintiffs suggested they could cure

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the problems in the original complaint. They have not done so and it does not appear they will

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be able to save the complaint by further amendment. The court declines to grant them leave to

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amend. Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

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IT IS THEREFORE ORDERED that:

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1. Defendants’ motion to dismiss, ECF No. 23, is granted; and

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2. This case is closed.

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DATED: June 14, 2013.

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UNITED STATES DISTRICT JUDGE

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