Pinales et al v. Quality Loan Service Corporation et al

Filing 22

ORDER Granting With Prejudice 14 Motion to Dismiss the First Amended Complaint; and Granting 14 Motion to Expunge Lis Pendens: The Lis Pendens recorded on the property located at 3922 Genine Drive, Oceanside, California in the official records of San Diego County shall be expunged from the official records. The Clerk of the Court is directed to enter judgment in accordance with this Order. Signed by Judge M. James Lorenz on 9/22/2010. (mjj)

-AJB Pinales et al v. Quality Loan Service Corporation et al

Doc. 22

1 2 3 4 5 6 7 8 9 10 11 EFREN PINALES, HELDA PINALES, 12 13 v. 14 QUALITY LOAN SERVICE CORPORATION, et al., 15 Defendants. 16 17 Plaintiffs, ) ) ) ) ) ) ) ) ) ) ) Civil No. 09cv1884 L(AJB) ORDER GRANTING WITH PREJUDICE MOTION TO DISMISS THE FIRST AMENDED COMPLAINT AND GRANTING MOTION TO EXPUNGE LIS PENDENS [doc. #14] UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

Defendant Aurora Loan Services Corporation1 moves to dismiss plaintiffs' first amended

18 complaint and to expunge lis pendens. The motions have been fully briefed and considered 19 without oral argument under Civil Local Rule 7.1(d)(1). 20 1. 21 Motion to Dismiss Legal Standard A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v.

22 Block, 250 F.3d 729, 732 (9th Cir. 2001). "While a complaint attacked by a Rule 12(b)(6) 23 motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide 24 the grounds of his entitlement to relief requires more than labels and conclusions, and a 25 formulaic recitation of the elements of a cause of action will not do. Factual allegations must be 26 27 Defendants Finance West Mortgage and Homecomings Financial Network were never served and have been dismissed from this action. Quality Loan filed a declaration of 28 nonmonetary status under California Civil Code § 29241.
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1 enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 2 550 U.S. 544, 555 (2007) (internal quotation marks, brackets and citations omitted). Federal 3 Rule of Civil Procedure 8(a) requires a complaint to contain "a short and plain statement of the 4 claim showing that the pleader is entitled to relief . . . ." FED. R. CIV. P. 8(a). 5 In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of

6 all factual allegations and must construe them in the light most favorable to the nonmoving 7 party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Legal conclusions 8 need not be taken as true merely because they are cast in the form of factual allegations. Roberts 9 v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987); W. Mining Council v. Watt, 643 F.2d 618, 10 624 (9th Cir. 1981). Similarly, "conclusory allegations of law and unwarranted inferences are 11 not sufficient to defeat a motion to dismiss." Pareto v. Fed. Deposit Ins. Corp., 139 F.3d 696, 12 699 (9th Cir. 1998). 13 In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond

14 the complaint for additional facts, e.g., facts presented in plaintiff's memorandum in opposition 15 to a defendant's motion to dismiss or other submissions. United States v. Ritchie, 342 F.3d 903, 16 908 (9th Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998); see also 2 17 MOORE'S FEDERAL PRACTICE, § 12.34[2] (Matthew Bender 3d ed.) ("The court may not . . . take 18 into account additional facts asserted in a memorandum opposing the motion to dismiss, because 19 such memoranda do not constitute pleadings under Rule 7(a)."). 20 A court may, however, consider items of which it can take judicial notice without

21 converting the motion to dismiss into one for summary judgment. Barron v. Reich, 13 F.3d 22 1370, 1377 (9th Cir. 1994). Judicial notice may be taken of facts "not subject to reasonable 23 dispute" because they are either "(1) generally known within the territorial jurisdiction of the 24 trial court or (2) capable of accurate and ready determination by resort to sources whose 25 accuracy cannot reasonably be questioned." FED. R. EVID. 201. Additionally, a court may take 26 judicial notice of "`matters of public record' without converting a motion to dismiss into a 27 motion for summary judgment.'" Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001) 28 (quoting MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986)). Under the
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1 incorporation by reference doctrine, courts may also consider documents "whose contents are 2 alleged in a complaint and whose authenticity no party questions, but which are not physically 3 attached to the [plaintiff's] pleading." In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 4 (9th Cir.1999) (quoting Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) (alteration in 5 original)). 6 2. 7 Background In September 2006, plaintiffs obtained a home mortgage loan from defendant

8 Homecomings Financial Network for property located in Oceanside, California and executed a 9 Deed of Trust as security for the loan. When plaintiffs failed to make payments as required, a 10 Notice of Default and Election to Sell under the Deed of Trust was recorded on January 12, 11 2009. A Notice of Trustee Sale was recorded on August 17, 2009, which set the sale of the 12 property for September 3, 2009. The record does not disclose whether the Trustee Sale has been 13 conducted. 14 Plaintiffs' initial complaint contained 18 causes of action. After the filing of Aurora's

15 motions to dismiss and to expunge lis pendens, plaintiffs filed an amended complaint that 16 alleged nine causes of action to which Aurora filed the present motions. In response to 17 defendant's motion, plaintiffs withdrew their sixth and seventh causes of action: violation of 18 California Civil Code § 1632 and Business & Professions Code § 17200. The second cause of 19 action, breach of fiduciary duty, is not brought against Aurora. 20 3. 21 22 Motion to Dismiss A. Intentional Misrepresentation

As Aurora correctly notes, the allegations concerning intentional misrepresentation refer

23 to actions of defendants Finance West and Homecoming. For example, plaintiffs contend 24 Finance West and Homecoming inserted inflated income for the plaintiffs in the loan 25 application, failed to inform plaintiffs of their rights to rescind, and misstated the APR and 26 finance charge. (Amended Complaint at 6.) Plaintiffs offer no facts to suggest that Aurora, the 27 later-added loan servicer, was involved in any manner with alleged misrepresentations at the 28 time of the loan origination. Because plaintiffs have had an opportunity to amend the complaint
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1 to assert facts showing involvement by Aurora with the alleged misrepresentations, this claim 2 will be dismissed with prejudice. 3 4 B. Quiet Title

The purpose of a quiet title action is to establish one's title against adverse claims to real

5 or personal property or any interest therein. See CAL. CIV. PROC. CODE § 760.020(a). Plaintiffs 6 contend that Quality Loan Services recorded the Notice of Default before it was substituted in as 7 trustee for the Deed of Trust. As a result, plaintiffs contend that the notice of default was invalid 8 because it was filed by a stranger, who was not the trustee, mortgagee or beneficiary. 9 The persons who can validly file a notice of default are "[t]he trustee, mortgagee, or

10 beneficiary, or any other authorized agents." CAL. CIV. CODE § 2924(a)(1). The notice of 11 default here was filed by Quality Loan Services. The notice identifies Quality Loan Services as 12 "either the original trustee, the duly appointed substituted trustee, or acting as agent for the 13 trustee or beneficiary." Plaintiffs argue that there was "no evidence on the public record that 14 Defendants Quality Loan services was acting as an authorized agent for Defendant Aurora." 15 (Opp. at 3.) There is no statutory requirement that the authorized agent must be recorded. 16 Nothing in the record indicates that the notice of default was invalid. Furthermore, the proposed 17 amended complaint does not include any factual allegations to support the legal conclusion that 18 the notice of default is invalid. See Roberts, 812 F.2d at 1177. Plaintiffs' argument that the 19 notice of default was invalid is rejected. Accordingly, plaintiffs' quiet title claim is dismissed 20 with prejudice. 21 22 C. TILA

The applicable statute of limitations for a claim for damages under TILA is "one year

23 from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). "[T]he limitations period 24 in Section 1640(e) runs from the date of consummation of the transaction but . . . the doctrine of 25 equitable tolling may, in the appropriate circumstances, suspend the limitations period until the 26 borrower discovers or had reasonable opportunity to discover the fraud or nondisclosures that 27 form the basis of the TILA action." King v. California, 784 F.2d 910, 915 (9th Cir. 1986). 28 Because the transaction was consummated on September 25, 2006 and this action was filed on
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1 January 15, 2010, the statute of limitations has long expired. Plaintiffs have not provided any 2 allegations in their amended complaint that would support equitable tolling. Accordingly, 3 defendant's motion to dismiss the TILA cause of action is dismissed with prejudice. 4 5 D. RESPA

Defendant contends plaintiffs' RESPA claims fail as a matter of law because there are no

6 factual allegation directed at Aurora. Plaintiffs do not address this contention but instead argue 7 that the RESPA claim is not time-barred. Having reviewed the amended complaint, there are no 8 allegations of RESPA violations on the part of Aurora. The RESPA claim must be dismissed as 9 to Aurora. 10 11 E. California Civil Code 2923.5

Plaintiffs allege defendants failed to contact them, or perform the required due diligence

12 to make contact, to discuss plaintiffs' financial situation and explore options for the borrower to 13 avoid foreclosure at least 30 days prior to recording the notice of default, in violation of 14 California Civil Code § 2923.5. In response, defendant correctly argues this cause of action 15 must be dismissed because it is preempted by the Home Owner's Loan Act ("HOLA"), 12 U.S.C. 16 § 1464. The state law's requirements dealing with contacting the borrower and including a 17 specific declaration in the Notice of Default fall squarely within the scope of HOLA's Section 18 560.2(b)(10), which deals with the "[p]rocessing, origination, servicing, sale or purchase of, or 19 investment or participation in, mortgages." See, e.g., Parcay v. Shea Mortgage, Inc., 2010 WL 20 1659369, at *9 (E.D.Cal. Apr.23, 2010) (concluding that HOLA preempts plaintiff's claim based 21 on the alleged violation of § 2923.5); Murillo v. Aurora Loan Servs., LLC,, 2009 WL 2160579, 22 at *4 (N.D.Cal. July 17, 2009) (same). Therefore, the RESPA claim is preempted and will be 23 dismissed with prejudice. 24 4. 25 Motion to Expunge Lis Pendens Last, Aurora moved to expunge lis pendens. "[T]he court shall order the notice expunged

26 if the court finds that the pleading on which the notice is based does not contain a real property 27 claim." Cal. Code Civ. Proc. § 405.31; see also Id. § 405.5 & 28 U.S.C. § 1964 (state law lis 28 pendens provisions apply in federal court). A plaintiff bears the burden of establishing, by a
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1 preponderance of the evidence, the probable validity of the claims. 2 Because the operative complaint has been dismissed with prejudice, plaintiffs have

3 alleged no "real property claim." Accordingly, the lis pendens is properly expunged. 4 5 Based on the foregoing, IT IS ORDERED 1. Defendant Aurora Loan Services LLC's motion to dismiss the first amended

6 complaint is GRANTED WITH PREJUDICE 7 8 2. 3. Defendants' motion to expunge lis pendens is GRANTED. The Lis Pendens recorded on the property located at 3922 Genine Drive,

9 Oceanside, California in the official records of San Diego County shall be expunged from the 10 official records, and a copy of this Order may be recorded in the official records. 11 12 4. The Clerk of the Court is directed to enter judgment in accordance with this Order.

IT IS SO ORDERED.

13 DATED: September 22, 2010 14 15 16 COPY TO: 17 HON. ANTHONY J. BATTAGLIA UNITED STATES MAGISTRATE JUDGE 18 19 ALL PARTIES/COUNSEL 20 21 22 23 24 25 26 27 28
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M. James Lorenz United States District Court Judge