Dang et al v. First Horizon Home Loan Corp. et al
Filing
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ORDER granting Defendants' 19 Motion to Dismiss. Plaintiffs' complaint is dismissed without prejudice. Signed by Judge John A. Houston on 8/22/13. (cge)
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UNITED STATES DISTRICT COURT
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SOUTHERN DISTRICT OF CALIFORNIA
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HIEN LE DANG; and THANH HUNG
NGUYEN,
Plaintiffs,
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v.
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FIRST HORIZON HOME LOAN
CORP.; NATIONSTAR MORTGAGE,
LLC; METLIFE BANK, NA; Does 1 to
1000,
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Defendants.
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Civil No.12cv0343 JAH(NLS)
ORDER GRANTING
DEFENDANTS’ MOTION TO
DISMISS
[Doc. # 19]
INTRODUCTION
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Currently pending before this Court is the motion to dismiss Plaintiffs’ first
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amended complaint filed by defendants First Horizon Loan Corporation (“First Horizon”)
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(a.k.a. “First Tennesee”) and Nationstar Mortgage, LLC (“Nationstar”) (collectively
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“defendants”). The motion has been fully briefed by the parties. After a careful review
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of the parties’ submissions, and for the following reasons, this Court GRANTS
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Defendants’ motion to dismiss.
BACKGROUND
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I.
Factual Background
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Plaintiffs Hien Le Dang and Thanh Hung Nguyen (“Plaintiffs”) allege in their first
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amended complaint that, in October 2004, they obtained financing to purchase a home
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in San Diego, California through Defendant First Horizon. Doc. # 16 ¶ 10. Plaintiffs
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allege that they understand little English and that both speak with heavy accents. Id. ¶ 11.
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Plaintiffs allege that they were never “asked for any verification of income, nor [were they
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asked to] provide any documentation of income during the entire application process.”
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Id. ¶ 13. Plaintiffs further allege that when they asked a question to their loan officer that
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the loan officer replied, “[d]on’t worry, just read and then sign.” Id. The loan documents
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were executed on October 28, 2004. Id. ¶ 14. Sometime thereafter, Plaintiffs defaulted on
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the loan. Id. On November 13 and 30, 2009, Plaintiffs received notices of default
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(“NOD”) from Quality Loan Service Corporation, as Trustee for First Horizon. Id. ¶ 16.
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On June 10, 2011, Defendant New Horizon sent Plaintiffs a notice of trustee sale
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indicating a sale date of July 6, 2011, which stated that the foreclosing party was Metlife
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Home Loans of Irving, Texas. Id. ¶ 17. Plaintiffs claim no notice of the transfer to Metlife
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Home Loans was provided them. Id. The trustee sale was postponed to September 8,
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2011, and New Horizon provided a notice of transfer of servicing rights to Nationstar
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effective August 16, 2011. Id. ¶ 27. Plaintiff Nguyen filed for bankruptcy in September
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2011. Id. ¶ 27. The bankruptcy court entered an order dismissing the bankruptcy petition
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on October 27, 2011. Id. The record does not reflect that the trustee sale has been
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conducted.
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II.
Procedural History
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On December 12, 2011, Plaintiffs filed a complaint in Superior Court against
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defendants First Horizon; Nationstar Mortgage; and Metlife Bank, N.A. (“Metlife”). See
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Doc. # 1. On February 9, 2012, Defendant Metlife removed the action to this Court
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citing diversity jurisdiction. See id. On February 16, 2012, Metlife filed a motion to
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dismiss the complaint. See Doc. # 5. This motion was unopposed and the claims against
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Metlife were dismissed without prejudice on April 10, 2012. See Doc. # 11. On February
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16, 2012, First Horizon and Nationstar filed a motion to dismiss the claims against them.
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See Doc. # 6.
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On December 18, 2012, the Court dismissed the claims against First Horizon and
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Nationstar without prejudice and with leave to amend, finding the claims were untimely
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under the “gravamen of the action doctrine.” See Doc. # 14. The Court also found that
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the delayed discovery rule, which would toll the statute of limitations, did not apply in this
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case. See id. at 6.
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On January 17, 2013, Plaintiffs filed a first amended complaint alleging: (1) breach
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of covenant of good faith and fair dealing, (2) cancellation of contract, (3) unfair business
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practices, (4) actual fraud, (5) negligent lending, (6) violation of Finance Lenders Law, and
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(7) violation of the Rosenthal Fair Debt Collection Practices Act. See Doc. # 16. On
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February 4, 2013, Defendants filed the instant motion to dismiss Plaintiffs’ first amended
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complaint. See Doc. # 19-1. Plaintiffs filed an opposition1 on February 22, 2013 and on
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March 4, 2013, Defendants filed their reply. See Docs # 22, 25. This Court subsequently
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took the motion under submission without oral argument. See CivLR 7.1(d.1).
DISCUSSION
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Defendant moves to dismiss Plaintiff’s complaint pursuant to Rule 12(b)(6) of the
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Federal Rules of Civil Procedure.
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I.
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Legal Standard
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint.
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Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001).
Dismissal is warranted under
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Rule 12(b)(6) where the complaint lacks a cognizable legal theory. Robertson v. Dean
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Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984); see Neitzke v. Williams, 490
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U.S. 319, 326 (1989) (“Rule 12(b)(6) authorizes a court to dismiss a claim on the basis
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of a dispositive issue of law.”). Alternatively, a complaint may be dismissed where it
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presents a cognizable legal theory yet fails to plead essential facts under that theory.
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Robertson, 749 F.2d at 534. While a plaintiff need not give “detailed factual allegations,”
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he must plead sufficient facts that, if true, “raise a right to relief above the speculative
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level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007).
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Both Plaintiffs and Defendants filed requests for Judicial Notice requesting the Court judicially
notice certain facts contained in eight documents. See Docs #20, 22-4. Because this Court need not rely
upon these documents to make its determination, Plaintiffs’ and Defendants’ requests for judicial notice are
DENIED AS MOOT.
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“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
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accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
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129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 547). A claim is facially
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plausible when the factual allegations permit “the court to draw the reasonable inference
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that the defendant is liable for the misconduct alleged.” Id. In other words, “the non-
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conclusory ‘factual content,’ and reasonable inferences from that content, must be
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plausibly suggestive of a claim entitling the plaintiff to relief. Moss v. U.S. Secret Service,
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572 F.3d 962, 969 (9th Cir. 2009). “Determining whether a complaint states a plausible
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claim for relief will ... be a context-specific task that requires the reviewing court to draw
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on its judicial experience and common sense.” Iqbal, 129 S.Ct. at 1950.
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In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the
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truth of all factual allegations and must construe all inferences from them in the light most
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favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir.
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2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). However,
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legal conclusions need not be taken as true merely because they are cast in the form of
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factual allegations. Ileto v. Glock, Inc., 349 F.3d 1191, 1200 (9th Cir. 2003); Western
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Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When ruling on a motion
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to dismiss, the Court may consider the facts alleged in the complaint, documents attached
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to the complaint, documents relied upon but not attached to the complaint when
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authenticity is not contested, and matters of which the Court takes judicial notice. Lee
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v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). If a court determines that
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a complaint fails to state a claim, the court should grant leave to amend unless it
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determines that the pleading could not possibly be cured by the allegation of other facts.
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See Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).
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II.
Analysis
Defendants argue that (A) Plaintiffs’ claims one through six are untimely; and (B)
Plaintiffs’ seventh cause of action is inadequately pled.2
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A.
Untimeliness
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Defendants advance the same arguments in their motion to dismiss Plaintiffs’ first
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amended complaint as they advanced in their motion to dismiss Plaintiffs’ original
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complaint. See Doc. # 6-1; compare Doc. # 19-1. Defendants again argue that Plaintiffs’
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causes of action one through six which are“related to origination are barred by the statute
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of limitations” because “allegations of fraudulent inducement at the time of the loan’s
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origination in October 2004 are the gravamen of the complaint.” Doc. # 19-1 at 4-5. This
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Court finds Plaintiffs have again failed to show that they have filed their claim within the
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applicable statutes of limitations as to claims one through six.
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To determine the statute of limitations that applies to a cause of action it is
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necessary to identify the nature of the cause of action, i.e., the “gravamen” of the cause of
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action. See City of Vista v. Robert Thomas Sec., Inc., 84 Cal. App. 4th 882 (2000); In re
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Asyst Techs. Inc. Derivative Litig., 2009 WL 2169021 (N.D. Cal. May 23, 2009). The
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nature of the right sued upon, or the principal purpose of the action, rather than the form
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of the action or the relief demanded, determines the applicable statute of limitations. See
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Davies v. Krasna, 14 Cal.3d 502, 515 (1975). Defendants contend that, where the
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“allegations of fraudulent inducement at the time of the loan’s origination in October
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2004 are the gravamen of the complaint,” a three year statute of limitations applies. Doc.
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# 19-1 at 5 (citing Cal. Civ. Proc. Code § 338).
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In addition, Defendants argue that “even if the gravamen of the action theory were
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not applied, the particular statutes of limitations applicable to various claims in the first
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amended complaint show that each is time-barred as to any origination related conduct
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by [First Horizon].” Doc. # 19-1 at 5. Defendants acknowledge Plaintiffs invoke the
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Because this Court dismisses all of Plaintiffs’ causes of action on other grounds, this Court does not
address Defendants’ arguments regarding judicial estoppel or whether Defendants had a duty to inform
Plaintiffs of the affordability of the loan.
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discovery rule, but argue that in order for the discovery rule to apply, “Plaintiffs must
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allege ‘circumstances beyond their control that prevented them from seeking a translation
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of the loan documents that they signed and received.’” Id. at 6 (quoting Cervantes v.
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Countrywide Home Loans, Inc., 656 F.3d 1034, 1045 (9th Cir. 2011)). Defendants also
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argue that equitable tolling should not apply because “Plaintiffs allege no such obstacles
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in preventing them from obtaining the necessary translation.” Id. Further, Defendants
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claim that if Plaintiffs did not understand their loan documents, they could have requested
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a translation, or declined to sign the note and deed of trust. See id. Defendants conclude
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that Plaintiffs’ first amended complaint does not present facts to warrant equitable tolling.
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See id.
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In opposition, Plaintiffs assert their claims are not time-barred under the discovery
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rule which may toll the statute of limitations upon a showing of a defendant’s fraudulent
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conduct resulting in concealment of operative facts underlying the cause of action along
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with due diligence by the plaintiff until the discovery of those facts. See Doc. # 22 at 11
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(citing Federal Election Com’n v. Williams, 104 F.3d 237, 240-41 (9th Cir. 1996)).
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Under this theory, Plaintiffs claim they suffered an injury both at the origination stage and
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at the loan modification stage alleging Plaintiffs did not receive original loan documents
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and loan modification documents in their native language, thus preventing them from
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discovering the violations alleged in their complaint within the statutory time period. See
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id. at 11-12. Plaintiffs argue that when one’s “language comprehension ‘prevents him from
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discovering the factual basis for his claim’ equitable tolling applies.” Id. at 13 (quoting
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Bojorquez v. Gutierrez et al., 2010 WL 1223144 at *5 (N.D. Cal. July 26, 2010) (citing
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Galindo v. Financo Fin., Inc., 2008 WL 4452344 (N.D. Cal. Oct. 3, 2008) (finding that
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equitable tolling was appropriate where plaintiff could not read and had to rely on verbal
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representations of a loan officer)).
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In reply, Defendants argue Plaintiffs ignore cases that contradict their arguments
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regarding equitable tolling and instead cite to unpublished cases that pre-date Defendants’
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authority and are factually distinguishable. See Doc. # 25 at 3 (citing Cervantes v.
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Countrywide Home Loans, Inc., 656 F.3d 1034, 1045 (9th Cir. 2011) (finding that the
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fact native Spanish speakers were not given their loan documents in their native language
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does not support a claim for equitable tolling); see also Nelmida v. Flagstar Bank, FSB,
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2012 WL 10150 at *3 (N.D. Cal. Jan. 2, 2012) (citing Cervantes, 656 F.3d at 1045).
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This Court’s review of Plaintiffs’ amended complaint reveals Defendants are correct
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that Plaintiffs’ six causes of action allege fraud. Plaintiffs allege that fraudulent
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misrepresentations were made before, at the origination, and when Defendants refused to
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modify Plaintiffs’ loan. However, the harm allegedly done to Plaintiffs occurred as soon
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as the loan was made, and all of the claims above are attributable to the original lending
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documents. The complaint was filed seven years later, in December 2011, four years past
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the expiration of the three year statute of limitations for fraud. As such, claims one
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through six are barred under the gravamen of the action doctrine.
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This Court also agrees with Defendants that speakers of foreign languages not
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provided with loan documents in their native language do not support a claim for equitable
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tolling. See Cervantes, 656 F.3d at 1045 (Plaintiffs did not allege circumstances beyond
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their control that prevented them from seeking a translation of the loan documents that
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they signed and received, and therefore, failed to state a basis for equitable tolling.)).
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The facts Plaintiffs allege relate to the origination of the loan, and thus the statute
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of limitations for each claim began to run when the loan was executed. Therefore, absent
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tolling, the statute of limitations for each individual claim has expired and these claims are
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dismissed as untimely. This Court finds Plaintiffs have failed to allege facts sufficient to
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toll the statute of limitations.
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Although Defendants seek dismissal of these claims with prejudice, this Court finds
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Plaintiffs could possibly cure the deficiencies outlined herein by the allegations of other
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facts. See Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). Accordingly, Plaintiffs’
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causes of action one through six are DISMISSED WITHOUT PREJUDICE.
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B.
Failure to State a Claim
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Defendants also argue that “Plaintiffs have fatally failed to rebut the proposition
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that ‘foreclosure does not constitute debt collection’ in their FAC” under the Rosenthal
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Fair Debt Collection Practices Act (“RFDCPA”) as presented in Plaintiffs’ seventh cause
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of action. Doc. # 19-1 at 22 (quoting Altman v. PNC Mortg., 850 F. Supp. 2d 1057,
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1071 (E.D. Cal. 2012)). To state a claim for violation of the RFDCPA, a plaintiff must
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allege that a “debt collector,” as defined by statute, was engaged in “debt collection,” also
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defined by statute. Cal. Civ. Code § 1788.1(2)(b) & (c). Defendants contend that
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“[b]ecause Plaintiffs have failed to refute well-settled case law that foreclosing on a deed
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of trust is not ‘debt collection’ for RFDCPA purposes, Plaintiffs failed to state a viable
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RFDCPA claim.” Doc. #19 at 22.
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In opposition, Plaintiffs argue that mortgage services can be liable for a violation of
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the RFDCPA if allegations of harassment are presented. Doc. # 22 at 25 (citing Cal. Civ.
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Code § 1788). In their amended complaint, Plaintiffs fail to assert allegations of conduct
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by Defendants that constitute harassment under the RFDCPA. Instead, Plaintiffs allege
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conduct by Quality Loan Services, acting as an agent and trustee on behalf of Metlife on
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November 20, 2009, constituted harassment under the RFDCPA. See Doc # 16 ¶ 237-38.
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Plaintiffs fail, however, to implicate Defendants First Horizon or Nationstar, the only
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remaining Defendants here, in their RFDCPA claim.
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This Court finds Plaintiffs have failed to sufficiently plead an RFDCPA claim
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pursuant to Cal. Civ. Code § 1788.1. As required by the RFDCPA, Plaintiffs allege
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Defendants are “debt collectors” and that they were engaged in “debt collection,” but the
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alleged debt collection is based solely on the foreclosure of Plaintiffs’ property. See Doc.
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# 16 ¶ 237-39. As noted by Defendants, courts in the Ninth Circuit have found that
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“foreclosure does not constitute debt collection.” Doc # 19-1 at 22 (quoting Altman, 850
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F. Supp. 2d at 1071; Izenberg v. ETS Services, LLC, 589 F. Supp. 2d 1193, 1199
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(C.D.Cal.2008)). Thus, this Court finds Plaintiffs’ complaint fails to sufficiently allege
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Defendants are debt collectors or that Defendants engaged in debt collection under the
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RFDCPA. This Court finds Plaintiffs’ complaint could possibly be cured by the allegation
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of other facts regarding their RFDCPA claim. Therefore, this Court GRANTS Defendants’
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motion to dismiss Plaintiffs’ seventh cause of action, and DISMISSES PLAINTIFFS’
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RFDCPA CLAIM WITHOUT PREJUDICE.
CONCLUSION AND ORDER
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Based on the foregoing, IT IS HEREBY ORDERED that Defendants’ motion to
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dismiss [doc. # 19] is GRANTED and Plaintiffs’ complaint is DISMISSED WITHOUT
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PREJUDICE.
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Dated:
August 22, 2013
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JOHN A. HOUSTON
United States District Judge
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