ALLISON CLAIRE, Magistrate Judge.
This is a mortgage foreclosure case. The First Amended Complaint ("Complaint") alleges violations of (1) the Trust in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, (2) the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p, and (3) California's Unfair Competition Law, Cal. Bus. & Prof. Code §§ 17200, et seq.
Defendants move to dismiss this action on several grounds. Their principal argument, however, is that the entire lawsuit is dependent upon plaintiff's alleged rescission of her loans, but that the rescission was made nine (9) years after the loans were made, long past the three (3) year period for rescission permitted by 15 U.S.C. § 1635(f). For the reasons set forth below, the undersigned will recommend that the motions be granted, and that the Complaint be dismissed with leave to amend.
In her First Amended Complaint ("Complaint") (ECF No. 17), plaintiff alleges that she "rescinded" her Wells Fargo ("Harbor View Trust") loan on March 14, 2015, and that she "rescinded her second trust deed loan" with Bank of New York ("BoNY") on July 2, 2015. Complaint ¶¶ 10 & 11. Plaintiff does not allege the date the loans were made, nor attach any documentation of the loan from which the court could determine the date. However, implicitly acknowledging that the rescission must occur within 3 years after the date the loan was made,
The Complaint's first three Causes of Action allege that all the defendants violated the FDCPA by: (1) taking collection activity against her that "cannot legally be taken" (violating 15 U.S.C. § 1692e(5); (2) falsely represented the legal status of the debt (violating 15 U.S.C. § 1692e(2)(A)); and (3) threatened "to collect an amount not authorized by law" (violating 15 U.S.C. § 1692f(1)). Each of these claims is predicated upon plaintiff's implicit allegation (reading the Complaint in the light most favorable to her) that she had properly rescinded the loans under TILA, before defendants took these actions.
The Complaint's Fourth Cause of Action alleges that all the defendants violated the California Business & Professions Code § 17200 by violating the FDCPA.
The Complaint's Fifth Cause of Action alleges that defendants Wells Fargo and BoNY violated TILA by failing to comply with their obligations once her loans had been rescinded.
Wells Fargo
All defendants have moved to dismiss all the FDCPA claims, arguing that plaintiff's TILA right to rescind her mortgage loans — upon which all of her FDCPA claims are based — expired years ago under TILA's three-year statute of repose, as set forth at 15 U.S.C. § 1635(f). ECF Nos. 27-1 at 4-7 (Real Time), 29 at 6-7 (Wells Fargo), 33 at 7-8 (BoNY). The defendants have also made the following arguments.
Real Time moves to dismiss (1) the FDCPA claims and the state claim, for failure to allege that it violated any provision of the FDCPA, (2) all claims against it, arguing that the Complaint does not comply with the "short and plain statement" requirement of Fed. R. Civ. P. 8, and (3) California's Unfair Competition Law claim, for lack of standing. ECF No. 27-1 at 7-9.
BoNY moves to dismiss the FDCPA claims, arguing that it is not engaged in the collection of any debt. ECF No. 33 at 9. The undersigned interprets this to be an argument that BoNY is not a "debt collector" within the meaning of the FDCPA, 15 U.S.C. § 1692a(6). Wells Fargo and BoNY also argue that the FDCPA statute only applies to the collection of debt, and that non-judicial foreclosures are not the collection of "debt," within the meaning of the FDCPA, 15 U.S.C. § 1692a(5). ECF Nos. 29 at 9 (Wells Fargo), 33 at 9-10 (BoNY).
All defendants have moved to dismiss based upon Rule 12(b)(6) and/or Rule 8(a). However, since defendants' motions are predicated in part upon 15 U.S.C. § 1635(f), which is a jurisdictional statute of repose, the court must also consider the standards applicable to Rule 12(b)(1) motions to dismiss for lack of jurisdiction.
In this case, defendants have mounted a "facial" attack, because they base the attack on the face of the Complaint, together with matters that may be considered by the court through judicial notice. Specifically, defendants argue that the Deeds of Trust for plaintiff's loans, which they assert are subject to judicial notice, show that plaintiff's lawsuit was filed more than three years from the date the loans were made. Defendants further argue that plaintiff's opposition to their motion is based upon allegations of the Complaint that contradict matters subject to judicial notice. Accordingly, all of defendants' motions will be decided under Rule 12(b)(6) standards.
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal sufficiency of the Complaint.
In order to survive dismissal for failure to state a claim, a complaint must contain more than a "formulaic recitation of the elements of a cause of action;" it must contain factual allegations sufficient to "raise a right to relief above the speculative level."
In reviewing a complaint under this standard, the court "must accept as true all of the factual allegations contained in the complaint," construe those allegations in the light most favorable to the plaintiff, and resolve all doubts in the plaintiffs' favor.
Pro se pleadings are held to a less stringent standard than those drafted by lawyers.
"A court shall take judicial notice if requested by a party and supplied with the necessary information." Fed. R. Evid. 201(d). "A judicially noticed fact must be one not subject to reasonable dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Fed. R. Evid. 201(b).
Even where a document is not subject to judicial notice, however, the court may still consider a document proffered for judicial notice, if it qualifies under the "incorporation by reference" doctrine.
Home equity "Credit Line Agreement" for $170,000, dated March 6, 2006, between borrower Svetlana Tyshkevich and lender America's Wholesale Lender ("AWL"), and bearing the signature of Ms. Tyshkevich (dated March 7, 2006). ECF No. 27-4.
The Agreement does not purport to be an official document, nor to be recorded in any recorder's office or with any other governmental agency. Real Time vaguely asserts that plaintiff refers in the Complaint to all documents for which it seeks judicial notice (or that they are contained in public records). ECF No. 27-1 at 2 n.1. However, the court can find no reference to this document in the Complaint, and Real Time does not specify where in the Complaint this reference is to be found. The Complaint does refer to plaintiff's "mortgage loan with Harbor View Trust," and her "second trust deed loan with BONY," but Exhibit A does not on its face show that it is either of these loans.
The request for judicial notice of this document will therefore be denied.
Deed of Trust dated March 6, 2006, for $170,000, between Svetlana Tyshkevich and America's Wholesale Lender (through its "nominee," the Mortgage Electronic Registration Systems, Inc. ("MERS")), recorded at the Placer County Recorder's Office on March 14, 2006 (Recorder's Office Document No. DOC-2006-0027653). ECF No. 27-5. The Deed of Trust states that it encumbers plaintiff's home as security for her "revolving credit agreement dated March 6, 2006," and states that "[t]he maximum principal obligation under the Agreement" secured by the Deed of Trust is $170,000.
The existence and contents of this publicly recorded document can accurately and readily be determined, and therefore the request for judicial notice of the document (hereinafter "Real Time RfJN Exh. B"), will be granted.
Correspondence from Real Time, addressed to Svetlana Tyshkevich, dated March 27, 2009. ECF No. 27-6. This document is not referred to in the Complaint (notwithstanding Real Time's vague assertion that all documents for which it seeks judicial notice are referred to in the Complaint), and it meets none of the requirements for taking judicial notice. The request for judicial notice of this document will be denied.
"Notice of TILA Rescission" from Svetlana Tyshkevich to Real Time, dated July 2, 2015. ECF No. 27-7. The document makes reference to America's Wholesale Lender as the "Lender," and to "Countrywide" as the "Originator."
This document may, or may not, be referred to in the Complaint. In the Complaint, plaintiff alleges that on July 2, 2015, she "rescinded her second trust deed loan with BONY." Complaint ¶ 36. However, Exhibit D contains no reference to any "loan with BONY." Real Time makes no effort to explain how the court would know that Exhibit D is the document referred to in the Complaint, and therefore the request for judicial notice of this document will be denied.
Deed of Trust dated March 6, 2006 for $1.36 million, between Svetlana Tyshkevich and America's Wholesale Lender, recorded at the Placer County Recorder's office on March 14, 2006 (Recorder's Office Document No. DOC-2006-0027652). ECF No. 30 at 5-27. The Deed of Trust encumbers plaintiff's home as security for "a promissory note signed by Borrower and dated March 6, 2006," and which promissory note "states that Borrower owes Lender" $1.36 million.
The existence and contents of this publicly recorded document can accurately and readily be determined, and therefore the request for judicial notice of the document (hereinafter "Wells Fargo RfJN Exh. A"), will be granted.
"Notice of Default" based upon the $1.36 million Deed of Trust executed by Svetlana Tyshkevich, dated June 12, 2008, and recorded at the Placer County Recorder's Office on June 16, 2008 (Recorder's Office Document No. DOC-2008-0048763-00). ECF No. 30 at 29-30. The existence and contents of this publicly recorded document can accurately and readily be determined, and therefore the request for judicial notice of the document (hereinafter "Wells Fargo RfJN Exh. B"), will be granted.
"Notice of Rescission" of Exhibit B, dated December 3, 2012, and recorded at the Placer County Recorder's Office on December 5, 2012 (Recorder's Office Document No. DOC-2012-0116251-00). ECF No. 30 at 32. The existence and contents of this publicly recorded document can accurately and readily be determined, and therefore the request for judicial notice of the document (hereinafter "Wells Fargo RfJN Exh. C"), will be granted.
"Notice of Default" based upon the $1.36 million Deed of Trust executed by Svetlana Tyshkevich, dated October 20, 2014, and recorded at the Placer County Recorder's office on October 22, 2014 (Recorder's Office Document No. DOC-2014-0074663-00). ECF No. 30 at 34-37. The existence and contents of this publicly recorded document can accurately and readily be determined, and therefore the request for judicial notice of the document (hereinafter "Wells Fargo RfJN Exh. D"), will be granted.
"Notice of Trustee's Sale," dated March 10, 2015, recorded at the Placer County Recorder's office on March 12, 2015, and referring to the $1.3 million Deed of Trust (County Recorder's Office Document No. DOC-2006-0027652), executed by Svetlana Tyshkevich (County Recorder's Office Document No. DOC-2015-0017658-00). ECF No. 30 at 39-40. The existence and contents of this publicly recorded document can accurately and readily be determined, and therefore the request for judicial notice of the document (hereinafter "Wells Fargo RfJN Exh. E"), will be granted.
Decision in
BoNY has submitted five documents (Exhibits 1-5, ECF No. 34-1), and requests judicial notice of them. Each document purports to be recorded at the Placer County Recorder's office, and the Request for Judicial Notice asserts that each document bears a specified "instrument number."
However, each document has that instrument number redacted out. It is that instrument number that permits the court to accurately and readily determine the existence and content of the document. Therefore, the requests for judicial notice will be denied.
Plaintiff requests judicial notice of the Brief of Amicus Curiae Consumer Financial Protection Bureau in Support of Appellant and Reversal,
The existence of this publicly filed document can accurately and readily be determined, but the arguments and factual assertions contained in the brief are not judicially noticeable facts. Because the existence of the brief and the fact that it was filed are not relevant to the issues before the court, the request for judicial notice will be denied.
Plaintiff requests judicial notice of
The court may take judicial notice of court records.
However, the court recognizes that plaintiff is proceeding pro se, and further, that it must interpret plaintiff's Complaint in the light most favorable to her. Accordingly, the court will construe plaintiff's Complaint in light of her reliance on the Florida case, to include the allegation that AWL was not a corporation in 2005, and that AWL was not incorporated thereafter by Countrywide or Bank of America.
Plaintiff alleges that she properly "rescinded" her mortgage loans under TILA. Complaint ¶¶ 35, 36. Because plaintiff properly rescinded the loans (according to the complaint), defendants Wells Fargo Bank, N.A. and BoNY were then required to "cancel the note, release the deed of trust, and credit any and all payments, fees, and charges associated with the transaction to Plaintiff's account," which they failed to do, in violation of TILA. Complaint ¶¶ 37-39.
TILA provides that "in the case of any consumer credit transaction," which includes the home equity loans at issue here, the borrower "shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later." 15 U.S.C. § 1635(a).
However, if the lender is late in delivering the required disclosure forms, the right of rescission persists for up to three years past the date the loan is consummated. 15 U.S.C. § 1635(f). At the end of that three year period, the borrower's right of rescission expires even if the lender never provides the required disclosures.
Moreover, the three-year period is not a statute of limitations, but a statute of repose.
In order for the court to determine whether the right of rescission has been extinguished by the 3-year statute of repose, it must know when the statute of repose clock starting ticking. Defendants argue that the clock started on or about March 6, 2006, when the loans were made. In support, they cite the Deeds of Trust (of which the court has taken judicial notice), both of which are dated March 6, 2006.
Plaintiff argues that the 3-year clock did not start to run on March 6, 2006, because the loan was not "consummated" at that time. In her Complaint, plaintiff alleges that the loans were never "consummated" as defined by "Regulation Z," 12 C.F.R. Part 226. Specifically, she argues, "the true creditor to the transaction was never disclosed to Plaintiff," Complaint ¶ 35, even though this is required to consummate the loan.
As plaintiff argues, her right to rescind her consumer credit transaction expires "three years after the date of consummation of the transaction." 15 U.S.C. § 1635(f). In turn, Regulation Z, the federal regulation that implements the TILA, interprets "consummation" to mean "the time that a consumer becomes contractually obligated on a credit transaction." 12 C.F.R. § 226.2(a)(13). State law determines when a borrower becomes contractually obligated under Regulation Z.
"Under the law of California, as in most jurisdictions, no loan contract is formed if an essential element [of the contract] is missing."
Plaintiff thus rests her entire case upon her allegation that the "true" lender — and therefore the other party to the loan — was never identified. Interpreting this allegation in the light most favorable to plaintiff, she is alleging either that (a) "America's Wholesale Lender" — the party identified as the lender on the Deeds of Trust — is a fictitious name, or a "dba," for some other entity, and that other entity was never disclosed to plaintiff, or (b) there was no such contracting entity as "America's Wholesale Lender," even though that name was placed on the loan documents.
The face of the Complaint, together with matters subject to judicial notice, show that all the parties to the contract are identified. There are two loans at issue here. The parties identified for both loans are plaintiff and America's Wholesale Lender ("AWL"). Real Time RfJN Exh. B ($170,000 deed of trust), Wells Fargo RfJN Exh. A ($1.3 million deed of trust). As noted, plaintiff argues against this showing by noting that she has alleged that AWL is not the "true" lender.
Under the first, and most likely interpretation of the Complaint, plaintiff is alleging that "America's Wholesale Lender" is a fictitious name. First, the Complaint alleges that the loan documents do not disclose the "true" lender. Complaint at 6 n.2 ("the pertinent loan documents failed to identify the true parties to the transactions"). Second, at oral argument on the motion, plaintiff interjected that "America's Wholesale Lender" was a "dba." Third, as disclosed in
However there is nothing in California law that prohibits an entity from doing business under a fictitious business name, or a "dba." To the contrary, California law specifically provides for this practice.
The other possible interpretation of the Complaint is that plaintiff is alleging that AWL simply did not exist, and that a made-up business name was simply added as the lender, on her loan contract. In light of plaintiff's implicit acknowledgment in her state lawsuit that AWL does exist as the fictitious name of Countrywide, and her acknowledgement at oral argument that AWL was a "dba," the court does not consider this possibility to be a plausible interpretation of the Complaint.
At oral argument on this matter, however, plaintiff pressed the possibility that AWL was actually non-existent, rather than simply a fictional name, by asserting that the Deeds of Trust identify AWL as a New York corporation, when in fact, she alleges, it was not a New York corporation. This argument misreads the Deeds of Trust. They do not state that "AWL" is a corporation. Rather, they state that the "Lender" is a corporation organized under the laws of New York. While the wording could be clearer, this plain meaning of this is that the "Lender" — which plaintiff implicitly acknowledges is Countrywide (dba AWL) — is a New York Corporation. It does not assert that AWL — the fictitious name itself — is a New York Corporation.
Defendants Wells Fargo and BoNY, the only defendants against whom the TILA claim is made, move to dismiss the TILA claim because plaintiff's lawsuit is predicated upon her rescissions, in 2015, of two loans that were made in March 2006. Looking only to the Complaint and to matters subject to judicial notice, it appears that plaintiff's ability to rescind the loans was extinguished in March 2009, six years before plaintiff filed this lawsuit. Plaintiff's argument that the loans were not "consummated" in March 2009 (or maybe never), is not supported by anything appearing in the Complaint or subject to judicial notice, or plausibly inferable from either.
However, the court cannot definitively exclude the possibility that plaintiff could allege in good faith that AWL was not a proper contracting party in March 2006.
Wells Fargo and BoNY move to dismiss the TILA claim on the further ground that the Complaint fails to allege that plaintiff has the ability "to tender the amount owed on the loan." Defendants are correct that if plaintiff is able to rescind, she will be required to give back what she received from the lender, namely, the benefit of the $1.36 million and the $170,000 loans. 15 U.S.C. § 1635(b) ("Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value"); 12 C.F.R. § 226.23(d)(3) ("If the creditor has delivered any money or property, the consumer may retain possession until the creditor has met its obligation under paragraph (d)(2) of this section. When the creditor has complied with that paragraph, the consumer shall tender the money or property to the creditor"). Because of this, the district court has the discretion to require plaintiff to show that she has the ability to tender the amount of proceeds she received from the loan.
However, this is not a pleading issue susceptible of resolution on a Rule 12(b)(6) motion.
All of plaintiff's FDCPA claims are predicated upon the alleged rescission of her loans. Thus, in her fist claim, plaintiff alleges that defendants pursued "collection activity against Plaintiff" after the loans were rescinded under TILA. Complaint ¶¶ 17-18;
The Complaint contains no claim that defendants otherwise violated the FDCPA. For example, there is no claim that defendants threatened plaintiff with arrest, or employed "unfair or unconscionable means to collect or attempt to collect any debt," independent of the alleged rescission.
Because plaintiff's current complaint (together with matters subject to judicial notice), shows that her TILA claim and right to rescind, upon which all of the FDCPA claims rest, was extinguished years ago, these claims must be dismissed against all defendants, for failure to state a claim. Since, however, the TILA claim is being dismissed without prejudice, these claims should also be dismissed without prejudice. If plaintiff prevails on a motion for leave to amend her complaint to cure the TILA timeliness issue, she should be able to re-allege her FDCPA claims.
The FDCPA "bans a variety of debt collection practices and allows individuals to sue offending debt collectors."
BoNY argues that it is not engaged in the collection of any debt, which the court construes to be an argument that it is not a "debt collector." In addition, Wells Fargo and BoNY both argue that "the only `collection' action . . . [they] have engaged in is the pursuit of non-judicial foreclosure."
There are three possibilities for Wells Fargo or BoNY to be a debt collector under the FDCPA. The first type of "debt collector" is an entity whose "principal purpose" is debt collection. 15 U.S.C. § 1692a(6);
The second type of "debt collector" is an entity that "regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another," 15 U.S.C. § 1692a(6) (emphasis added), so long as the debt "was not in default at the time it was obtained" by the person collecting the debt,
The third type of "debt collector" is any business, "the principal purpose of which is the enforcement of security interests." 15 U.S.C. § 1692a(6).
Plaintiff's Complaint contains no factual allegations from which the court can conclude that Wells Fargo or BoNY is a debt collector, or at least is acting as such in this case.
Both defendants further argue, independently of their argument that they are not debt collectors, that the FDCPA "is not applicable to non-judicial foreclosures." The undersigned rejects this argument because, as discussed below, both defendants are alleged to have engaged in conduct other than non-judicial foreclosure, and further, the FDCPA does apply to certain non-judicial foreclosures.
The Complaint, read in the light most favorable to plaintiff, alleges that all defendants (including Real Time, which does not join Wells Fargo and BoNY in these arguments), engaged in "collection activity against Plaintiff." Complaint ¶¶ 17, 18, 24, 25. Specifically, plaintiff alleges that Wells Fargo and BoNY (and other defendants) "continue to falsely represent the legal status" of the loans at issue here. Complaint ¶ 21. This conduct — if true, engaged in by a "debt collector," and occurring within the statute of repose — is unlawful under the FDCPA.
Defendants argue that the FDCPA "is not applicable to non-judicial foreclosures." In fact, the FDCPA specifically prohibits "unfair or unconscionable means" in connection with non-judicial foreclosures:
15 U.S.C.A. § 1692f(6) (emphasis added). Defendants do not explain why this provision, which by its terms plainly applies to non-judicial foreclosures, does not mean what it says.
Nor do defendants explain why the documents threatening foreclosure are not attempts to collect the underlying debt, especially when they state, among other things:
Wells Fargo RfJN Exh. D (ECF No. 30 at 34-35) ("Notice of Default"). Even assuming, without deciding, that the judicial foreclosure itself is not the collection of a debt, it does appear that the Notice of Default is attempting to collect the debt, at least as an alternative to the threatened foreclosure.
Real Time moves to dismiss for failure to state a claim, separate and apart from the argument that the claim is time-barred. Defendant argues that plaintiff fails to allege that it violated 15 U.S.C. §§ 1692e, 1692f. That is not so. Plaintiff alleges that Real Time (along with all other defendants) misrepresented the status of the loan (because it had been rescinded) and tried to collect a loan it had no right to collect (because it had been rescinded). If the loan had in fact been rescinded, those would appear to be good FDCPA claims. Real Time's motion to dismiss on grounds of Fed. R. Civ. P. 8(a) is not meritorious, as plaintiff's claim is clearly stated.
The complaint should be dismissed because it was filed too long after the loans were issued. Because the TILA rescission claims were brought long after the latest statutory deadline, both the TILA claims and the FDCPA claims fail. The current complaint does not contain facts that support plaintiff's theory that the loans were not consummated because the lender was not identified and/or the entity identified was legally incapable of contracting. The undersigned is unconvinced that plaintiff will be able to amend her complaint to include facts that would demonstrate the loans were not consummated within the meaning of Regulation Z and California law. However, the possibility cannot be ruled out at this stage. It will therefore be recommended that the complaint be dismissed without prejudice, and plaintiff permitted to
For the reasons stated above, IT IS HEREBY ORDERED that
1. Defendant Real Time's Request for Judicial Notice (ECF No. 27-2), is GRANTED as to Real Time RfJN Exh. B (ECF No. 27-5), and is otherwise DENIED;
2. Defendant Wells Fargo's Request for Judicial Notice (ECF No. 30), is GRANTED in its entirety, that is, as to Wells Fargo RfJN Exhs. A-F;
3. BoNY's Request for Judicial Notice (ECF No. 34), is DENIED in its entirety; and
4. Plaintiff's Request for Judicial Notice (ECF No. 37), is DENIED in its entirety.
IT IS HEREBY RECOMMENDED that defendants' motions to dismiss (ECF Nos. 27, 29, 33), be GRANTED IN PART and DENIED IN PART, as follows:
1. In regard to the motions of defendants Wells Fargo and BoNY, to dismiss the TILA claim for untimeliness:
a. Such motions should be GRANTED, without prejudice. The recommendation is being made without prejudice in order to permit plaintiff an opportunity to amend her complaint to cure the timeliness defect, if she can truthfully do so.
b. Plaintiff should be granted 30 days to
2. All defendants' motions to dismiss the FDCPA claims for failure to state a claim predicated upon the alleged TILA rescission, should be GRANTED without prejudice.
3. BoNY's motion to dismiss the FDCPA claims because it is not a "debt collector," should be GRANTED without prejudice.
4. Consideration of the state claims should be DEFERRED until the status of plaintiff's federal claims is resolved.
5. All other grounds for dismissing the TILA or FDCPA claims should be overruled.
These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(1). Any party may file written Objections with the court and serve a copy on all parties within twenty-one (21) days. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Any response to any Objection shall be filed within fourteen (14) days of service of the Objection. Failure to file objections within the specified time may waive the right to appeal the District Court's order.
