Lowery v. Deutsche Bank National Trust Company et al

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UNITED STATES BANKRUPTCY COURT
CENTRAL DISTRICT OF CALIFORNIA
In re:
Cynthia Rene Lowery,
Debtor(s),
Cynthia Rene Lowery
Plaintiff(s),
Vs.
Deutsche Bank National Trust Company, HOMEQ
SERVICING CORPORATION, NEW CENTURY
MORTGAGE CORPORATION
Defendant(s).
Case No.: 1:08-bk-19328-MT
Adversary No.: 1:09-ap-01019-MT
Chapter: 13
MEMORANDUM RE DEFENDANT’S MOTION TO
DISMISS PLAINTIFF’S FIRST AMENDED
COMPLAINT
Date: August 27, 2009
Time: 9:30 a.m.
Location: Courtroom 302
I. INTRODUCTION
Defendant Barclays Capital Real Estate Inc., d.b.a. HomEq Servicing, (“defendant”)
seeks dismissal of plaintiff Cynthia Rene Lowrey’s (“plaintiff”) First Amended Complaint under
Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012.
//
FILED & ENTERED
SEP 09 2009
CLERK U.S. BANKRUPTCY COURT
Central District of California
BY DEPUTY CLERK	marshall
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II. BACKGROUND
On September 1, 2006, plaintiff refinanced her property with New Century Mortgage
(“NCM”). Plaintiff received a 2/28 adjustable rate mortgage.1 In order to affect the refinance,
plaintiff executed a Deed of Trust and Adjustable Rate Rider in favor of NCM. NCM then paid
off the two existing loans secured by the subject property and provided plaintiff with
$51,633.60 in cash.
In December of 2006, defendant began servicing plaintiff’s loan. Before the rate even
reset, in September of 2007, plaintiff ceased making payments on the note. Plaintiff then
received a notice of default from defendant. Plaintiff contacted defendant to attempt to
negotiate a forbearance agreement. The parties were unable to reach an agreement, and on
February 22, 2008, a Notice of Default was recorded. On June 6, 2008, a Notice of Trustee’s
Sale was recorded.
On June 25, 2008, plaintiff filed a voluntary Chapter 13 petition (case number 1:08-bk-
14294-MT), which was dismissed on November 5, 2008 for plaintiff’s failure to tender the
required payments to the trustee. Plaintiff subsequently filed a new Chapter 13 petition on
November 19, 2008 (case number 1:08-bk-19328-MT) but did not move for an extension of the
stay. The foreclosure sale took place on December 29, 2008, and the Trustee’s Deed Upon
Sale was recorded on January 21, 2009. That same day, plaintiff filed her complaint initiating
this adversary proceeding. The complaint alleged violations of the Fair Housing Act (“FHA”),
Equal Credit Opportunity Act (“ECOA”), the Civil Rights Act (“CRA”), and the automatic stay,
and alluded to potential causes of action under the Home Ownership and Equity Protection Act
(“HOEPA”), Truth in Lending Act (“TILA”), Unfair or Deceptive Business Practices, and equity.
On March 13, 2009, defendant filed a Motion to Dismiss plaintiff’s complaint under
FRCP 12(b)(6). On April 29, 2009, defendant’s Motion to Dismiss was granted with respect to
plaintiff’s FHA, CRA, ECOA, and violation of the automatic stay claims. The court granted
plaintiff leave to amend her potential HOEPA, TILA, Unfair or Deceptive Business Practices,
1 A 2/28 loan appears to be a loan with an initial rate for 2 years. The initial rate resets upward after the
two-year period and it can change every six months thereafter.
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and equity claims. Plaintiff filed her First Amended Complaint on June 30, 2009. On July 14,
2009, defendant filed a Motion to Dismiss Adversary Proceeding. On August 3, 2009, plaintiff
filed her Objection to defendant’s Motion to Dismiss. On August 7, 2009, defendant filed its
Reply to Plaintiff’s Objection to Defendant’s Motion to Dismiss.
III. ARGUMENTS
Defendant argues that the court must dismiss plaintiff’s First Amended Complaint.
Defendant asserts that the statutes of limitations bar all plaintiff’s claims for relief under FHA,
ECOA, and CRA. Defendant also argues that plaintiff’s Unfair or Deceptive Business
Practices claim must fail because plaintiff fails to plead facts showing defendant engaged in
any specific unlawful, fraudulent, or unfair conduct, and because the claim otherwise relies on
plaintiff’s claims under FHA, ECOA, and CRA. Moreover, defendant argues that plaintiff’s
claim for equitable relief must fail because plaintiff has not demonstrated a likelihood of
success on the merits, and because an injunction is moot since the property has been sold.
Finally, defendant argues that plaintiff’s request for equitable tolling under TILA must be
dismissed because plaintiff has not set forth a corresponding cause of action for violation of
TILA, and because defendant cannot be liable under TILA as a subsequent assignee of the
original loan.
Plaintiff’s response to defendant’s motion to dismiss does not contain any substantive
counter-argument to those presented by defendant and requests discharge of defendant’s
security interest.
Defendant replied by re-arguing the points made in its original motion and responding to
plaintiff’s request for discharge of defendant’s security interest.
IV. DISCUSSION
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the complaint. Navarro
v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A plaintiff must plead “‘enough facts to state a
claim to relief that is plausible on its face.’” Williams ex rel. Tabiu v. Gerber Products Co., 523
F.3d 934, 938 (9th Cir. 2008), quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). In
evaluating a motion to dismiss a court must assume the truth of all factual allegations and must
construe all inferences from them in the light most favorable to the nonmoving party.
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Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002). Affirmative defenses may be upheld on
a motion to dismiss only when they are established on the face of the complaint. Jablon v.
Dean Witter & Co., 614 F.2d 677, 682 (9th Cir. 1980). A court can only grant a motion to
dismiss, based solely upon the running of the statute of limitations, when no reading of the
complaint would allow the plaintiff to prove the statute was tolled. Id.
A. FHA, CRA, ECOA and Automatic Stay
Defendant’s motion to dismiss plaintiff’s original complaint was granted with respect to
plaintiff’s claims for violations of the FHA, ECOA, CRA, and the automatic stay. The Court
determined that plaintiff was granted leave to amend her complaint only with respect to her
potential HOEPA, TILA, Unfair or Deceptive Business Practices, and equitable relief claims.
Therefore, plaintiff’s reassertion of her FHA, CRA, and ECOA claims is improper. Plaintiff’s
reassertion of these claims also continues to fail to allege any cognizable cause of action. For
these reasons, defendant’s Motion to Dismiss plaintiff’s First Amended Complaint with respect
to these claims is granted.
B. Unfair or Deceptive Business Practices
Section 17200 of the California Business and Professions Code (“CBPC”) creates a
cause of action for an “unlawful, unfair or fraudulent business act or practice.” Henry v.
Lehman Commer. Paper, Inc., 471 F.3d 977, 995-96 (9th Cir. 2006). Violations of the CBPC
must be pled with reasonable particularity. Khoury v. Maly’s of California, Inc., 14 Cal. App.
4th 612, 619 (Cal. App. N.D. 1993). Plaintiff’s First Amended Complaint is devoid of any
specific allegations that can be construed as stating a cause of action for Unfair or Deceptive
Business Practices with any reasonable degree of particularity. Instead, plaintiff’s First
Amended Complaint merely asserts conclusory statements that defendant’s alleged violations
of FHA, ECOA, CRA and HOEPA justify a claim for Unfair or Deceptive Business Practices.
However, because plaintiff was barred from reasserting those claims, other than HOEPA, and
in any event failed to plead facts sufficient to support those claims, plaintiff’s claim cannot
survive defendant’s motion to dismiss.
//
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C. TILA/Equitable Tolling
The statute of limitations to file a claim for violation of TILA is one year. 15 U.S.C.
§1640(e). Plaintiff signed her loan documents in September of 2006. However, this adversary
proceeding was not filed until January 22, 2009. Because more than one year passed
between the alleged TILA violation and plaintiff’s initiation of this action, plaintiff’s TILA claim is
time-barred unless the doctrine of equitable tolling applies.
Equitable tolling of civil damages claims brought under TILA may suspend the
limitations period under the appropriate circumstances until the plaintiff/borrower discovers or
had a reasonable opportunity to discover the TILA violations. Rosal v. First Fed’l Bank of Cal.,
2009 U.S. Dist. LEXIS 60400 (N.D. Cal. 2009). Plaintiff’s First Amended Complaint states that
plaintiff received a notice of default in September of 2007. This notice provided plaintiff with a
reasonable opportunity to discover the alleged TILA violations. However, plaintiff did not file
this adversary proceeding until January 22, 2009. Because plaintiff has not alleged any facts
demonstrating that she did not have a reasonable opportunity to discover the alleged
violations, equitable tolling is inapplicable and plaintiff’s TILA cause of action is consequently
time-barred. Even if the September 2007 notice of default did not provide plaintiff was
reasonable notice, plaintiff has failed to state any facts sufficient to support a TILA cause of
action.
D. Equitable Relief
An injunction is appropriate only where the plaintiff can establish risk of irreparable harm
and a likelihood of success on the merits. Sun Microsystems, Inc. v. Microsoft Corp., 188 F.3d
115, 1119 (9th Cir. 1999). Plaintiff is not entitled to an injunction because she has failed to
establish a likelihood of success on the merits.
E. Other Relief Sought
Plaintiff’s First Amended Complaint makes only passing mention of a HOEPA cause of
action, but does not contain any specific allegations. Moreover, plaintiff requests additional
relief in the form of monetary damages and restitution. Because plaintiff has failed to state a
claim upon which such relief may be granted, plaintiff is not entitled to such relief.
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V. CONCLUSION
For the foregoing reasons, defendant’s Motion to Dismiss should be granted in its
entirety. Plaintiff should not be barred from pursuing any appropriate state law remedies in
any subsequent eviction action.
###
United States Bankruptcy Judge
DATED: September 9, 2009
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NOTE TO USERS OF THIS FORM:
1) Attach this form to the last page of a proposed Order or Judgment. Do not file as a separate document.
2) The title of the judgment or order and all service information must be filled in by the party lodging the order.
3) Category I. below: The United States trustee and case trustee (if any) will always be in this category.
4) Category II. below: List ONLY addresses for debtor (and attorney), movant (or attorney) and person/entity (or
attorney) who filed an opposition to the requested relief. DO NOT list an address if person/entity is listed in category I.
NOTICE OF MEMORANDUM AND SERVICE LIST
Notice is given by the court that a judgment or order entitled (specify) MEMORANDUM RE
DEFENDANT’S MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT
was entered on the date indicated as AEntered@ on the first page of this judgment or order and will be served
in the manner indicated below:
I. SERVED BY THE COURT VIA NOTICE OF ELECTRONIC FILING (ANEF@) B Pursuant to controlling
General Order(s) and Local Bankruptcy Rule(s), the foregoing document was served on the following
person(s) by the court via NEF and hyperlink to the judgment or order. As of September 5, 2009, the following
person(s) are currently on the Electronic Mail Notice List for this bankruptcy case or adversary proceeding to
receive NEF transmission at the email address(es) indicated below.
• Eric D. Houser scleere@houser-law.com
• United States Trustee (SV) ustpregion16.wh.ecf@usdoj.gov
Service information continued on attached page
II. SERVED BY THE COURT VIA U.S. MAIL: A copy of this notice and a true copy of this judgment or order
was sent by U.S. Mail to the following person(s) and/or entity(ies) at the address(es) indicated below:
Cynthia Rene Lowery
14826 Chatsworth Dr
Mission Hills, CA 91345
Service information continued on attached page
III. TO BE SERVED BY THE LODGING PARTY: Within 72 hours after receipt of a copy of this judgment or
order which bears an AEntered@ stamp, the party lodging the judgment or order will serve a complete copy
bearing an AEntered@ stamp by U.S. Mail, overnight mail, facsimile transmission or email and file a proof of
service of the entered order on the following person(s) and/or entity(ies) at the address(es), facsimile
transmission number(s) and/or email address(es) indicated below:
Service information continued on attached page
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