Batache v. Santi

TANIA BATACHE, Plaintiff, v. ROQUE SANTI, et al. Defendants.

Case No. 2:18-cv-06907-ODW(KS)

United States District Court Central District of California

November 15, 2018

ORDER GRANTING MOTION TO DISMISS [25]; DENYING MOTION FOR PRELIMINARY INJUNCTION [15]; AND DENYING MOTION TO STRIKE COMPLAINT OF PUNITIVE DAMAGES [26]

I. INTRODUCTION

Plaintiff Tania Batache moves the Court for a Preliminary Injunction to prevent Defendants Roque Santi and Mafalda Fontana ("Defendants") from selling real property prior to a trial on the merits. (ECF No. 15.) Conversely, Defendants move for Dismissal of Plaintiff's claims. (ECF No. 25.) Having reviewed the parties' submissions and with the benefit of oral argument on November 4, 2018, the Court DENIES Plaintiff's Motion for Preliminary Injunction, GRANTS Defendants' Motion to Dismiss, and DENIES Defendants' Motion to Strike as MOOT.

II. BACKGROUND

Plaintiff owns two residential properties, one in the City of Los Angeles (the "Venice Property") and the other in the City of Manhattan Beach (the "Manhattan Beach Property"). (See Compl. ¶¶ 15-18, ECF No. 1.) In 2014, Plaintiff and Defendants entered into negotiations to provide Plaintiff a loan. (Id. ¶ 20.) These negotiations eventually bore fruit, and Defendants provided Plaintiff a loan for $630,000. (Id. ¶ 24.) In exchange for the loan, Plaintiff signed and delivered to Defendants a promissory note secured by a deed of trust. (Id.) The deed of trust is collateralized against both the Venice Property and the Manhattan Property, giving Defendants a third position right in those properties. (Id. ¶ 20.)

Subsequently, on April 1, 2015, the parties entered into a "Loan Modification Agreement." (Id. ¶ 32.) The Loan Modification Agreement extended the maturity date of the initial loan to October 1, 2015. (Id. ¶ 34.) Plaintiff alleges that the principal amount she owed Defendants when she entered into the Loan Modification Agreement was $661,293.18 and that this amount was subject to monthly interest accruing at a rate of 14% per year. (Id. ¶ 35.) Plaintiff's consideration for the Loan Modification Agreement included a $12,966.53 extension fee which was added to the principal balance. (Id. ¶ 36.) In addition, Defendants received the right to a percentage of the sale price if Plaintiff sold the Venice or Manhattan Property. (Id. ¶ 37.)

The following year, on May 27, 2016, Defendants recorded "Notices of Default" against both the Venice and Manhattan Properties with the Los Angeles County Recorder's Office. (Id. ¶ 40-41.) The Notices of Default provided that Defendants were owed $804,022.47. (Id.) Several months later, on August 19, 2016, Plaintiff filed for bankruptcy protection under Chapter 11 of the Bankruptcy Code. (Id. ¶ 42.) This bankruptcy action, then pending in the Central District of California, was dismissed on December 31, 2017. (Id.) Plaintiff filed for bankruptcy a second time on January 2, 2018. (Id. ¶ 43.) In turn, the Defendants filed a "Notice of Sale" against the Venice Property on August 2, 2018. (Id. ¶ 44.) The Notice of Sale provided that the total amount due to Defendants was $1,213,534.04. (Id.) The foreclosure sale was set to commence on August 30, 2018. (Id.)

On August 10, 2018, Plaintiff brought this action raising claims arising out of the loan she obtained from Defendants. (See generally Compl.) On August 22, 2018, Plaintiff filed an Ex Parte Application seeking entry of a temporary restraining order ("TRO") and issuance of an order to show cause why a preliminary injunction should not issue (Ex Parte Application ("Application"), ECF No. 10). The Application sought to enjoin Defendants "from selling, attempting to sell, or causing to be sold Plaintiff's real properties commonly known as 41 Clubhouse Drive, Los Angeles, California 90291 (the 'Venice Property') and 520 Manhattan Beach Boulevard, Manhattan Beach, California 90266 (the 'Manhattan Beach Property')." (Id.) This Application mooted when the Parties agreed to postpone the sale of the property until October 8, 2018. (ECF No. 15.) Accordingly, the court issued an OSC why a preliminary injunction should not issue and set the matter for hearing on October 1, 2018. (Id.) The matter was subsequently transferred to this Court on September 24, 2018, and the Court held a hearing on whether a preliminary injunction should issue on November 4, 2018.

III. LEGAL STANDARDS

A. MOTION TO DISMISS

A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable legal theory or insufficient facts pleaded to support an otherwise cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988). A court may also dismiss a complaint for lack of subject matter jurisdiction, pursuant to Rule 12(b)(1).

To survive a motion to dismiss, a complaint need only satisfy the minimal notice pleading requirements of Rule 8(a)(2) - a short and plain statement of the claim. Porter v. Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual "allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). That is, the complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). These factual allegations must provide fair notice and enable the opposing party to defend itself effectively. Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

The determination whether a complaint satisfies the plausibility standard is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679. A court is generally limited to the pleadings and must construe all "factual allegations set forth in the complaint . . . as true and . . . in the light most favorable" to the plaintiff. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

B. PRELIMINARY INJUNCTION

Federal Rule of Civil Procedure 65 governs the issuance of preliminary injunctions. An injunction is an exercise of a court's equitable authority which should not be invoked as a matter of course, but "only after taking into account all of the circumstances that bear on the need for prospective relief." Salazar v. Buono, 559 U.S. 700, 714 (2010). To obtain a preliminary injunction, the moving party must show: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving party in the absence of preliminary relief; (3) that the balance of the equities tips in the moving party's favor; and (4) that an injunction is in the public interest. Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 20 (2008).

A preliminary injunction is "an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Id. at 22. The moving party bears the burden of meeting all four Winter elements. DISH Network v. FCC, 653 F.3d 771, 776-77 (9th Cir. 2011).

IV. DISCUSSION

A. JURISDICTION

In federal court, subject matter jurisdiction may arise from either "federal question jurisdiction" or "diversity of citizenship" when the amount in controversy exceeds $75,000. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). To properly allege diversity jurisdiction, a plaintiff must claim damages in excess of $75,000 and each defendant must be a citizen of a different state from each plaintiff. See 28 U.S.C. § 1332; Diaz v. Davis (In re Digimarc Corp. Derivative Litig.), 549 F.3d 1223, 1234 (9th Cir. 2008). Here, as all parties are residents of California, there is no diversity jurisdiction. However, the Court has federal question jurisdiction under 28 U.S.C. § 1331 because Plaintiff pleads claims under the Truth in Lending and Home Owner Equity Protection Acts. Moreover, the Court may exercise supplemental jurisdiction under 28 U.S.C. § 1367 because Plaintiff's state law claims arise out of the same common nucleus of operative fact as Plaintiff's Truth in Lending and Home Owner Equity Protection Act claims.

B. TRUTH IN LENDING ACT AND HOEPA CLAIMS

Plaintiff argues that Defendants violated various provisions of the Truth in Lending Act ("TILA") as well as the Home Owners Equity Protection Act ("HOEPA"). However, for reasons that follow, the Court does not reach the merits of Plaintiff's TILA (and HOEPA by extension because the Act is an amendment to TILA) claims because they are time-barred.

1. Truth in Lending Act

TILA was enacted "to assure meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing." 15 U.S.C. § 1601(a). "[T]he Act requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower's rights." Davenport v. Litton Loan Servicing, LP, 725 F. Supp. 2d 862, 872 (N.D. Cal. 2010) (quoting Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998)). TILA grants a borrower the right to civil damages, which must be brought within one year from the date on which the transaction underlying the alleged violation is consummated. 15 U.S.C. §§ 1635(f), 1640(a), (e); Conder v. Home Sav. of Am., 2010 WL 2486765, at *2-3 (C.D. Cal. June 14, 2010) (citing King v. California, 784 F.2d 910, 915 (9th Cir. 1986)).

TILA rescission claims "expire three years after the date of the consummation of the transaction or upon the sale of the property, whichever comes first." 15 U.S.C. § 1635(f). In contrast to a TILA damages claim, TILA rescission claims contain a three-year statute of repose, and is not subject to equitable tolling. See Be...