Welsh v. Am. Home Mortg. Assets, LLC

MAURICE WELSH and PAULA WELSH, Plaintiffs, v. AMERICAN HOME MORTGAGE ASSETS, LLC; WELLS FARGO BANK, N.A.;DEUTSCHE BANK NATIONAL TRUST COMPANY; and Does 1 to 50, inclusive, Defendants.

No. 4:13-CV-04750 CW

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

September 30, 2014

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS (Docket No. 7) and GRANTING PLAINTIFFS LEAVE TO AMEND

Plaintiffs Maurice Welsh and Paula Welsh assert various mortgage-related claims against Defendants American Home Mortgage Assets, LLC, Wells Fargo Bank, N.A., and Deutsche Bank National Trust Company. Defendants Wells Fargo and Deutsche Bank¹ move to dismiss Plaintiffs' complaint.² The Court took the motion under submission on the papers. Having considered the arguments presented by the parties, the Court GRANTS the motion and GRANTS Plaintiffs leave to amend.

BACKGROUND

The following summary is taken from the complaint and documents of which the Court takes judicial notice.³

Plaintiffs are senior citizens. Compl. Intro. In April 2007, Plaintiffs refinanced their mortgage with a loan funded by American Home Mortgage Acceptance, Inc. in the principal amount of $580,000. Request for Judicial Notice (RFJN), Ex. A. The loan was secured by a deed of trust encumbering the real property located at 453 Creighton Way, Oakland, California. Id. The beneficiary of the deed of trust was MERS and Stewart Title was appointed as the trustee. Id. At the time of the loan refinance, Plaintiff Maurice Welsh was retired and Plaintiff Paula Welsh was working part-time as a self-employed contractor. Id.

An adjustable rate rider was attached to the deed of trust. Id. The interest rate on the loan, according to the rider, was to increase monthly but not exceed 9.95%. Id. Plaintiffs signed both the deed of trust and the rider. Id.

"[W]ithout a loan officer to explain what [they] were signing and no knowledge of [the] type of loan[,]" Plaintiffs allege that they were rushed into signing the loan documents. Compl. Intro. Plaintiffs explained to their mortgage broker that they wanted to refinance their mortgage in order to lower their monthly payments. Id. Their broker told them he "was putting [them] in to a loanthat [they] could pay the minimum amount on[,] a pick-a-pay loan." Id. Plaintiffs were happy with their initial payments, but did not know they qualified for a fixed rate mortgage at an interest rate at or below prime. Compl. ¶ 3.

In 2008, Plaintiffs received a loan modification. Id. Again, however, they were rushed into signing the loan documents. Id. Plaintiffs allege that the modification terms were worse than the terms of their refinancing loan. Id. Plaintiffs accepted the loan modification anyway. Id. Now Plaintiffs believe they were charged an excessive interest rate in the modification despite having excellent credit. Id.

Some time later, Plaintiffs realized that the principal on their loan was increasing rather than decreasing. Compl. Intro. Plaintiffs allege that they made consistent monthly payments until they realized that the value of their home, and those in their neighborhood, had fallen rapidly. Compl. ¶ 3.

During this time Plaintiff Maurice Welsh suffered a stroke. Compl. Intro. Plaintiff Paula Welsh stopped working to care for her husband. Id. Plaintiffs allege that they attempted to modify their loan again several times, but all attempts "proved futile." Id.

In November 2009, LSI Title Company recorded a notice of default on Plaintiffs' loan. RFJN, Ex. B.

In February 2010, Plaintiffs filed for Chapter 7 bankruptcy in the Bankruptcy Court of the Northern District of California. RFJN, Ex. E. In June 2010, their debts were discharged.RFJN, Ex. G. Plaintiffs did not include their claims against Defendants in their original bankruptcy schedules or in their amended schedules.

In March 2010 and October 2010, Fidelity National Title Company recorded notices of a trustee's sale of the property. RFJN, Ex. C, D.

Plaintiffs allege that, in 2012, they filed for Chapter 13 bankruptcy. Compl. Intro.

Since 2008, Plaintiffs' loan has been transferred five times. Id. Plaintiffs allege that, every time their lender changed, they applied for a modification. Id. There is no record of an actual foreclosure sale. Plaintiffs filed this suit in August 2013.

Plaintiffs conducted an investigation into their loan origination and allege several "procedural improprieties." Compl. ¶¶ 6-7. Plaintiffs' complaint consists of fourteen causes of action: (1) "fraudulent inducement to breach contract"; (2) violation of the Truth-In-Lending Act (TILA); (3) fraud and conspiracy to commit fraud; (4) violation of California Civil Code section 2923.5; (5) predatory lending "in violation of Truth In Lending"; (6) unlawful business practices in violation of the California Unfair Competition Law (UCL), California Business and Professions Code section 17200; (7) fraudulent business practices in violation of the UCL; (8) fraudulent business practices in violation of the UCL;⁴ (9) violation of the Fair Credit ReportingAct (FRCA); (10) defamation; (11) false light; (12) breach of contract; (13) declaratory relief/injunction; and (14) financial elder abuse.

LEGAL STANDARD

A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). The plaintiff must proffer "enough facts to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). On a motion under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. Twombly, 550 U.S. at 555. A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.

In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1061 (9th Cir. 2008). The court's review is limited to the face of the complaint, materials incorporated into the complaint by reference, and facts of which the court may take judicial notice. Id. at 1061. However, the court need not accept legal conclusions, including "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555).

When granting a motion to dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was made, unless amendment would be futile. Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 246-47 (9th Cir. 1990). In determining whether amendment would be futile, the court examines whether the complaint could be amended to cure the defect requiring dismissal "without contradicting any of the allegations of [the] original complaint." Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990).

DISCUSSION

Defendants seek to dismiss Plaintiffs' complaint in its entirety. They argue that Plaintiffs' complaint fails for several reasons. First, Plaintiffs' complaint does not satisfy the pleading requirements of Federal Rule of Civil Procedure 8(a). Second, Plaintiffs' failure to declare these claims in their bankruptcy schedules bars them from bringing this action. Third, Plaintiffs' causes of action grounded in fraud do not satisfy the pleading requirements of Federal Rule of Civil Procedure 9(b) and are time-barred. Fourth, Plaintiffs' claims brought pursuant to TILA are time-barred. Fifth, Plaintiffs do not allege sufficient facts to support their claim under California Civil Code section 2923.5. Sixth, Plaintiffs' causes of actions based on the UCL do not allege sufficient facts to support the claims. Seventh, Plaintiffs' claims for violations of FCRA fail to state a claim for which relief can be granted. Eighth, Plaintiffs' claims for defamation and false light fail because they are preempted by FCRA. Ninth, Plaintiffs' claims for breach of contract are pleadinsufficiently. Tenth, Plaintiffs' equitable relief claims fail because they are plead insufficiently. Lastly, Plaintiffs' claim for financial elder abuse is plead insufficiently.

I. Rule 8(a)

Defendants argue that Plaintiffs' complaint should be dismissed in its entirety because its "boilerplate allegations fail to give Defendants fair notice." Defs.' Mot. Dismiss 1.

"Under Twombly and Iqbal, 'the pleading standard Rule 8 announces . . . demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.'" Perez v. Gordon & Wong Law Grp., PC, 2012 WL 1029425, at *6 (N.D. Cal.) (quoting Iqbal, 556 U.S. at 678). "Rather, 'in order to give the defendant fair notice of what the . . . claim is and the grounds upon which it rests,' Twombly, 550 U.S. at 554-55, 'a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face, Iqbal, 556 U.S. at 678.'" Id. (internal quotation marks and citations omitted). "[W]hile the Rule 8 pleading standard does not require extensive, detailed factual allegations, bare statements reciting mere legal conclusions are insufficient." Id. at *10. Pro se pleadings must, however, be liberally construed. See Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1988).

While many of Plaintiffs' claims are defective for various reasons, their factual allegations are more than a recitation of boilerplate. Accordingly, the Court declines to dismiss the complaint in its entirety based on Rule 8(a).

II. Standing After Bankruptcy Discharge

Defendants argue that Plaintiffs do not have standing to bring any of these claims because Plainti...