Duarte v. Quality Loan Serv. Corp., Case No. 2:17-cv-08014-ODW-PLA

CourtUnited States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
Docket NumberCase No. 2:17-cv-08014-ODW-PLA
Decision Date07 May 2018

On November 20, 2017, Plaintiffs Hector Sanchez and Brenda Duarte filed a Complaint against Defendants Quality Loan Servicing Corp., Quality Loan Service Corporation (together, "Quality"), and Quantum Servicing Corporation1 ("Quantum"), alleging violations of the Equal Credit Opportunity Act, 15 U.S.C. § 1691, and the Civil Rights Act of 1991, 42 U.S.C. § 1981, along with four state law claims. (Seegenerally Compl., ECF No. 1.) Plaintiffs later filed a First Amended Complaint, which Quantum now moves to dismiss in its entirety. (First Am. Compl. ("FAC"), ECF No. 14.; Mot. 2, ECF No. 27.) For the reasons discussed below, the Court GRANTS Defendants' Motion to Dismiss.2


In 2005, Plaintiffs applied for a mortgage loan with First Magnus Financial ("First Magnus") in the amount of $412,000. (FAC ¶ 19, ECF No. 14.) First Magnus approved the mortgage, and the loan was secured by a deed of trust on Plaintiffs' family home in Long Beach, California (the "Property"). (FAC ¶ 2.) Plaintiffs later refinanced the Property with American Brokers Conduit ("ABC"), receiving a new loan in the amount of $472,000. (FAC ¶ 20.) In 2007, First Magnus and ABC were identified by the Federal Reserve as subprime lenders involved in predatory loans. (FAC ¶ 2.)

In 2010, ABC assigned Plaintiffs' loan to Defendants Quality and Quantum. (FAC ¶ 2.) The balance on the loan at the time of assignment was $472,200. (FAC ¶ 21.) Quality and Quantum acted together as lender and servicer for Plaintiffs' loan. (FAC ¶ 3.)

Plaintiffs are Hispanic, and Defendants knew this to be the case. (FAC ¶ 7.) Since 2005, Hispanics, as a group, have lost a disproportionate share of their family wealth compared to non-Hispanic whites. (FAC ¶ 8.) Plaintiffs themselves lost over 60% of their income between 2005 and 2007. (FAC ¶ 9.) From 2008 to 2011, Plaintiffs "slowly began to recover" their income. (FAC ¶ 9.)

However, Plaintiffs continued to struggle financially throughout this period. (FAC ¶¶ 9-10.) By 2011, "they had one or more children, and had to account for those expenses." (FAC ¶ 9.) Several times between 2010 and 2012, Plaintiffs informed Defendants of their financial struggles, and Plaintiffs made numerousrequests for a modification of the mortgage loan. (FAC ¶¶ 10, 22, 32.) Defendants denied these loan modification requests, in contravention of best practices suggested by the Office of the Comptroller of the Currency. (FAC ¶¶ 24, 34.) In fact, Defendants rarely, if ever, granted the type of loan modification that would allow severely distressed borrowers to remain in their homes; instead, Defendants "maneuver[ed] homeowners toward default, foreclosure, eviction, and money judgments." (FAC ¶ 25.) As part of their collection efforts, Defendants have filed lawsuits against Latinos in Los Angeles County and Orange County Superior Courts for similar delinquent mortgages. (FAC ¶ 24.)

Plaintiffs do not specify in their First Amended Complaint exactly when Plaintiffs defaulted on their loan. (See generally FAC.) In 2012, Defendants moved to foreclose on the loan. (FAC ¶ 22.) In 2011, rates of foreclosure among Hispanic home loan borrowers were higher than rates of foreclosure among non-Hispanic White borrowers. (FAC ¶ 33.) Plaintiffs were ultimately evicted from the Property. (FAC ¶ 57.)

Following foreclosure, Defendants reported Plaintiffs' loan delinquency to the credit reporting agencies. (FAC ¶¶ 22, 26, 39, 49, 56, 71.) The First Amended Complaint is ambiguous as to when or how often Defendants reported Plaintiffs' delinquency. Portions of the Complaint seem to indicate that Defendants reported Plaintiffs' delinquency just once, and thereafter merely failed to subsequently advise the agencies that the underlying loan was predatory. (FAC ¶¶ 26, 39.) Elsewhere, Plaintiffs allege that Defendants made "annual" reports of Plaintiffs' delinquency. (FAC ¶ 71.) Plaintiffs further allege that Defendants "continued" to report Plaintiffs' delinquency until either 2016 or 2017.3 (FAC ¶¶ 22, 49, 56.)

On November 2, 2017, Plaintiffs filed their initial Complaint in federal court, bringing two causes of action under federal law and four causes of action underCalifornia state law. (ECF No. 1.) Plaintiffs subsequently filed a First Amended Complaint on January 15, 2018. (ECF No. 14.) On February 26, 2018, Quantum moved to dismiss the First Amended Complaint in its entirety. (ECF No. 27.) Quality has yet to appear in this case. Both Plaintiffs and Quantum have submitted briefs in support of their respective positions, and the Motion is ripe for determination. (ECF Nos. 27, 30, 33.)


A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal is proper if the complaint "lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008).

In ruling on a motion to dismiss under Rule 12(b)(6), the court assumes all factual allegations in the complaint to be true, viewing those allegations in the light most favorable to the nonmoving party. Thompson v. Davis, 295 F.3d 890, 896 (9th Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). While a plaintiff need not give "detailed factual allegations," the plaintiff must plead sufficient facts that, if true, "raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Moreover, a court need not "accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Ultimately, "[t]he claim must be sufficiently plausible that 'it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation.'" Mora v. U.S. Bank, No. CV 15-02436 DDP (AJWx), 2015 WL 4537218, at *2 (C.D. Cal July 27, 2015) (quoting Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011)). If a court determines that a complaint fails to state a claim, the court should grant leave to amend unless it determines that amendment could not possiblycure the complaint's deficiencies. Steckman v. Hart Brewing, Inc., 143 F.3d 1293, 1296 (9th Cir. 1998); Fed. R. Civ. P. 15(a)


For the reasons discussed below, the Court finds that Plaintiffs fail to state a claim for relief. Plaintiffs' First and Second Causes of Action are time-barred, and Plaintiffs' Third, Fourth, Fifth, and Sixth Causes of Action fail on the merits.

A. Material outside the Complaint

Generally, a court "may not consider any material beyond the pleadings in ruling on a Rule 12(b)(6) motion." United States v. Corinthian Colls., 655 F.3d 984, 998 (9th Cir. 2011). However, courts in the Ninth Circuit ruling on 12(b)(6) motions may consider: (1) material that was "properly submitted as part of the complaint," Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555, n.19 (9th Cir. 1989); (2) materials whose authenticity is not questioned and on which the Plaintiff's complaint necessarily relies, Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001), and (3) judicially noticed matters of public record, id. at 688-89.

Both Quantum and Plaintiffs ask the Court to consider certain materials outside the four corners of the Complaint. (Def.'s Req. Jud. Notice Ex. 1 at 5, ECF No. 27-2; FAC Ex.1, Ex. 2; Decl. of Herbert N. Wiggins ("Wiggins Decl.") Ex. 1, ECF No. 32-1.) The Court first considers Quantum's requests.

1. Quantum's Requests for Judicial Notice

Quantum asks the Court to judicially notice that the Property was sold at a non-judicial foreclosure sale on February 27, 2012.4 (Def.'s Req. Jud. Notice Ex. 1 at 6.) Judicial notice is appropriate when the fact to be noticed "is not subject to reasonable dispute because it . . . can be accurately and readily determined from sources whoseaccuracy cannot reasonably be questioned." Fed. R. Civ. P. 201(b)(2); see also Lee, 250 F.3d at 689 (recognizing that a court may take judicial notice of facts in the public record). If a party requests judicial notice of a fact and supplies the Court with the necessary information, the Court must take judicial notice of the fact. Fed. R. Civ. P. 201(c)(2).

The source of the date of the foreclosure sale of the Property is the Trustee's Deed Upon Sale, which is filed at the Los Angeles County Recorder's Office. (Def.'s Req. Jud. Notice Ex. 1.) The Court finds that the accuracy of official records in the County Recorder's Office cannot reasonably be questioned, and therefore finds that the date of the foreclosure sale is beyond reasonable dispute. See Snyder v. HSBC Bank, USA, N.A., 913 F. Supp. 2d 755, 768 (D. Ariz. 2012) (taking judicial notice of a publicly-recorded Trustees' Deed Upon Sale, where defendants provided the court a complete copy and plaintiffs did not object to the request). Moreover, Plaintiffs have not objected to the accuracy of this date. (See generally Opp'n, ECF No. 30.) Therefore, the Court takes judicial notice of the fact that the Property was sold at a non-judicial foreclosure sale on February 27, 2012.

Quantum also asks the Court to judicially notice the results of an online search of Los Angeles County Superior Court records for two case numbers that appear in the First Amended Complaint. (See Def.'s Req. Jud. Notice Exs. 2, 3; FAC ¶ 12(D).) The Court has no need to rely on the contents of the results of these two searches, and the...

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