Hernandez v. Hilltop Financial Mortg., Inc.

• Decision Date: 22 October 2007
• Docket Number: No. C 06-7401 SI.,C 06-7401 SI.
• Citation: 622 F.Supp.2d 842
• Court: U.S. District Court — Northern District of California
• Parties: Sergio HERNANDEZ and Maria Hernandez, Plaintiffs, v. HILLTOP FINANCIAL MORTGAGE, INC., Fieldstone Mortgage Company Co., Countrywide Home Loans, Inc., and Ameriquest Mortgage Co., Defendants.

622 F.Supp.2d 842

Sergio HERNANDEZ and Maria Hernandez, Plaintiffs, v. HILLTOP FINANCIAL MORTGAGE, INC., Fieldstone Mortgage Company Co., Countrywide Home Loans, Inc., and Ameriquest Mortgage Co., Defendants.

No. C 06-7401 SI.

United States District Court, N.D. California.

October 22, 2007.

COPYRIGHT MATERIAL OMITTED

Daniel V. Grinnell, Attorney at Law, Novato, CA, Alan Emmerson Ramos, Law Offices of Alan E. Ramos, Pleasanton, CA, Geoffrey WM. Steele, Lafayette, CA, for Plaintiffs.

Byron H. Done, Attorney at Law, Walnut Creek, CA, Sunny S. Huo, Joshua Eric Whitehair, Michael Jan Steiner, Severson & Werson, Mia S. Blackler, Buchalter Nemer, San Francisco, CA, Aaron Michael McKown, Sr., Lawrence L. Yang, Bryan Cave LLP, Irvine, CA, for Defendants.

ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS FOR FAILURE TO STATE A CLAIM AND GRANTING AMERIQUEST'S MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION

SUSAN ILLSTON, District Judge.

On October 3, 2007, the Court heard argument on defendants' motion to dismiss for failure to state a claim and on defendant Ameriquest's motion to dismiss for lack of subject matter jurisdiction. Having considered the arguments of counsel and the papers submitted, the Court hereby DENIES defendants' motion to dismiss for failure to state a claim and GRANTS Ameriquest's motion to dismiss for lack of subject matter jurisdiction.

BACKGROUND

This action arises from two mortgage loans received by plaintiffs Sergio and Maria Hernandez.¹ Each loan transaction took place with different companies. However, both situations share similar circumstances: all discussions with plaintiffs took place in Spanish, plaintiffs received and executed documents solely in English without an interpreter present, and the English documents allegedly contained misrepresentations of the terms agreed to during negotiations.

Plaintiffs first refinanced with defendant Ameriquest Mortgage Company on January 9, 2004. As plaintiffs speak limited English, all negotiations regarding the refinance were done in Spanish. Ameriquest's employee assured plaintiffs that their monthly payment of $1,384.98 included property taxes and property insurance premiums. Later, at the Hernandez home and just before plaintiffs executed the loan documents, a notary public, hired by Ameriquest, again assured plaintiffs that the payments included property taxes and property insurance premiums. Plaintiffs then executed the loan documents, which were all in English. Ameriquest did not provide plaintiffs with versions translated in Spanish. Unable to read English, plaintiffs did not realize that the papers detailed that their monthly payment of $1,384.98 only included principal and interest, not property taxes and property insurance premiums.

Burdened by the added costs of these taxes and insurance premiums, plaintiffs began discussions in December 2004 with defendant Hilltop Financial Mortgage Company about refinancing their Ameriquest loan. Plaintiffs conducted discussions with Hilltop's agent Edward Salem primarily in Spanish. Mr. Salem told plaintiffs that refinancing with Hilltop would cost approximately $120 more per month, but it would include property taxes and property insurance premiums and do so at a less expensive rate than they were currently paying. He made the additional promise that the loan would pay off about $4,000 in consumer debt and give them $10,000 in cash. On or about February 11, 2005, plaintiffs executed the Hilltop loan documents. Plaintiffs were again provided with documents completely in English and did not bring nor did Hilltop provide an interpreter. Among the loan documents, Hilltop gave each plaintiff a "Notice of Right to Cancel" form. The document required that dates be filled in at the end of the following two sentences: (1) "If you cancel by mail or telegram, you must send the notice no later than midnight of _______" and (2) "I received Notice of Right to Cancel in Duplicate this Date ______, ______." (emphasis in original). In copies eventually sent to plaintiffs and in copies obtained by plaintiffs from the escrow agent for the loan, both notices were left blank in the space requiring the date.²

In or about March, 2005, plaintiffs learned that their higher monthly payments ($1,508.42 compared to $1,384.98 per month under the Ameriquest loan) did not in fact cover property taxes and property insurance premiums despite the assurances received from Mr. Salem. Instead, defendant Fieldstone³ wanted an additional $350 for property taxes and property insurance premiums (the same amount plaintiffs had previously been paying). Additionally, the Hilltop/Fieldstone loan only paid $1,323.00 in consumer debt (as opposed to the promised $4,000) and plaintiffs received a cash payment of only $4,046.15 (as opposed to the promised $10,000 cash payment). On or about April 1, 2005, Fieldstone assigned its rights in the loan to defendant Countrywide. Plaintiffs believe Countrywide assigned partial interest in the Hilltop/Fieldstone loan to an investor who now along with Countrywide are the current assignees of the loan.

On November 7, 2005, plaintiffs sent Countrywide their notice of rescission. Defendants allegedly received the notice on November 9, 2005. Twenty-three days later, on December 2, 2005, Countrywide faxed plaintiffs a letter denying plaintiffs' notice of rescission. On December 1, 2006, plaintiffs filed this complaint and, on May 21, 2007, they filed their First Amended Complaint ("FAC").

LEGAL STANDARD

I. Failure to state a claim upon which relief can be granted

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. The question presented by a motion to dismiss is not whether the plaintiff will prevail in the action, but whether the plaintiff is entitled to offer evidence in support of the claim. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 L.Ed.2d 139 (1984).

In answering this question, the Court must assume that the plaintiff's allegations are true and must draw all reasonable inferences in the plaintiff's favor. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir.1987). Even if the face of the pleadings suggests that the chance of recovery is remote, the Court must allow the plaintiff to develop the case at this stage of the proceedings. See United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir.1981).

If the Court dismisses the complaint, it must then decide whether to grant leave to amend. The Ninth Circuit has "repeatedly held that a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir.2000) (citations and internal quotation marks omitted).

II. Subject matter jurisdiction

Federal Rule of Civil Procedure 12(b)(1) allows a party to challenge the jurisdiction over the subject matter of the complaint. The party invoking the jurisdiction bears the burden of establishing that the Court has the requisite subject matter jurisdiction to grant the relief requested. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 376-78, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Under this standard, all factual allegations pled by the plaintiff must be accepted as true and construed in the light most favorable to the plaintiff. See NL Indus. v. Kaplan, 792 F.2d 896, 898 (9th Cir.1986).

If subject matter jurisdiction exists over one or more claims, a federal court may exercise supplemental jurisdiction over "all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." 28 U.S.C. § 1367. A district court has discretion to hear such claims "where there is a substantial federal claim arising out of a common nucleus of operative fact." Hoeck v. City of Portland, 57 F.3d 781, 785 (9th Cir.1995). If "state issues substantially predominate, . . . the state claims may be dismissed without prejudice and left for resolution to state tribunals." United Mine Workers v. Gibbs, 383 U.S. 715, 726-27, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

DISCUSSION

Plaintiffs bring nine causes of action based on alleged unfair trade practices and misrepresentations made when plaintiffs refinanced their mortgage loan on two occasions, first with defendant Ameriquest and then with defendant Hilltop, who subsequently assigned its loan rights to defendant Fieldstone, and then Fieldstone to defendant Countrywide. Plaintiffs' first claim alleges a violation of the Truth in Lending Act ("TILA"). Their second claim is for violations of the California Translation Act ("CTA"). Their third and fourth claims allege violations of the California Consumer Legal Remedies Act ("CLRA"). The remaining claims are for violations of various state laws and a common law fraud claim. Plaintiffs do not allege each of their nine claims against all four defendants.

Of the nine causes of action, each defendant moves to dismiss certain claims alleged against it. Defendant Countrywide moves to dismiss the TILA, CTA, and fraud claims for failure to state a claim. Defendants Hilltop and Fieldstone move to dismiss the CLRA claim for failure to state a claim. Finally, defendant Ameriquest seeks to dismiss all claims against it—alleged violations of the CLRA, California Business and Professions Code, and a fraud claim—for lack of subject matter jurisdiction.

For the following reasons, the Court DENIES the motions to dismiss filed by defendants Hilltop, Fieldstone, and Countrywide, and GRANTS Ameriquest's motion to dismiss for lack of subject matter jurisdiction.

I. Motion to dismiss plaintiffs' claim under the...