Mangindin v. Washington Mutual Bank

• Decision Date: 18 June 2009
• Docket Number: No. C 09-01268 JW.,C 09-01268 JW.
• Citation: 637 F.Supp.2d 700
• Parties: Angelita MANGINDIN, et al., Plaintiffs, v. WASHINGTON MUTUAL BANK, et al., Defendants.
• Court: U.S. District Court — Northern District of California

637 F.Supp.2d 700

Angelita MANGINDIN, et al., Plaintiffs, v. WASHINGTON MUTUAL BANK, et al., Defendants.

No. C 09-01268 JW.

United States District Court, N.D. California, San Jose Division.

June 18, 2009.

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Reuben Lagbao Nocos, Nocos Law Firm, APC, San Mateo, CA, for Plaintiffs.

David C. Scott, James Michael Hester, Matthew Edward Podmenik, McCarthy & Holthus, LLP, San Diego, CA, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS; DENYING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION

JAMES WARE, District Judge.

I. INTRODUCTION

Angelita Mangindin, Bernadette Pantaleon and Theodore Pantaleon ("Plaintiffs") bring this action against Washington Mutual Bank ("Washington Mutual"), California Reconveyance Company ("Reconveyance"), JP Morgan Chase Bank ("JP Morgan"), and Quality Loan Service ("Quality"), alleging, inter alia, violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601, et seq., fraud and unjust enrichment. Plaintiffs allege that Defendants engaged in predatory lending and have attempted to foreclose on Plaintiffs' home without following California law.

Presently before the Court are Plaintiffs' Motion for a Preliminary Injunction¹ and Defendants' Motion to Dismiss.² The Court finds it appropriate to take the matter under submission without oral argument. See Civ. L.R. 7-1(b). Based on the papers submitted to date, the Court GRANTS Defendants' Motion to Dismiss and DENIES Plaintiffs' Motion for Preliminary Injunction.

II. BACKGROUND

In a Complaint³ filed on March 10, 2009, Plaintiffs allege as follows Plaintiffs are residents at 1041 Ruge Drive, San Jose, California 95132 ("the Subject Property"). (Complaint ¶ 1.) On August 29, 2006, Plaintiffs obtained a loan for the Subject Property pursuant a deed of trust, for which Defendant Washington Mutual was the original beneficiary. (Id. ¶¶ 2, 17.)

Defendant Washington Mutual failed to follow reasonable underwriting standards in that it failed to verify Plaintiffs' income. (Complaint ¶ 18.) Defendants also failed to provide all the requisite disclosures under federal and state laws. (Id. ¶¶ 19-20.) In particular, the Adjustable Rate Note reports an interest rate of 1.35% and a loan amount of $627,440, but makes no mention of the monthly payment. (Id. ¶ 41.)

On July 31, 2008, Defendant Washington Mutual filed a Notice of Default. (Complaint ¶ 17.) On November 11, 2008, Washington Mutual filed a Notice of Trustee Sale, which was set aside because Plaintiffs filed bankruptcy. (Id.) On December 4, 2008, the Subject Property was foreclosed upon, and Defendant JP Morgan became the owner of record. (Id.) On February 23, 2009, a second Notice of Trustee Sale was again filed by Defendant Quality. (Id.)

On the basis of the allegations outlined above, Plaintiffs allege seventeen causes of action: (1) Declaratory Relief; (2) Civil Conspiracy; (3) Breach of the Covenant of Good Faith and Fair Dealing; (4) Violation of TILA; (5) Rescission; (6) Fraud; (7) Constructive Fraud; (8) Intentional Misrepresentation; (9) Concealment; (10) Negligent Misrepresentation; (11) Unfair Business Practices; (12) Breach of Fiduciary Duty; (13) Negligence; (14) Unjust Enrichment; (15) Undue Influence; (16) Injunctive Relief; and (17) Quiet Title.

Presently before the Court are Plaintiffs' Motion for Preliminary Injunction and Defendants' Motion to Dismiss.

III. STANDARDS

A. Motion to Dismiss

Pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint may be dismissed against a defendant for failure to state a claim upon which relief may be granted against that defendant. Dismissal may be based on either the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988); Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-534 (9th Cir.1984). For purposes of evaluating a motion to dismiss, the court "must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the nonmoving party." Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir.1987). Any existing ambiguities must be resolved in favor of the pleading. Walling v. Beverly Enters., 476 F.2d 393, 396 (9th Cir. 1973).

However, mere conclusions couched in factual allegations are not sufficient to state a cause of action. Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); see also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir.1988). The complaint must plead "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Courts may dismiss a case without leave to amend if the plaintiff is unable to cure the defect by amendment. Lopez v. Smith, 203 F.3d 1122, 1129 (9th Cir.2000).

B. Preliminary Injunction

To obtain injunctive relief a plaintiff must show either (1) a combination of probable success on the merits and the possibility of irreparable harm, or (2) that serious questions are raised and the balance of hardships tips sharply in the moving party's favor. See Roe v. Anderson, 134 F.3d 1400, 1402 (9th Cir.1998); GoTo. com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1204-05 (9th Cir.2000) (quoting Sardi's Restaurant Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir.1985)). "These two formulations represent two points on a sliding scale in which the required degree of irreparable harm increases as the probability of success decreases." Id.; See Rodeo Collection Ltd. v. W. Seventh, 812 F.2d 1215, 1217 (9th Cir.1987).

IV. DISCUSSION

Since Plaintiffs must establish a likelihood of success on the merits to obtain a preliminary injunction, the Court first considers Defendants' Motion to Dismiss to determine what, if any, of Plaintiffs' claims have been adequately alleged.

A. Defendants' Motion to Dismiss

Defendants move to dismiss each of Plaintiffs' seventeen causes of action on various grounds. The Court considers each cause of action in turn.

1. Fourth Cause of Action for Violation of TILA⁴

Defendants move to dismiss Plaintiffs' Fourth Cause of Action for violation of TILA on the grounds that Plaintiffs' TILA claim is barred by the statute of limitations, Plaintiffs have failed to allege reliance on Defendants' failure to disclose and Plaintiffs have failed to tender repayment of the loan to Defendants. (Defendants' Motion at 10-11.)

Under TILA, a borrower has two remedies for loan disclosure violations. TILA gives a borrower the right to rescind any credit transaction in which a security interest is created in the borrower's home. 15 U.S.C. § 1635. TILA also gives a borrower a right to civil damages. 15 U.S.C. § 1640. A claim for rescission must be brought within three years "after the date of consummation of the transaction or upon sale of the property, whichever occurs first," while a claim for damages must be brought within one year "from the date of the occurrence of the violation." 15 U.S.C. §§ 1635(f), 1640(e).

For a rescission claim, TILA establishes the following framework:

Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court.

15 U.S.C. 1635(b); see also 12 C.F.R. § 226.23(d). However, the Ninth Circuit has held that TILA's framework gives a trial court discretion to condition rescission on a tender by the borrower of the property, or the property's reasonable value, to the lender. Yamamoto v. Bank of New York, 329 F.3d 1167, 1171 (9th Cir.2003).

Here, Plaintiffs' loan was consummated on August 29, 2006. Therefore, since Plaintiffs did not file this action prior to August 29, 2007, they cannot seek damages under § 1640 of TILA.⁵ With respect to Plaintiffs' claim for rescission, the Complaint alleges, in relevant part, as follows:

Defendant Washington Mutual provided inaccurate disclosures in violation of TILA. The Adjustable Rate Note reports an interest rate of 1.35%, a loan amount of $627,440.00 and makes no mention of the monthly payment. (Complaint ¶ 41.)

Defendants [JP Morgan, Reconveyance and Quality] are secondarily liable, contributorily liable, and/or vicariously liable for [Washington Mutual's] fraud under the civil conspiracy cause of action. (Complaint ¶ 43.)

Notably absent from Plaintiffs' Complaint is any allegation that they attempted to tender, or are capable of tendering, the value of the property pursuant to the rescission framework established by TILA. Nor do Plaintiffs allege that such equitable circumstances exist that conditioning rescission on any tender would be inappropriate. Thus, the Court finds that Plaintiffs have failed to adequately allege that they are entitled to rescission under TILA.

Accordingly, the Court GRANTS Defendants' Motion to Dismiss Plaintiffs' Fourth Cause of Action for violations of TILA.

2. Sixth, Seventh, Eighth, Ninth and Tenth Causes of Action Sounding in Fraud

Defendants...