Case Name:   Nelson R. Herrera, et al. v. Countrywide KB Home Loans, et al.

Case No.:       1-14-CV-264242

 

Currently before the Court is defendant Bank of America, N.A. (erroneously sued as Countrywide KB Home Loans), ReconTrust, MERS and EMC Mortgage Corporation’s (collectively, “Defendants”) demurrer to the complaint of plaintiffs Nelson R. Herrera and Nenebeth T. Herrera (collectively, “Plaintiffs”).

 

Request for Judicial Notice

 

In support of its demurrer, Defendants ask the Court to take judicial notice of the following: (A) a deed of trust recorded on November 28, 2006, (B) a deed of trust and assignment of rents recorded on November 28, 2006, (C) a notice of default and election to sell recorded March 13, 2009, (D) a corporation assignment of deed of trust recorded April 18, 2011, (E) a notice of rescission of the notice of default recorded on November 29, 2012, and (F) an assignment of deed of trust recorded November 8, 2013.

 

Courts may take judicial notice of the existence and recordation of real property records when the authenticity of the documents is not challenged. (See Fontenot v. Wells Fargo Bank, N.A. (2011) 198 Cal.App.4th 256, 264-265.) Here, while Plaintiffs object to the request for judicial notice, they do not challenge the authenticity of these documents. Accordingly, Defendants’ request for judicial notice as to these documents is GRANTED.

 

Demurrer to the Complaint

 

Defendants demur to each cause of action in the complaint on the ground that Plaintiffs fail to allege facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).) They contend that the doctrine of res judicata bars each cause of action, the first ten causes of action are time-barred, and Plaintiffs do not allege sufficient facts supporting the elements of the eleventh cause of action for intentional infliction of emotional distress.

 

Res Judicata

 

Defendants contend that each cause of action in the instant complaint is barred by the doctrine of res judicata because Plaintiffs could have litigated these claims in a prior action. Throughout their memorandum of points and authority, Defendants cite to request for judicial notice, Exhibits H, and I, which constitute Plaintiffs’ complaint in the prior action and a judgment of dismissal. However, the request for judicial notice does not contain Exhibits H or I. As Defendants did not request judicial notice of these documents, they fail to demonstrate that the present action is barred by the doctrine of res judicata. (See Frommhagen v. Board of Supervisors (1987) 197 Cal.App.3d 1292, 1299 [facts necessary to show action barred by res judicata must be within complaint or subject to judicial notice].)

First Cause of Action for Declaratory Relief

Defendants argue that the first cause of action is time-barred because it is based solely on alleged misconduct occurring at the loan’s origination in 2006. This argument is without merit. Plaintiffs specifically allege that their cause of action is based in part on “Defendants’ actions in the processing, handling, and attempted foreclosure of this loan….” (Compl., ¶ 118.) As this cause of action is not entirely based on misconduct occurring eight years ago, it is not subject to demurrer on the basis of the statute of limitations. Accordingly, the demurrer to the first cause of action for declaratory relief is OVERRULED.

Second Cause of Action for Breach of the Implied Covenant of Good Faith and Fair Dealing

Defendants contend that the second cause of action is barred by the statute of limitations because it is based on conduct occurring in 2006 when the loan was originated. This argument is not persuasive. Plaintiffs allege that Defendants failed to disclose when their negative credit scores were disseminated. (Compl., ¶ 126.) There is no indication that this breach occurred in 2006 when the loan was originated. As the running of the statute of limitations for this cause of action does not appear clearly and affirmatively from the face of the complaint (see Roman v. County of Los Angeles (2000) 85 Cal.App.4th 316, 324-325), the second cause of action is not subject to demurrer on the basis of the statute of limitations. Accordingly, the demurrer to the second cause of action for breach of the implied covenant of good faith and fair dealing is OVERRULED.

Third and Fifth Causes of Action for Violations of TILA and Rescission

Defendants argue that the third cause of action is time-barred because the alleged failure to provide the alleged material disclosures occurred at or near the time the loan was originated in 2006. This argument is persuasive. “TILA requires borrowers to file an action ‘within one year from the date of the occurrence of the violation.’ [Citation].” (Pacific Shore Funding v. Lozo (2006) 138 Cal.App.4th 1342, 1355.) Here, the alleged violation is the failure to make accurate material disclosures prior to the consummation of the loan in 2006. (Compl., ¶¶ 22, 131.) As Plaintiffs did not bring this action until eight years after the violation, the cause of action is time-barred absent some form of tolling.

The statute of limitations for a violation of TILA may be equitably tolled until the borrower discovers or had a reasonable opportunity to discovery the fraud or nondisclosures that form the basis of the TILA action. (See King v. California (9th Cir. 1986) 784 F.2d 910, 915.) However, equitable tolling must be alleged beyond bare legal conclusions, with facts showing due diligence. (See Silvas v. G.E. Money Bank (9th Cir. 2011) 449 Fed.Appx. 641, 644.) Here, Plaintiffs conclusorily allege that the statute of limitation is tolled due to Defendants’ failure to provide the required disclosures and notices. As Plaintiffs fail to allege facts showing due diligence to discover the nondisclosures that form the basis of their TILA action, their allegations are insufficient to toll the statute of limitations. Thus, the third cause of action is subject to demurrer on the basis of the statute of limitations. Accordingly, the demurrer to the third cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Plaintiffs’ fifth cause of action for rescission is premised on Defendants’ alleged TILA violations. (Compl., ¶ 144.) As Plaintiff’s TILA cause of action is barred by the statute of limitations, the fifth cause of action for rescission is likewise barred by the statute of limitations. (See Marin Healthcare Dist. v. Sutter Health (2002) 103 Cal.App.4th 861, 874-875 [nature of the right sued upon, not the form of action or the relief demanded determines the applicable statute of limitations].) Accordingly, the demurrer to the fifth cause of action for rescission is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Fourth Cause of Action for Violation of the Real Estate Settlement Practices Act (“RESPA”)

Defendants contend that the fourth cause of action is time-barred because the violation of RESPA identified occurred at or near the time the loan was originated in 2006. This argument is meritorious. The statute of limitations for a violation of RESPA is one year from the date of the occurrence of the violation. (See Jensen v. Quality Loan Serv. Corp. (E.D.Cal. 2010) 702 F.Supp.2d 1183, 1195.) A RESPA action accrues at the time the loan closes. (Id.) Here, it is undisputed that the loan closed in 2006. (Compl.,     ¶ 8.) As Plaintiffs did not file this action until 2014, this cause of action is subject to demurrer on the basis of the statute of limitations. Accordingly, the demurrer to the fourth cause of action for violation of RESPA is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.  

Sixth, Seventh, Eighth, Ninth and Tenth Causes of Action for Fraud, Unfair and Deceptive Business Act Practices, Breach of Fiduciary Duty, Unconscionability, and Quiet Title

Defendants argue that the sixth, seventh, eighth, ninth, and tenth causes of action are time-barred because they are based on conduct that occurred at or near the time the loan was originated in 2006. This argument is meritorious as all of the conduct that forms the factual basis of these causes of action necessarily occurred at or near the time of the origination of the loan in 2006. (See Compl., ¶¶  149, 155, 158, 165,170.) The longest possible statute of limitations for these causes of action would be four years. (See Cansino v. Bank of America (2014) 224 Cal.App.4th 1462, 1472 [3 years for fraud]; American Master Lease LLC v. Idanta Partners, Ltd. (2014) 225 Cal.App.4th 1451, 1478 [3 or 4 years for breach of fiduciary duty]; Yerkovich v. MCA, Inc. (C.D.Cal. 1997) 11 F.Supp.2d 1167, 1175 [4 years for unconscionability]; Ankoanda v. Walker-Smith (1996) 44 Cal.App.4th 610, 615 [3 years for quiet title based on fraud].) As Plaintiffs did not file this action until 2014, eight years after the origination of the loan, these causes of action are subject to demurrer on the basis of the statute of limitations. Accordingly, the demurrer to the sixth, seventh, eighth, ninth and tenth causes of action for fraud, unfair and deceptive business act practices, breach of fiduciary duty, unconscionability, and quiet title is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.

Failure to State Facts with Regard to the Eleventh Cause of Action for Intentional Infliction of Emotional Distress

Defendants contend that Plaintiffs fail to allege facts indicating that Defendants’ engaged in extreme and outrageous conduct. In particular, they argue that attempting to foreclose on a home, without more, does not constitute outrageous conduct as a matter of law. This argument is persuasive. Generally, in the absence of additional circumstances indicating bad faith or fraud, the act of foreclosing on a home does not constitute outrageous conduct. (See Wilson v. Hynek (2012) 207 Cal.App.4th 999, 1009, Quinteros v. Aurora Loan Services (E.D.Cal. 2010) 740 F.Supp.2d 1163, 1172.) In this cause of action, Plaintiffs provide no allegations indicating that Defendants acted fraudulently or in bad faith in conducting the foreclosure proceedings. Therefore, Plaintiffs do not allege facts indicating that Defendants engaged in outrageous conduct. Accordingly, the demurrer to the eleventh cause of action for intentional infliction of emotional distress is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND.