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analyzing identical HECLA with Countrywide and concluding that absent acceleration, the statute of limitations period began on the date of maturity
Summary of this case from Manlangit ex rel. Manlangit v. FCI Lender Servs.Opinion
Case No. 5:15-cv-04927-EJD
05-02-2016
Asia Bird, Plaintiff, v. Real Time Resolutions, Inc., Defendant.
Asia Bird, Lehi, UT, pro se. Nathaniel R. Lucey, Ericksen Arbuthnot, San Jose, CA, for Defendant.
Asia Bird, Lehi, UT, pro se.
Nathaniel R. Lucey, Ericksen Arbuthnot, San Jose, CA, for Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
Re: Dkt. No. 4
EDWARD J. DAVILA, United States District Judge
Plaintiff Asia Bird ("Plaintiff") disputes she owes a debt for a home equity line of credit acquired in 2005. She brings this action against the current debt servicer, Real Time Resolutions, Inc. ("Real Time"), for fraud, misrepresentation and violations of the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et. seq.
Federal jurisdiction arises pursuant to 28 U.S.C. § 1332. Presently before the court is Real Time's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Dkt. No. 4. Plaintiff opposes the motion. After carefully considering the parties' pleadings, the court finds Real Times' motion well-taken. It will therefore be granted for the reasons explained below.
On January 4, 2016, Plaintiff filed a document in response to an order to show cause (Dkt. No. 14), which the court has construed as her opposition to Real Time's motion.
I. BACKGROUND
On August 12, 2005, Plaintiff obtained "an open line of credit" for up to $100,000.00 from Countrywide Home Loans, Inc. ("Countrywide"), a subsidiary of Bank of America. Compl., at ¶ 5; Ex. 1. The line of credit was governed by a contract entitled "Home Equity Credit Line Agreement and Disclosure Statement" (the "Agreement"), and was secured by real property located in Santa Cruz, California. Id.
Real Time's Request for Judicial Notice is GRANTED. Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir.2001).
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Plaintiff alleges she ceased making payments on the line of credit in March, 2009, "due to financial hardship." Id. at ¶ 6. She further alleges that on or about October, 2010, Bank of America "charged off the loan" and transferred servicing of the loan to Real Time. Id. at ¶ 8. Bank of America then "reported the debt attributed to the loan as charged off with a zero balance." Id.
Plaintiff states she contacted Real Time on January 26, 2015, and February 12, 2015, to dispute the debt. Id. at ¶¶ 9, 10. During her second contact, Plaintiff purportedly communicated to Real Time that "the statute of limitations had expired since Bank of America had charged off the debt." Id. at ¶ 10. Plaintiff states that Real Time responded on February 24, 2015, "by stating that Bank of America's charge off does not affect the statute of limitations and that the statute of limitations had not expired." Id. at ¶ 11. Plaintiff disagreed with Real Times' position in another communication dated April 7, 2015. Id. at ¶ 12. She contends "[t]he applicable statute of limitations for collecting upon a debt is 4 years in the State of California." Id. at ¶ 7.
Plaintiff filed the Complaint underlying this action on October 27, 2015. Dkt. No. 1. Real Time filed the instant motion in response.
II. LEGAL STANDARD
A. Federal Rule of Civil Procedure 12(b)(6)
Federal Rule of Civil Procedure 8(a) requires a plaintiff to plead each claim with sufficient specificity to "give the defendant fair notice of what the...claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotations omitted). The factual allegations "must be enough to raise a right to relief above the speculative level" such that the claim "is plausible on its face." Id. at 556–57, 127 S.Ct. 1955. A complaint which falls short of the Rule 8(a) standard may be dismissed if it fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). "Dismissal under Rule 12(b)(6) is appropriate only where 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).
When deciding whether to grant a motion to dismiss, the court must generally accept as true all "well-pleaded factual allegations." Ashcroft v. Iqbal, 556 U.S. 662, 664, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The court must also construe the alleged facts in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir.1989). However, "courts are not bound to accept as true a legal conclusion couched as a factual allegation." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937.
Also, the court generally does not consider any material beyond the pleadings for a Rule 12(b)(6) analysis. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n. 19 (9th Cir.1989). Exceptions to this rule include material submitted as part of the complaint or relied upon in the complaint, and material subject to judicial notice. SeeLee v. City of Los Angeles, 250 F.3d 668, 688–69 (9th Cir.2001).
B. Pro Se Pleadings
Where, as here, the pleading at issue is filed by a plaintiff proceeding pro se, it must be construed liberally. Resnick v. Hayes, 213 F.3d 443, 447 (9th Cir.2000). In doing so, the court "need not give a plaintiff the benefit of every conceivable doubt" but "is required only to draw every reasonable or warranted factual inference in the plaintiff's favor." McKinney v. De Bord, 507 F.2d 501, 504 (9th Cir.1974). The court "should use common sense in interpreting the frequently diffuse pleadings of pro se complainants." Id. A pro se complaint should not be dismissed unless the court finds it "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Haines v. Kerner, 404 U.S. 519, 521, 92 S.Ct. 594, 30 L.Ed.2d 652 (1972).
III. DISCUSSION
A. Authority Governing Plaintiff's Causes of Action
Plaintiff's first two causes of action are for fraud and misrepresentation, respectively. "A plaintiff alleging fraud under California law must plead facts demonstrating five elements: (1) a misrepresentation; (2) the speaker's knowledge of falsity; (3) the intent to defraud or induce reliance; (4) justifiable reliance; and (5) resulting damage." Morici v. Hashfast Techs. LLC, No. 5:14–cv–00087–EJD, 2015 U.S. Dist. LEXIS 24251, *9, 2015 WL 906005, *3 (N.D.Cal. Feb. 27, 2015) (citing Lazar v. Super. Ct., 12 Cal.4th 631, 638, 49 Cal.Rptr.2d 377, 909 P.2d 981 (1996) ).
Because it is a species of fraud, the elements necessary to establish a misrepresentation claim are similar: "(1) the defendant represented to the plaintiff that an important fact was true; (2) that representation was false; (3) the defendant knew that the representation was false when the defendant made it, or the defendant made the representation recklessly and without regard for its truth; (4) the defendant intended that the plaintiff rely on the representation; (5) the plaintiff reasonably relied on the representation; (6) the plaintiff was harmed; and (7) the plaintiff's reliance on the defendant's representation was a substantial factor in causing that harm to the plaintiff." Manderville v. PCG&S Group, Inc., 146 Cal.App.4th 1486, 1498, 55 Cal.Rptr.3d 59 (2007).
Plaintiff's other three causes of action arise under the FDCPA, which is a statute that seeks "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e).
As relevant here, the FDCPA prohibits the use of "any false, deceptive, or misleading representation or means in connection with the collection of any debt," including "[t]he false representation of...the character, amount, or legal status of any debt," "[c]ommunicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed," and "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." 15 U.S.C. §§ 1692e, 1692e(2)(A), 1692e(8), 1692e(10). "In order to state a claim under the FDCPA, a plaintiff must allege facts that establish the following: (1) plaintiff has been the object of collection activity arising from a consumer debt; (2) the defendant qualifies as a ‘debt collector’ under the FDCPA; and (3) the defendant has engaged in a prohibited act or has failed to perform a requirement imposed by the FDCPA." Dang v. CitiMortgage, Inc., No. 5:11–cv–05036 EJD, 2012 U.S. Dist. LEXIS 30296, at *10, 2012 WL 762329, at *3 (N.D.Cal. Mar. 7, 2012).
B. Causes of Action Based on the Statute of Limitations
The causes of action for fraud, misrepresentation, and violation of §§ 1692e(2) and 1692e(10) of the FDCPA are each based on the allegation that Real Time misrepresented the effect of the statute of limitations on its ability to collect the debt from Plaintiff. To that end, Plaintiff alleges that "Caitlyn Coon, a research analyst and agent of Real Time, claimed the statute of limitations had not expired on the loan," and that "Real Time's communication alleged that the statute of limitations had not run on the Debt...." Compl., at ¶¶ 17, 24, 31, 37. Real Time argues Plaintiff has not stated a claim because the applicable statute of limitations has not actually expired.
As both parties recognize, the statute of limitations for "[a]n action upon any contract, obligation or liability founded upon an instrument in writing" is four years. Cal. Civ. Proc. Code § 337(1). And generally speaking, "where performance of contractual obligations is severed into intervals, as in installment contracts, the courts have found that an action attacking the performance for any particular interval must be brought within the period of limitations after the particular performance was due." Armstrong Petroleum Corp. v. Tri – Valley Oil & Gas Co., 116 Cal.App.4th 1375, 1388, 11 Cal.Rptr.3d 412 (2004).
But when the contract contains an acceleration clause, " ‘the statute does not begin to run on installments not yet due until the creditor, by some affirmative act, manifests his election to declare the entire sum due.’ " Garver v. Brace, 47 Cal.App.4th 995, 1000, 55 Cal.Rptr.2d 220 (1996) (quoting 3 Witkin, Cal. Procedure, Actions, § 384 p. 413 (3d ed. 1985) ); accordJones v. Wilton, 10 Cal.2d 493, 500, 75 P.2d 593 (1938) (holding that for the breach of a contract with an acceleration clause, "[i]f the creditor fails to act affirmatively to mature the indebtedness, the statute of limitations is not set in motion"); Trigg v. Arnott, 22 Cal.App.2d 455, 458, 71 P.2d 330 (1937) ("It is settled in California that the presence in a promissory note of a positive nonoptional acceleration clause does not have a self-operative effect so that the statute of limitations begins to run immediately upon the happening of a default in a payment which the note specifies shall be made on a designated date."). This is because acceleration clauses "are for the benefit of the creditor" such that the failure to pay an installment when due "cannot be taken advantage of by the debtor to mature the entire indebtedness." Andrews v. Zook, 125 Cal.App. 19, 24, 13 P.2d 518 (1932).
Here, the Agreement between the parties designates a Draw Period and a Repayment Period. Req. for Judicial Notice, Ex. A at § 1. During the Draw Period, Plaintiff can request loans "from time to time" up to the credit limit of $100,000.00 but is only obligated to pay the "Minimum Payment Due," which "equals all unpaid finance charges, credit life insurance premiums, and other charges imposed during the billing cycle" along with any past due payments. Id. at §§ 1, 3(E), 3(F), 4. Making only these minimum payments during the Draw Period does not result in a reduction of principal. Id. at § 3(F). The Draw Period is followed by the Repayment Period, which lasts for 180 months. Id. at § 1. During the Repayment Period, the "Minimum Payment Due" is "1/180th of the outstanding principal balance" as of the last day of the Draw Period. Id. at § 3(G).
The Agreement also contains an optional acceleration clause permitting the creditor to declare all sums owed immediately due and payable for various reasons, including for the failure to make a "Minimum Payment Due." Id. at § 12.
Plaintiff alleges she missed a payment in March, 2009, which was during the Draw Period. She does not allege, however, that Countrywide exercised the optional acceleration clause at that time in order to trigger the statute of limitations for all outstanding amounts. Instead, the Draw Period continued for 120 months from August 12, 2005—in the absence of an allegation that Countrywide failed to extend it—and principal payments under the Repayment Period did not become due any sooner than August 12, 2015. Thus, according to the plain terms of the Agreement, the loan will not mature for another 180 months from that date, or on August 12, 2030, at which time the § 337(1) four-year limitations period will commence. Consequently, Real Time did not misrepresent the statute of limitations in its communication with Plaintiff.
Under these circumstances, Plaintiff has not plausibly alleged facts to support her position that the statute of limitations began to run when she missed a non-principal payment in 2009. As a result, she has not stated claims for fraud or misrepresentation, or for violation of §§ 1692e(2) and 1692e(10). Those causes of action will be dismissed with leave to amend.
C. Cause of Action based on Credit Reporting
For her fifth cause of action under § 1692e(2)(A) of the FDCPA, Plaintiff alleges she sent Real Time a communication on January 26, 2015, disputing the debt owed on the line of credit, but that "[b]etween March of 2013, and to August 2015, Real Time has reported the Debt as undisputed to the three major credit bureaus (Experian, Equifax, and Transunion)." Compl., at ¶¶ 41, 43.
In terms of plausibility, this cause of action is problematic on its face. Real Time cannot violate § 1692e(2)(A) for any period prior to the date that Plaintiff actually notified it of her dispute. Since Plaintiff alleges she did not send a written dispute to Real Time until January 26, 2015, she cannot also seek to hold it liable under § 1692e(2)(A) for any period prior to that date.
In addition, Real Time is correct that Plaintiff's allegations are contradicted by an exhibit to the Complaint, at least in part. SeeSprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.2001) (providing that for a Rule 12(b)(6) motion, the court need not accept as true "allegations that contradict matters properly subject to judicial notice or by exhibit," or allegations that are "conclusory, unwarranted deductions of fact, or unreasonable inferences"). The Experian credit report attached as Exhibit 2 states in the "Comment" section: "Account Information disputed by consumer.... This item was update from our processing of your dispute in Mar 2015." Thus, in contrast to what Plaintiff alleges, that document shows that her dispute was at least communicated to Experian, and Plaintiff does not address this comment in the Complaint. Notably, however, the Experian credit report does not reveal what was communicated to Equifax or Transunion. Real Time, therefore, cannot rely on that document for any allegations related to those two credit bureaus.
In light of these deficiencies, the § 1692e(2)(A) claim will be dismissed with leave to amend so that Plaintiff may clarify her allegations.
IV. ORDER
Based on the foregoing, Real Time's motion to dismiss (Dkt. No.) is GRANTED. All claims in the Complaint are DISMISSED WITH LEAVE TO AMEND.
Any amended complaint must be filed on or before May 23, 2016, and must be consistent with the discussion above. Plaintiff is advised that, although leave to amend has been permitted, she may not add new claims or new parties to this action without first obtaining Real Time's consent or leave of court pursuant to Federal Rule of Civil Procedure 15.
In addition, Plaintiff is advised that the court will dismiss this action without further notice for failure to prosecute under Federal Rule of Civil Procedure 41(b) if an amended complaint is not filed by the deadline designated herein.
The court declines to set a case management schedule at this time given the dismissal of all claims.