Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_16-cv-02022/USCOURTS-cand-5_16-cv-02022-0/pdf.json

Nature of Suit Code: 220
Nature of Suit: Foreclosure
Cause of Action: 15:1601 Truth in Lending

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5:16-cv-02022-RMW

ORDER DISMISSING FEDERAL CLAIMS AND REMANDING CASE TO STATE COURT

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

LUZ MARIA HERNANDEZ, et al.,

Plaintiffs,

v.

RESIDENTIAL CREDIT SOLUTIONS, 

INC., et al.,

Defendants.

Case No. 5:16-cv-02022-RMW 

ORDER DISMISSING FEDERAL 

CLAIMS AND REMANDING CASE TO 

STATE COURT

Re: Dkt. Nos. 8, 9, 11, 13

Presently before the court are four motions to dismiss the complaint alleging illegal 

foreclosure that plaintiffs Luz Hernandez and Marco Zesati originally filed in state court: 

(1) Motion to Dismiss by defendants Countrywide Home Loans, Inc., dba America’s Wholesale 

Lender; CWMBS, Inc.; and Bank of America, N.A.1(collectively “Countrywide”), Dkt. No. 8; 

(2) Motion to Dismiss by defendant Residential Credit Solutions, Inc. (“RCS”), Dkt. No. 9; 

(3) Motion to Dismiss by defendant Mortgage Electronic Registrations Systems, Inc. (“MERS”), 

Dkt. No. 11; and (4) Motion to Dismiss by defendant The Bank of New York Mellon, formerly 

known as The Bank of New York as Trustee for the Certificate Holders of CWMBS, Inc., CHL 

 

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Plaintiffs’ complaint names Countrywide Home Loans Servicing LP as a defendant, not Bank of 

America. Bank of America, N.A. asserts that it is the successor by merger to BAC Home Loans 

Servicing, LP, which was formerly known as Countrywide Home Loans Servicing LP. Dkt. No. 8 

at 2.

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ORDER DISMISSING FEDERAL CLAIMS AND REMANDING CASE TO STATE COURT

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Mortgage Pass-through Trust 2007-J2 Mortgage Pass-through Certificates, Series 2007-J2 

(hereinafter “BNYM”),2 Dkt. No. 13.3For the reasons set forth below, the court dismisses 

plaintiffs’ federal claims and remands the remaining state law claims to the Monterey County 

Superior Court. 

I. BACKGROUND

A. Judicial Notice

Defendants request that the court take judicial notice of several documents that are 

referenced in plaintiffs’ complaint or its attachments. See Dkt. Nos. 7, 10, 12, 14. In ruling on a 

motion to dismiss, “courts may take into account documents whose contents are alleged in a 

complaint and whose authenticity no party questions, but which are not physically attached to the 

[plaintiff’s] pleading.” Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160 (9th Cir. 2012) 

(citation omitted). Accordingly, this court takes judicial notice of the specific documents cited 

below that were recorded in the Monterey County Recorder’s Office and that relate to ownership 

of the Promissory Note and Deed of Trust on the Hernandez home. This court need not rule on

defendants’ requests for judicial notice for documents not cited below because this order does not 

rely on such documents that are not cited.

B. Factual Background and Procedural History

The complaint alleges that on or about April 25, 2007, plaintiff Luz Hernandez signed a 

Promissory Note and obtained a $447,000 mortgage loan from Countrywide with her husband 

Angel Hernandez. Dkt. No. 1-1 (“Compl.”) ¶ 29. The loan was secured by a Deed of Trust over 

the Hernandez residence at 53600 Pine Canyon Road, King City, California.4Id. ¶¶ 8, 29; Dkt. 

No. 7-2 (Deed of Trust).5The Deed of Trust defined the “lender” as Countrywide Home Loans, 

 

2 BYNM asserts that the complaint erroneously refers to it as “The Bank of New York as Trustee 

for Securitized Trust CHL Mortgage Passthrough Trust 2007-12.” Dkt. No. 13 at Notice p. 2.

3 Defendant Quality Loan Service Corporation has not appeared in this matter. It is unclear 

whether Quality Loan Service was served with plaintiffs’ complaint.

4

The court takes judicial notice of the Deed of Trust, which was recorded in the Monterey County 

Recorder’s Office on May 3, 2007 and is attached to several defendants’ requests for judicial 

notice. E.g. Dkt. No. 7-2.

5

The first three pages of the Deed of Trust are attached as Exhibit M to the complaint. Dkt. No. 1-

1 at ECF pp. 145-48.

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ORDER DISMISSING FEDERAL CLAIMS AND REMANDING CASE TO STATE COURT

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Inc. dba America’s Wholesale Lender. Dkt. No. 7-2 at 2. The Deed of Trust identified non-party 

Monterey Recon Trust Company, NA as the “trustee.” Id. The Deed of Trust also identified 

defendant MERS as a “beneficiary.” Id.

The exact chain of events that followed is not entirely clear from the face of the complaint, 

but eventually the Hernandez home went into foreclosure. It appears that on October 7, 2011, 

Recontrust Company filed a Notice of Default with the Monterey County Recorder. Compl. Ex. G, 

Dkt. No. 1-1 at ECF p. 129. On May 1, 2015, Quality Loan Service filed another Notice of 

Default. Compl. Ex. E, Dkt. No. 1-1 at ECF p. 121. On January 13, 2016, Quality Loan Service 

filed a Notice of Trustee’s Sale indicating that the Hernandez home would be sold on February 10, 

2016. Compl. Ex. D, Dkt. No. 1-1 at ECF p. 118. On February 18, 2016, defendant RCS filed a 

Trustee’s Deed Upon Sale with the Monterey County Recorder indicating that the Hernandez 

home had been sold to defendant BNYM. Compl. Ex. C, Dkt. No. 1-1 at ECF p. 114.

In general terms, the complaint alleges that prior to the foreclosure proceedings, the loan 

was securitized, but the Promissory Note was not properly transferred to defendant BNYM. 

Compl. ¶ 30. As a result, plaintiffs contend, the loan was rendered invalid. See id. ¶¶ 29-43. 

Moreover, plaintiffs contend, none of the named defendants had a legal right to foreclose. See id.

¶¶ 57-58. Attached to the complaint is a forensic audit of Ms. Hernandez’s loan documents 

purportedly prepared by an organization called Certified Forensic Loan Auditors LLC. See Compl. 

¶ 31, Ex. A-B. Plaintiffs also contend that Countrywide failed to make required disclosures and 

gave Ms. Hernandez a loan that Countrywide knew or should have known that Ms. Hernandez 

would not be able to repay. See id. ¶¶ 51-55.

Plaintiffs commenced this lawsuit in Monterey County Superior Court on March 17, 2016. 

Dkt. No. 1-1. Plaintiffs’ complaint asserts the following causes of action:

1. Lack of Standing to Foreclose;

2. Fraud in the Concealment;

3. Fraud in the Inducement;

4. Intentional Infliction of Emotional Distress;

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5. Quiet Title;

6. Slander of Title;

7. Declaratory Relief;

8. Violations of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., as 

amended;

9. Violations of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. 

§ 2601 et seq.; and 

10. Rescission.

Id. Defendant Countrywide Home Loans Inc. removed the case to this court on April 18, 2016

based on federal question jurisdiction over plaintiffs’ TILA and RESPA claims and supplemental 

jurisdiction over plaintiffs’ state law claims. Dkt. No. 1. No party filed an objection to removal. 

Countrywide filed a motion to dismiss on April 21, 2016, Dkt. No. 6, but subsequently renoticed the motion to dismiss with a different hearing date, Dkt. No. 8. RCS, MERS, and BYNM 

filed motions to dismiss on April 28, 2016. Dkt. Nos. 9, 11, 13. Plaintiffs did not file written 

responses to any of the defendants’ motions to dismiss. The court held a hearing on the instant 

motions on June 3, 2016. Plaintiff Zesati appeared telephonically at the hearing, as did counsel for 

defendants.

II. ANALYSIS

A. Motions to Dismiss

Defendants argue that plaintiffs’ complaint fails to state a claim on which relief can be 

granted. Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss a complaint 

for failure to state a claim upon which relief can be granted. Such a motion tests the legal 

sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In considering 

whether the complaint is sufficient, the court must accept as true all of the factual allegations 

contained in the complaint. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). However, the court need

not accept as true “allegations that contradict matters properly subject to judicial notice or by 

exhibit” or “allegations that are merely conclusory, unwarranted deductions of fact, or 

unreasonable inferences.” In re Gilead Scis. Secs. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) 

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ORDER DISMISSING FEDERAL CLAIMS AND REMANDING CASE TO STATE COURT

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(citation omitted). While a complaint need not allege detailed factual allegations, it “must contain 

sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” 

Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim 

has facial plausibility when the plaintiff pleads factual content that allows the court to draw the 

reasonable inference that the defendant is liable for the misconduct alleged. The plausibility 

standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that 

a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (internal citation omitted).

1. TILA

Claim 8 of the complaint alleges that defendants violated the Truth in Lending Act by 

“failing to provide Plaintiff with accurate material disclosures” and “not taking into account the 

intent of the State Legislature in approving this statute which was to fully inform home buyers of 

the pros and cons of adjustable rate mortgages in a language (both written and spoken) that they 

can understand and comprehend.” Compl. ¶ 133. Plaintiffs allege that because of defendants’ 

conduct, they lost substantial equity in their home and were unable to refinance the home or obtain 

any modification of their loan. Id. ¶¶ 135-36. Claim 10 of the complaint seeks rescission based in 

part on the alleged TILA violations.

Defendants argue, among other things, that plaintiffs’ TILA claims are time-barred. Claims 

for damages under the TILA are subject to a one-year statute of limitations, running from the date 

of consummation of the transaction. 15 U.S.C. § 1640(e); King v. State of Cal., 784 F.2d 910, 915 

(9th Cir. 1986). Claims for rescission are subject to a three-year statute of limitations. Beach v. 

Ocwen Fed. Bank, 523 U.S. 410, 411-12 (1998). Claims for damages under the TILA may be 

subject to equitable tolling in appropriate circumstances, but claims for rescission are not subject 

to equitable tolling. Beach, 523 U.S. at 412-13. In the instant case, Ms. Hernandez obtained the 

home loan at issue in 2007 but did not file suit until 2016. Moreover, the complaint contains no 

allegations to explain the delay in filing suit that would suggest that equitable tolling might apply. 

At the hearing on the instant motions, after this court indicated to the parties that it was inclined to 

find that the statute of limitations barred plaintiffs’ federal claims, plaintiffs did not argue that 

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there are any facts that would toll the statute of limitations. Plaintiff Zesati indicated that he had 

understood that the statute of limitations began to run at the time of foreclosure, but he cited no 

authority in support of this argument that would refute the authority cited by defendants.

Accordingly, this court finds that plaintiffs’ TILA claims are time-barred. 

2. RESPA

Claim 9 of plaintiffs’ complaint alleges that “Defendants violated RESPA because the 

payments between the Defendants were misleading and designed to create a windfall.” Compl. 

¶ 146. Plaintiffs assert that “[t]he interest and income that Defendants have gained is 

disproportionate to the situation Plaintiff [sic] find themselves in.” Id. ¶ 144.

Defendants also argue that plaintiffs’ RESPA claims are time-barred. Claims for violations 

of 12 U.S.C. §§ 2607 and 2608 are subject to a one-year statute of limitations, and claims for 

violations of 12 U.S.C. § 2605 are subject to a three-year statute of limitations. 12 U.S.C. § 2614; 

Ireland v. Centralbanc Mortgage Corp., No. 5:12-CV-02991 EJD, 2012 WL 6025764, at *4 (N.D. 

Cal. Dec. 4, 2012). In this case, Ms. Hernandez’s loan originated in 2007, and it was last 

transferred in 2011. The complaint contains no allegations to suggest that equitable tolling might 

apply, and, as with the TILA claims, plaintiffs did not argue at the hearing on the instant motions 

that there are any facts that would toll the statute of limitations on their RESPA claims. Even 

under the broadest possible reading of the statutes of limitations, plaintiffs’ RESPA claims, filed 

in 2016, are time-barred. 

3. Other Grounds for Dismissal

Because the court finds that all of plaintiffs’ federal claims are time-barred, the court need 

not address defendants’ other arguments for dismissal of these claims. Moreover, because the 

court finds that plaintiffs have failed to state a claim under federal law and that subject matter 

jurisdiction over plaintiffs’ state law claims may be lacking, the court need not reach the merits of 

plaintiffs’ state law claims. 

4. Leave to Amend

Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “should be 

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freely granted when justice so requires.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en 

banc) (internal quotation marks omitted). Nonetheless, a court “may exercise its discretion to deny 

leave to amend due to ‘undue delay, bad faith or dilatory motive on part of the movant, repeated 

failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing 

party . . . , [and] futility of amendment.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 

892–93 (9th Cir. 2010) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)) (alterations in 

original).

In this case, plaintiffs did not file written responses to any of the defendants’ motions to 

dismiss. At the hearing on the instant motions, after this court indicated to the parties that it was 

inclined to find that the statutes of limitations barred plaintiffs’ federal claims, plaintiffs did not 

argue that there are any facts or legal authorities that would toll the statutes of limitations.

Accordingly, the court finds that amendment would be futile. Plaintiffs’ federal claims are 

dismissed with prejudice. 

B. Removal Jurisdiction

Because plaintiffs’ federal claims are being dismissed, and no party has asserted that 

diversity jurisdiction exists in this case, the court must decide whether to exercise supplemental 

jurisdiction or to remand the case to state court. A defendant may remove to federal court those 

civil actions filed in state court which could have been filed in federal court in the first instance. 

28 U.S.C § 1441. “If at any time before final judgment it appears that the district court lacks 

subject matter jurisdiction, the case shall be remanded.” 28 U.S.C. § 1447(c).

Original jurisdiction may be based on diversity or the existence of a federal question, as set 

forth in 28 U.S.C. sections 1331 and 1332. As noted above, Countrywide removed this case to this 

court based on federal question jurisdiction over plaintiffs’ TILA and RESPA claims and 

supplemental jurisdiction over plaintiffs’ state law claims. Dkt. No. 1. Countrywide has not 

asserted that diversity jurisdiction exists, and the pleadings suggest that such an argument would 

likely fail given that the Deed of Trust indicates that Countrywide’s principal place of business is 

in Calabasas, California. Compl. Ex. M at 2. Accordingly, the only potential basis for maintaining 

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jurisdiction over plaintiffs’ state law claims is supplemental jurisdiction. “If the federal claims that 

served as the basis for removal are eliminated, the district court has discretion to decline to 

exercise its supplemental jurisdiction and to remand the remaining state law claims to state court.” 

Perez v. Wells Fargo Bank, N.A., 929 F. Supp. 2d 988, 1001 (N.D. Cal. 2013) (citing 28 U.S.C. 

§ 1367(a); Albingia Versicherungs A.G. v. Schenker Intern. Inc., 344 F.3d 931, 938 (9th Cir.

2003), amended on other grounds, 350 F.3d 916 (9th Cir. 2003)). Factors that a court may 

consider in determining whether to retain supplemental jurisdiction over a case or remand the case 

include “the values of economy, convenience, fairness, and comity.” Harrell v. 20th Century Ins. 

Co., 934 F.2d 203, 205 (9th Cir. 1991).

In this case, the court finds that remand is appropriate. This case has been in federal court 

for less than two months, and it is still at the pleading stage; a trial date has not been set. This 

court has not performed a substantial amount of legal analysis that would need to be repeated by 

the state court. In addition, the vast majority of plaintiffs’ claims rely on state law, so 

considerations of comity weigh in favor of remand. The parties have not suggested that a state 

forum would be unfair to their claims, nor have they suggested that litigating in the Monterey 

County Superior Court would be inconvenient for them. Accordingly, this case is remanded to the 

Monterey County Superior Court. 

III. ORDER

For the reasons explained above, the court GRANTS defendants’ motions to dismiss 

plaintiffs’ TILA and RESPA claims with prejudice. Furthermore, this court REMANDS the 

remaining state law claims to the Superior Court of California, County of Monterey. The Clerk 

shall close the file.

IT IS SO ORDERED.

Dated: June 7, 2016

______________________________________

Ronald M. Whyte

United States District Judge

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