Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00423/USCOURTS-caed-2_05-cv-00423-3/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1601 Truth in Lending

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28 1 Because oral argument will not be of material

assistance, the court orders the matter submitted on the briefs. 

E.D. Cal. L.R. 78-230(h).

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

CEDRIC V. PETERSON,

NO. CIV S-05-0423 FCD/KJM

Plaintiff,

v. MEMORANDUM AND ORDER

JP MORGAN CHASE BANK, et al.,

Defendants.

----oo0oo----

This matter is before the court on defendants’ motion to

dismiss plaintiff’s complaint, pursuant to Federal Rules of Civil

Procedure 12(b)(6) for failure to state a claim upon which relief

may be granted.1 Specifically, defendants assert that

plaintiff’s first, second, and eighth claims for relief for

wrongful foreclosure, breach of contract, and injunctive relief,

respectively, are barred by the doctrines of res judicata and

collateral estoppel. Furthermore, defendants contend that

plaintiff’s claims of statutory violations of the federal Truth

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2

in Lending Act (“TILA”), the federal Fair Debt Collection

Practices Act (“FDCPA”), the California Consumer Legal Remedies

Act (“CLRA”), and the California Rosenthal Fair Debt Collection

Practices Act (“RFDCPA”) are barred by the statute of limitations

and/or have no substantive merit. Finally, defendants assert

that plaintiff has failed to state a claim against them for

violation of the California Real Estate Settlement Procedures Act

(“RESPA”).

BACKGROUND

Plaintiff, Cedric V. Peterson (“Peterson”), alleges that on

or about August 28, 2001, he executed a promissory note (“Note”)

secured by a deed of trust (“Deed”) to New Century Mortgage

Corporation (“New Century”). (Compl., filed March 2, 2005, at 4-

5). The Note and Deed covered real property located at 8675 Elm

Avenue, Orangevale, California, 95662, which was Peterson’s

residence. (Id.). The Deed was recorded with the County

Recorder of Sacramento County on September 5, 2001. (Id.; Deed

of Trust, Ex. A to Defs.’ Req. for Judicial Notice [“RJN”]).

On or about September 10, 2001, the Deed was assigned to JP

Morgan Chase Bank (“JP Morgan”), as trustee, under a pooling and

servicing agreement dated June 1, 2002, among Credit-Based Asset

Servicing and Securitization LLC, Salomon Brothers Mortgage

Securities VII, Inc., Litton Loan Servicing LP and JP Morgan

Chase Bank, Salomon Mortgage Loan Trust, C-BASS Mortgage Loan

Asset-Backed Certificates, and Series 2002-CB3, without recourse. 

(Corp. Assignment of Deed of Trust, Ex. B to RJN). Thus, JP

Morgan, as trustee, became the beneficiary of the Deed. (Id.).

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3

On February 15, 2002, Litton Loan Servicing LP (“Litton”)

was appointed loan servicing agent for JP Morgan as trustee. 

(Mot. to Dismiss, filed July 29, 2005, at 4). On August 30,

2002, Litton instructed Quality Loan Service Corporation

(“Quality Loan”), as trustee, to commence non-judicial

foreclosure proceedings on Peterson’s property by recording and

serving a Notice of Default. (Compl. at 4; Notice of Default,

Ex. C to RJN). Peterson failed to cure the default and thus a

Notice of Sale was recorded on December 5, 2002. (Notice of

Sale, Ex. D to RJN). 

On April 10, 2003, Quality Loan conducted a foreclosure sale

and sold Peterson’s property to defendant JP Morgan to satisfy

the debt. (Compl. at 4; Trustee’s Deed Upon Sale, Ex. E to RJN). 

On May 11, 2003, Peterson and his wife filed a state court

complaint in the Sacramento County Superior Court against JP

Morgan, et. al. (“defendants”) to set aside the trustee sale,

quiet title, cancel trustee’s deed, accounting, fraud, and

injunctive relief. (State Compl., Ex. F to RJN). On October 5,

2004, the Sacramento County Superior Court granted defendants’

motion for summary judgment as to all claims and entered judgment

in favor of defendants. (Tentative Ruling, Ex. G to Defs. RJN). 

Subsequently, the court entered a Judgment and Amended Judgment

awarding attorneys’ fees and costs to defendants. (Ex. H to

RJN). 

On April 29, 2005, plaintiff and his wife appealed the

decision of the superior court. The appellate court granted

defendants’ motion to dismiss the appeal on July 27, 2005. 

(Appellate Dismissal, filed July 7, 2005, Ex. I to RJN).

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4

On March 2, 2005, before appealing the state action,

Peterson filed an action in this court against defendants,

alleging breach of contract, wrongful foreclosure, injunctive

relief, and violations of TILA, RESPA, FDCPA, RFDCPA, and CLRA. 

Defendants now move to dismiss the instant action under Rule

12(b)(6) on the grounds that Peterson’s claims are either barred

by res judicata or collateral estoppel, barred on statute of

limitations grounds, or fail to state a viable claim. (Mot. to

Dismiss at 6-12). 

STANDARD

On a motion to dismiss, the allegations of the complaint

must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322

(1972). The court is bound to give the plaintiff the benefit of

every reasonable inference to be drawn from the “well-pleaded”

allegations of the complaint. Retail Clerks Int'l Ass'n v.

Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff

need not necessarily plead a particular fact if that fact is a

reasonable inference from facts properly alleged. See id. 

Given that the complaint is construed favorably to the

pleader, the court may not dismiss the complaint for failure to

state a claim unless it appears beyond a doubt that the plaintiff

can prove no set of facts in support of the claim which would

entitle him or her to relief. Conley v. Gibson, 355 U.S. 41, 45

(1957); NL Industries, Inc. v. Kaplan, 792 F.2d 896, 898 (9th

Cir. 1986).

Nevertheless, it is inappropriate to assume that the

plaintiff “can prove facts which it has not alleged or that the

defendants have violated the . . . laws in ways that have not

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been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal.

State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover,

the court “need not assume the truth of legal conclusions cast in

the form of factual allegations.” United States ex rel. Chunie

v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986).

In ruling upon a motion to dismiss, the court may consider

only the complaint, any exhibits thereto, and matters which may

be judicially noticed pursuant to Federal Rule of Evidence 201. 

See Mir v. Little Co. Of Mary Hosp., 844 F.2d 646, 649 (9th Cir.

1988); Isuzu Motors Ltd. v. Consumers Union of United States,

Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).

ANALYSIS

I. Claims for Breach of Contract, Wrongful Foreclosure, and

Injunction

In his first, second, and eighth claims for relief against

defendants, plaintiff alleges breach of contract, wrongful

foreclosure, and entitlement to injunctive relief. These claims

cannot stand, however, because they are barred by the doctrines

of res judicata and/or collateral estoppel. 

A. Res Judicata and Collateral Estoppel

The Full Faith and Credit Act, 28 U.S.C.§ 1738 (“FFCA”),

does not allow federal courts to employ their own rules of res

judicata in determining the effect of state court judgments.

Rather, FFCA requires federal courts to apply rules chosen by the

state from which judgment is taken. Parsons Steel, Inc. v. First

Alabama Bank, 474 U.S. 518, 523 (1986). A federal court must

give to a state-court judgment the same preclusive effect as

would be given that judgment under the law of the state in which

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the judgment was rendered, absent a federal law modifying the

operation of FFCA. Migra v. Warren City School Dist. Bd. of Ed.,

465 U.S. 75, 81 (1984). 

Under California law, res judicata describes the preclusive

effect of a final judgment on the merits. Mycogen Corp. v.

Monsanto Co., 28 Cal. 4th 888, 896 (2002). Res judicata has a

“double aspect.” Todhunter v. Smith, 219 Cal. 690, 695 (1934). 

“In its primary aspect,” commonly known as claim preclusion, it

“operates as a bar to the maintenance of a second suit between

the same parties on the same cause of action.” Clark v. Lesher,

46 Cal. 2d 874, 880 (1956). “In its secondary aspect,” commonly

known as collateral estoppel, “[t]he prior judgment . . .

‘operates’ in a second suit . . . based on a different cause of

action . . . ‘as an estoppel or conclusive adjudication as to

such issues in the second action as were actually litigated and

determined in the first action.’” Id. (citing Todhunter, 219

Cal. at 695). The prerequisite elements for applying res

judicata to either an entire claim or one or more issues are the

same: (1) a claim or issue raised in the present action is

identical to a claim or issue litigated in a prior proceeding,

(2) the prior proceeding resulted in a final judgment on the

merits, and (3) the party against whom the doctrine is being

asserted was a party or in privity with a party to the prior

proceeding. People v. Barragan, 32 Cal. 4th 236, 252-53 (2004)

(citing Brinton v. Bankers Pension Services, Inc., 76 Cal. App.

4th 550, 556 (1999)). 

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2 Peterson and his wife were both plaintiffs in the state

court action. For simplicity and consistency, this order refers

to one plaintiff in that action.

7

1. Identical claim adjudicated in prior proceeding

A valid final judgment on the merits in favor of a defendant

serves as a complete bar to further litigation on the same cause

of action. Busick v. Workmen’s Comp. Appeals Bd., 7 Cal. 3d 967,

973 (1972). “For purposes of identifying a cause of action under

res judicata, ‘California has consistently applied the primary

rights theory under which the invasion of one primary right gives

rise to a single cause of action.’” Branson v. Sun-Diamond

Growers, 24 Cal. App. 4th 327, 340 (1994) (citing Slater v.

Blackwood, 15 Cal. 3d 791, 795 (1975)). A “cause of action is

based on the harm suffered, as opposed to the particular theory

asserted by the litigant. Even where there are multiple legal

theories upon which recovery might be predicated, one injury

gives rise to only one claim for relief.” Branson, 24 Cal. App.

4th at 340-41. Thus, two actions constitute a single cause of

action if they both affect the same primary right. Gamble v.

General Foods Corp., 229 Cal. App. 3d 893, 898 (1991).

In his state court complaint, plaintiff’s asserted primary

right was the right to title of his property for his use and

enjoyment.2 (See generally State Compl., Ex. F to RJN). The

alleged injury was the wrongful and invalid foreclosure of his

property by defendants. (Id.). The causes of action plead in

the state court complaint were: to set aside trustee sale, quiet

title, cancel trustee’s deed, accounting, and injunctive relief. 

(Id.).

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The state trial court granted summary adjudication as to all

causes of action. (Tentative Ruling, Ex. G to RJN, at 1). In

particular, with respect to the causes of action to set aside the

trustee sale and quiet title, the trial court found that

defendants met their burden of proof as to a revised forbearance

agreement between plaintiff and Litton, and plaintiff’s

subsequent failure to comply with the terms of that agreement. 

(Id.). As to the cause of action for an accounting, the court

stated that defendant Litton, the loan servicing agent at the

time, confirmed receipt of plaintiff’s January and February 2003

payments despite plaintiff’s contention that Litton had not

confirmed receipt. (Id.). Finally, as to the causes of action

for fraud, to quiet title, and for injunctive relief, the court

found that no triable issues of material fact remained, requiring

award of summary judgment in defendants’ favor. (Id.).

In the present case, plaintiff alleges, inter alia, breach

of contract by defendants. Specifically, plaintiff claims that

“defendant[s] . . . failed to acknowledge receipt of funds

tendered by plaintiff in payment on the note . . . pursuant to

the terms of one or more forbearance agreements.” (Compl. at 4). 

This allegation mirrors plaintiff’s state court allegation. 

(State Compl., Ex. F to RJN, at 6) (alleging defendants violated

terms of Note and Deed and such violations were a material

breach). The state court adjudicated the issue of whether

defendants failed to comply with the terms of the

contract/agreement and determined the issue in favor of

defendants, finding “no disputed material facts remain[ed].” 

(Tentative Ruling, Ex. G to RJN, at 1). Thus, res judicata

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3 Additionally, it is noteworthy that California case law

provides that a judgment adjudicating the title or interest of

parties in property within California is conclusive as to what is

determined at the time of its rendition. See generally In re

Estate of Clark, 190 Cal. 354 (1923); Gerlach v. Copeland, 212

Cal. 758 (1931). Thus, once the right to possession of real

property is adjudicated, it cannot be relitigated between the

parties. See generally Bank of America Nat’l Trust & Sav. Ass’n

v. McLaughlin, 22 Cal. App. 2d 411 (1937); Bracey v. Gray, 65

Cal. App. 2d 282 (1944).

9

applies to plaintiff’s instant breach of contract claim.

Furthermore, plaintiff alleges herein wrongful foreclosure

and asks for injunctive relief thereto. Again, these claims

mirror plaintiff’s state court allegations. (State Compl., Ex. F

to RJN, at 5-12, 22) (alleging numerous invalid foreclosure

proceedings and asking court to restrain all action inconsistent

with plaintiff’s title and right to possession of property). The

trial court determined that the foreclosure sale was valid and

thus denied plaintiff injunctive relief. (Tentative Ruling, Ex.

G to RJN, at 1-2). Under res judicata principles, plaintiff

cannot now relitigate those issues.3

2. Final adjudication on the merits

To have the conclusive effect of res judicata, an

adjudication must be a judgment or final order in an action

before a court or judge having jurisdiction to pronounce the

judgment or order. Cal. Code Civ. Proc. § 1908(a). If a

judgment is still open to direct attack by appeal or otherwise,

it is not final and res judicata does not apply. Nat’l Union

Fire Ins. Co. v. Stites Prof. Law Corp., 235 Cal. App. 3d 1718,

1726 (1991). Plaintiff has already pursued, and has been denied,

an appeal of the state trial court’s award of summary

adjudication. Thus, res judicata may be applied in this case.

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4 Plaintiff’s claims of breach of contract, wrongful

foreclosure, and an injunction would likewise be barred by the

doctrine of collateral estoppel; however, that analysis is

unnecessary because res judicata principles dispose of

plaintiff’s claims.

5 While defendants do not specifically raise RESPA,

certain RESPA violations have a one-year statute of limitations

and thus the equitable tolling analysis, below, applies.

10

3. Parties to the prior proceeding

The parties do not dispute that plaintiff’s federal

complaint names the same defendants as in the state court action.

For the foregoing reasons, this court finds that plaintiff’s

claims for relief for breach of contract, wrongful foreclosure,

and an injunction are barred by the doctrine of res judicata.

Therefore, defendants’ motion to dismiss plaintiff’s first,

second, and eighth claims for relief is GRANTED with prejudice.4

II. Claims for Violations of TILA, RESPA, RFDCPA, and CLRA

In his third, fourth, sixth, and seventh claims for relief,

plaintiff alleges defendants violated TILA, RESPA, RFDCPA, and

CLRA. Defendants assert, inter alia, that the TILA, RFDCPA, and

CLRA claims are barred by the statute of limitations.5

The statute of limitations for TILA is one-year from the

date the violation occurs. 15 U.S.C. § 1640(e); 12 U.S.C. §

2614. There is some debate as to whether the TILA statute of

limitations commences on the date the credit contract is

executed, or at the time plaintiff discovered, or should have

discovered the acts constituting the violation. Meyer v.

Ameriquest Mort. Co., 342 F.3d 899, 902 (9th Cir. 2003); Katz v.

Bank of Cal., 640 F.2d 1024, 1025 (9th Cir. 1981). Here,

plaintiff entered into a mortgage loan transaction on August 28,

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6 Plaintiff invokes 15 U.S.C. section 1640(e) as an

alternative statutory timeframe for his TILA claims. Section

1640(e) states:

This subsection does not bar a person from asserting

a violation of this title in an action to collect

the debt which was brought more than one year from 

the date of the occurrence of the violation as a 

matter of defense by recoupment or set-off in such

action . . . .

As defendants point out, however, this statute is inapplicable to

the present action. (Reply, filed September 1, 2005, at 6). The

statute offers a defense to a borrower in a creditor’s action to

collect a debt. Here, plaintiff is suing defendants, only after

satisfaction of a debt by a foreclosure sale, seeking damages for

an alleged violation of TILA provisions by defendants. Id.

Therefore, § 1640(e) would not render plaintiff’s claim timely.

11

2001. (Compl. at 3). Plaintiff filed his federal complaint on

March 2, 2005, alleging claims surrounding a foreclosure sale

occurring April 10, 2003. Even under the more expansive

“discovery” rule, plaintiff’s TILA allegations are clearly

outside the one-year statute of limitations.6

The statute of limitations for RFDCPA is one year from the

date of the violation. Cal. Civ. Code § 1788.30(f). In his

complaint, plaintiff alleges that defendants “threatened to take

(and did take) an action prohibited by law, in noticing and

conducting the April 10, 2003 trustee’s sale and prosecution of

the subsequent unlawful detainer action.” (Compl. at 12)

(emphasis added). Thus, this claim is outside the applicable

statute of limitations.

The statute of limitations for CLRA is three years from the

date of the violation. Cal. Civ. Code § 1783. In his complaint,

plaintiff refers to the misrepresentations of “quality,

characteristics, benefits and rights of the services involved in

the transaction.” (Compl. at 13). Plaintiff also refers to the

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“misrepresentations by lender . . . in the consumer lending

transaction.” (Id.). The consumer lending transaction at issue

occurred on August 28, 2001. (Id. at 3). Thus, this claim is

also outside the applicable statute of limitations.

Regarding RESPA, the statute of limitations is one or three

years from the date of the violation, depending on the

allegations. 12 U.S.C. § 2614. Plaintiff’s first allegation

under RESPA, “that defendant[s] have not fully responded in the

form and manner mandated by law” (Compl. at 9) to his qualified

written requests, appears to fall within the three-year statute

of limitations period. See 12 U.S.C. § 2614 (stating that

violation under § 2605 of RESPA warrants three-year statute of

limitations); 12 U.S.C. § 2605 (addressing duty of loan servicer

to respond to qualified written requests). If so, this claim is

not barred by the statute of limitations. However, plaintiff’s

second allegation under RESPA, that defendants “violated RESPA in

the deceptive disclosures regarding the Yield Spread Premium,”

(Compl. at 9) falls under a one-year statute of limitations

period. See 12 U.S.C. § 2614 (stating that violation under §

2607 of RESPA warrants one-year statute of limitations); 12

U.S.C. § 2607 (eliminating payment of unearned fees in connection

with settlement services provided in federally related mortgage

transactions). Plaintiff concedes this second allegation is

outside the applicable statute of limitations, but argues it is

“nonetheless indicative of . . . defendant’s bad faith.” (Compl.

at 9). 

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7 Plaintiff does not specifically invoke equitable

tolling for RESPA, however, as set forth above, the equitable

tolling analysis also applies to RESPA.

13

Plaintiff responds that his TILA, RFDCPA, and CLRA claims7

have been equitably tolled during the pendency of the underlying

state court proceedings. Under California law, the plaintiff has

the burden of establishing entitlement to equitable tolling. 

Elshirbiny v. Hewlett Packard Co., 2001 U.S. Dist. LEXIS 7087, at

*13 (D. Cal. 2001); see also Hinton v. Pacific Enterprises, 5

F.3d 391, 395 (9th Cir. 1993). The plaintiff must satisfy these

factors: timely notice to the defendants in filing the first

claim, lack of prejudice to the defendants in gathering evidence

for the second claim, and good faith and reasonable conduct in

filing the second claim. Cervantes v. City of San Diego, et.

al., 5 F.3d 1273, 1275 (9th Cir. 1993); see Donoghue v. Orange

County, 848 F.2d 926, 931 (9th Cir. 1987).

The Ninth Circuit has recognized that “California’s factintensive test for equitable tolling is more appropriately

applied at the summary judgment or trial stage of litigation.” 

Cervantes, 5 F.3d at 1276. “At a minimum, determining the

applicability of equitable tolling necessitates resort to the

specific circumstances of the prior claim: parties involved,

issues raised, evidence considered and discovery conducted.” Id.

“Thus, the question ordinarily requires reference to matters

outside the pleadings, and is generally not amenable to

resolution on a Rule 12(b)(6) motion, where review is limited to

the complaint alone.” Id.

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The sole issue then to consider for this motion becomes

“whether the complaint, liberally construed in light of [ ]

notice pleading [ ], adequately alleges facts showing the

potential applicability of the equitable tolling doctrine.” Id.

In light of this query, the Ninth Circuit has held that “an

allegation of the continued pendency of prior actions suffices to

overcome a motion to dismiss.” Id.; see Emrich v. Touche Ross &

Co., 846 F.2d 1190, 1200 (9th Cir. 1988) (“[W]e conclude the

dismissal of the complaint was improper as a matter of law

because the face of the complaint invoked state and federal

equitable tolling doctrines as it alleged the pendency of two

prior actions.”). 

Here, plaintiff’s complaint contains references, albeit

cursory, to “the currently pending Superior Court action for

unlawful detainer” and the “action in the unlawful detainer

proceeding in the Superior Court of Sacramento County.” (Compl.

at 13). Because this court must construe plaintiff’s complaint

liberally, plaintiff has alleged, at least, the potential for

equitable tolling. Therefore, the court cannot find, at this

juncture, that his claims are barred by the applicable statutes

of limitations.

III. Substantive Merits of Claims Under TILA, RESPA, RFDCPA,

CLRA, and FDCPA

A. TILA

Defendants assert that the TILA claim should be dismissed

because they are statutorily exempt from its provisions as

assignees of mortgage loans rather than creditors. To support 

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their assertion, defendants point to the definition of “creditor”

as defined in section 1602 of TILA:

[A] person who both (1) regularly extends, whether

in connection with loans, sales of property or 

services or otherwise, consumer credit which is 

payable by agreement in more than four installments 

or for which the payment of a finance charge is 

or may be required, and (2) is the person to whom 

the debt arising from the consumer credit transaction is initially payable on the face of the 

evidence of indebtedness or, if there is no such

evidence of indebtedness, by agreement.

Defendants claim that New Century, as the original lender, is the

“person to whom the debt [was] initially payable.” Thus, because

JP Morgan became the trustee by virtue of an assignment from New

Century, it is not a “creditor” under TILA.

Defendants further rely on Bescos v. Bank of America, 105

Cal. App. 4th 378 (2003), contending that in Bescos, the court

held that assignees of mortgage loans and their agents are

expressly excluded from TILA. However, Bescos does not so hold. 

Instead, the Bescos court states that the 1980 amendment to

TILA’s definition of creditor “will eliminate confusion under the

current act as to the responsibilities of assignees and

‘arrangers of credit.’” Id. at 389. This is not an express

finding absolving assignees of mortgages from statutory

liability. 

Moreover, 15 U.S.C. § 1641(a) specifically states that an

action brought under TILA “against a creditor may be maintained

against any assignee of such creditor [ ] if the violation . . .

is apparent on the face of the disclosure statement, except where

the assignment was involuntary.” Plaintiff’s complaint alleges

numerous disclosure violations on the part of defendants. 

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8 Equitable tolling is not necessary to the first

allegation under RESPA because the applicable statute of

limitations is three years.

9 Defendants do not address plaintiff’s allegations of

deceptive disclosures concerning the Yield Spread Premium. These

allegations also sufficiently state a claim against defendants

for violation of RESPA.

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(Compl. at 5-9). For these reasons, plaintiff has alleged

sufficient facts to state a claim against defendants for

violations of TILA. Thus, defendants’ motion to dismiss

plaintiff’s TILA claim is DENIED.

B. RESPA

Plaintiff alleges that defendants violated RESPA by failing

to “fully respond[] in the form and manner mandated by law.” 

(Compl. at 9). Plaintiff further claims that defendants violated

RESPA “in the deceptive disclosures regarding the Yield Spread

Premium.” (Id.) As described above, as to this latter

allegation, plaintiff has demonstrated the potential for

equitable tolling.8

In support of dismissal of the RESPA claim, defendants argue

that they fulfilled their statutory duties under RESPA by

responding to plaintiff’s written request. (Mot. to Dismiss at

11). Plaintiff’s claim, however, is not based on a failure to

respond but rather the substantive inadequacy of the response. 

Such allegations challenging the substance of defendants’

response under the statute sufficiently state a claim against

defendants for violation of RESPA. Thus, defendants’ motion to

dismiss plaintiff’s RESPA claim is DENIED.9

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C. RFDCPA

Plaintiff alleges defendants violated the RFDCPA by taking

“an action prohibited by law, in noticing and conducting the

April 10, 2003 trustee’s sale and prosecution of the subsequent

unlawful detainer action.” (Compl. at 12). For the same reasons

as set forth above, regarding plaintiff’s claims for breach of

contract, wrongful foreclosure, and injunctive relief, this claim

is barred by res judicata in that the state court found the

foreclosure sale valid. Plaintiff contends, nonetheless, that

defendants’ violations of the RFDCPA “are not limited” to the

above-mentioned violation. (Id.). Yet, plaintiff fails to

allege any other specific facts upon which he can base his RFDCPA

claim. (Id.).

As such, plaintiff has failed to adequately state a RFDCPA

claim, and defendants’ motion to dismiss must be granted. 

However, because Rule 15(a) of the Federal Rules of Civil

Procedure provides that leave to amend shall be freely given when

justice so requires, the court will allow plaintiff to amend his

complaint to allege the other purported violations of RFDCPA. 

D. CLRA

Plaintiff alleges that defendants violated the CLRA by

“misrepresenting the quality, characteristics, benefits and

rights of the services involved in the transaction.” (Compl. at

12). Defendants set forth a number of arguments in response

(although inconclusive), to demonstrate that they and plaintiff

fall outside the CLRA’s purview. 

First, defendants argue that the statute expressly exempts

from its reach “any transaction which provides for the sale of an

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entire residence . . . or for the sale of a lot or parcel.”

(Mot. to Dismiss at 12); Cal. Civ. Code § 1754. As this is a

loan for residential real property, defendants seem to imply that

they are thus statutorily exempted. (Mot. to Dismiss at 12). 

Second, in response to plaintiff’s claim that the loan at

issue is for a refinance, defendants assert that the CLRA’s

provisions “are not applicable to the facts of the instant case

whether the [ ] loan is . . . a purchase money loan or a

refinance.” (Mot. to Dismiss at 8). In support of this

assertion, defendants point to the statutory definition of

“consumer” to apparently imply that plaintiff is not a “consumer”

as defined in CLRA. (Reply at 8). “Consumer,” as statutorily

defined, is “an individual who seeks or acquires, by purchase or

lease, any goods or services for personal, family, or household

purposes.” Cal. Civ. Code § 1761(d). Thus, according to

defendants, because plaintiff is not a “consumer,” this section

is inapplicable. 

Lastly, defendants cite California Civil Code section

1770(a), which provides that the CLRA applies to “unfair methods

of competition and unfair or deceptive acts or practices

undertaken by any person in a transaction . . . which results in

the sale or lease of goods or services to any consumer.” Again,

by this argument, defendants seem to suggest that because the

“transaction” at issue falls outside the CLRA and plaintiff is

not a “consumer” under the CLRA, they are statutorily exempt.

Defendants fail to show decisively, however, that the loan

at issue falls outside the definition of a “transaction . . .

provid[ing] for the sale of an entire residence . . . or for the

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sale of a lot or parcel.” Cal. Civ. Code § 1754. Moreover,

defendants fail to show that they, as loan servicing agents, fall

outside the ambit of “services” as defined under the CLRA. The

CLRA defines “services” as “work, labor, and services for other

than a commercial or business use, including services furnished

in connection with the sale or repair of goods.” Cal. Civ. Code

§ 1754. Additionally, the CLRA specifically states that its

provisions “shall be liberally construed and applied to promote

its underlying purpose . . . to protect consumers against unfair

and deceptive business practices . . . and provide efficient and

economical procedures to secure such protection.” Cal. Civ. Code

§ 1760.

Thus, the court finds that plaintiff has sufficiently stated

a claim against defendants under the CLRA for alleged

misrepresentations in the consumer lending transaction. 

Defendants’ motion to dismiss the plaintiff’s CLRA claim is

accordingly DENIED. 

E. FDCPA

Plaintiff alleges defendants violated the FDCPA in their

attempts to collect a consumer debt plaintiff owed. Plaintiff’s

claim cannot stand, however, because defendants do not fall under

the purview of the FDCPA.

The FDCPA defines a “debt collector” as “any person . . .

who regularly collects or attempts to collect, directly or

indirectly, debts owed or due or asserted to be owed or due to

another.” 15 U.S.C. § 1692a(6). The FDCPA further provides that

the term “debt collector” does not include “any person collecting

or attempting to collect any debt owed or due or asserted to be

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owed or due another to the extent such activity . . . concerns a

debt which was not in default at the time it was obtained by such

person.” Id. at § 1692a(6)(F); see also Barber v. Natl Bank of

Alaska, 815 P.2d 857, 860-61 (Alaska 1991) (holding that FDCPA’s

definition of “debt collector” does not encompass collection of

mortgage debt or mortgage service companies servicing debts that

were not in default when servicing commenced). In Schlosser v.

Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003), the

court stated:

[F]or purposes of applying the [FDCPA] to a particular

debt . . . debt collector and creditor are mutually

exclusive. If the one who acquired the debt continues

to service it, it is acting much like the original

creditor that created the debt. On the other hand, if

it simply acquires the debt for collection, it is

acting more like a debt collector.

Defendants request that the court take judicial notice of

the Corporation Assignment of Deed of Trust (Ex. B to RJN), and

the court grants said request. This document establishes that on

September 10, 2001, New Century assigned the interest in the

property to JP Morgan, as trustee, under a pooling and servicing

agreement. Subsequently, JP Morgan, as trustee, continued to

service the loan through its agent, Litton. The loan, thus, was

not in default when assigned to defendants.

Accordingly, plaintiff has failed to show that defendants

were “debt collectors” under the FDCPA. For this reason,

defendants’ motion to dismiss plaintiff’s claim under the FDCPA

is GRANTED.

CONCLUSION

For the foregoing reasons, defendants’ motion to dismiss as

to plaintiff’s claims for violations of TILA, RESPA, and CLRA is

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DENIED. Defendants’ motion to dismiss as to plaintiff’s claims

for breach of contract, wrongful foreclosure, FDCPA violations,

and an injunction is GRANTED with prejudice. Regarding

plaintiff’s RFDCPA claim, defendants’ motion to dismiss is

GRANTED without prejudice; because plaintiff has demonstrated the

potential ability to plead sufficient facts under the RFDCPA

against defendants, plaintiff is granted fifteen (15) days from

the date of this order to file a first amended complaint in

accordance with this order. Defendants are granted thirty (30)

days from the date of service of plaintiff’s first amended

complaint to file a response thereto.

IT IS SO ORDERED.

DATED: September 23, 2005

 

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

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