Concepcion v. Ygrene, Inc.

[7] 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA [10] MANUEL CONCEPCION, Case No. 19-cv-1465-BAS-MDD [11] Plaintiff, ORDER GRANTING MOTION 12 TO DISMISS 13 v. [ECF No. 27] 14 YGRENE, INC. et al., 15 Defendants. [17] 18 Plaintiff Manuel Concepcion sued six defendants alleging ten causes of action. 19 (First Amended Complaint, “FAC,” ECF No. 3.) As relevant here, Defendant Home 20 Energy Solutions, Inc. moves to dismiss various causes of action. (“Mot.,” ECF No. 21 27.) Plaintiff filed an opposition to the Motion, (“Opp’n,” ECF No. 28), to which 22 Defendant filed a reply, (“Reply,” ECF No. 32). The Court finds this Motion suitable 23 for determination on the papers and without oral argument. Civ. L. R. 7.1(d)(1). For 24 the reasons stated below, the Court GRANTS the Motion. 25 I. BACKGROUND 26 Plaintiff is an 83-year-old single, Hispanic male suffering from the early stages 27 of dementia. (FAC ¶ 11.) Plaintiff used to own and reside at a home in Oceanside, 1 to pay his mortgage. (Id. ¶ 11.b.) Therefore, his mortgage servicer modified his loan 2 to make his mortgage affordable. (Id. ¶ 11.a.) Plaintiff states he lost his home due 3 to the actions of Defendants, through “door to door solicitations peddling green 4 energy/home improvement and financing, namely Property Assessed Clean Energy 5 (PACE) financing.” (Id. ¶ 2.) 6 A brief summary of PACE financing is necessary. PACE financing “allows 7 property owners to finance the cost of energy or other eligible improvements on a 8 property and pay for those improvements by entering into a voluntary agreement to 9 place a special assessment on the property.” James Milano et al., Recent 10 Developments in Pace Financing, 74 Bus. Law. 519 (2019). Under the California 11 PACE program, “a local governmental entity enters into an agreement with a PACE 12 program administrator that facilitates financing of energy or other improvements on 13 local properties.” Id. The property owner purchases the improvements from a 14 contractor, and the program administrator provides funding for the purchase through 15 either the sale of municipal bonds or a private market financing source. Id. The 16 property owner “then repays the cost of the improvements by entering into a 17 voluntary contractual property assessment with the local government or the program 18 administrator.” Id. This gives rise to a lien, and the local government collects PACE 19 assessment payments through the county tax collector. Id. The obligation is “an 20 assessment against the property and not a personal obligation to the property owner.” 21 Id. PACE programs take an interest in the property that is senior to any mortgagees’ 22 interest. County of Sonoma v. Fed. Housing Fin. Agency, 710 F.3d 987, 988 (9th 23 Cir. 2013). 24 In 2016, a door-to-door salesperson “from Home Energy Solutions, aka 25 Clearview” came to Plaintiff’s home and “convinced him that he needed roof repairs 26 and that his house needed to be painted, and that a government program would take 27 care of it all.” (FAC ¶¶ 13, 43.) Plaintiff agreed to sign up because he was told that 1 qualified for the government program. (Id. ¶ 43.) But, in reality, Plaintiff alleges the 2 PACE loan raised his monthly mortgage payment to the point where he could not 3 pay it. (Id. ¶ 19.) Normally, PACE financing is secured by a tax lien on the property; 4 homeowners then repay the money as a special tax assessment. Plaintiff 5 acknowledges this in his complaint. (See id. ¶ 6 (“PACE . . . is structured as a 6 property tax assessment . . . [which] guarantees its repayment in virtually every 7 scenario, hence no consideration is given to the borrower’s finances or ability to 8 repay the loan.”).) But, he states in his case, his mortgage servicer was making his 9 tax payments. (Id. ¶ 7.) Plaintiff’s mortgage payment increased over time because 10 the mortgage servicer was advancing the property tax payments and charging 11 Plaintiff. (Id.) Plaintiff could not repay his servicer, so he was placed in default. 12 (Id.) Plaintiff received no energy savings from the home improvements. (Id. ¶ 52.) 13 The mortgage servicer eventually initiated foreclosure proceedings, Plaintiff lost his 14 home to foreclosure, and he is being evicted. (Id. ¶¶ 21–23.) Plaintiff sued multiple 15 Defendants, but, as relevant here, Plaintiff alleges that the salesman who convinced 16 Plaintiff he needed roof repairs works for Defendant Home Energy Services, who 17 does business as a general contractor and provides PACE funding to pay for its 18 services. (Id. ¶ 38.) 19 Plaintiff brings ten causes of action: (1) violation of the Truth in Lending Act; 20 (2) violation of the California Rosenthal Fair Debt Collections Practices Act; (3) 21 violation of the Fair Debt Collection Practices Act; (4) violation of the Real Estate 22 Settlement Procedures Act; (5) fraud/intentional misrepresentation; (6) 23 fraud/negligent misrepresentation; (7) violation of California Business and 24 Professions Code section 17200; (8) breach of implied covenant of good faith and 25 fair dealing; (9) breach of contract; and (10) elder financial abuse. Defendant moves 26 to dismiss the first, second, third, fourth, eighth, and ninth causes of action. 27 II. LEGAL STANDARD 1 that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal 2 quotation marks and citations omitted). “A claim has facial plausibility when the 3 plaintiff pleads factual content that allows the court to draw the reasonable inference 4 that the defendant is liable for the misconduct alleged.” Id. 5 A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil 6 Procedure tests the legal sufficiency of the claims asserted in the complaint. Fed. R. 7 Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The court 8 must accept all factual allegations pleaded in the complaint as true and must construe 9 them and draw all reasonable inferences from them in favor of the nonmoving party. 10 Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336 , 337–38 (9th Cir. 1996). To avoid a Rule 11 12(b)(6) dismissal, a complaint need not contain detailed factual allegations, rather, 12 it must plead “enough facts to state a claim to relief that is plausible on its face.” Bell 13 Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A Rule 12(b)(6) dismissal may 14 be based on either a ‘lack of a cognizable legal theory’ or ‘the absence of sufficient 15 facts alleged under a cognizable legal theory.’” Johnson v. Riverside Healthcare 16 Sys., LP, 534 F.3d 1116, 1121 (9th Cir. 2008) (quoting Balistreri v. Pacifica Police 17 Dep’t, 901 F.2d 696, 699 (9th Cir. 1990)). 18 III. ANALYSIS 19 A. Defendant’s Request for Judicial Notice 20 Defendant asks the Court to judicially notice five documents. (ECF No. 2721 2.) Plaintiff does not address the request, thus, the Court assumes Plaintiff does not 22 oppose it. Defendant first asks the Court to take judicial notice of the articles of 23 incorporation of Home Energy Solutions, Inc. and of Clearview Home 24 Improvements, Inc., as well as the fictitious business name statement of Clearview 25 Home Improvements. 26 The court may take judicial notice of public records in ruling on a Rule 27 12(b)(6) motion. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). The 1 public record. The fictitious business name statement is also a public, recorded 2 document. See Better Homes Realty, Inc. v. Watmore, 16-cv-1607-BEN-MDD, 2017 3 WL 14000065 , at *2 (S.D. Cal. Apr. 18, 2017) (finding a fictitious business name 4 statement to be a matter of public record and judicially noticeable). The Court takes 5 judicial notice of the documents. 6 Defendant next asks the Court to judicially notice a public website page 7 maintained by the Department of Consumer Affairs, Contractors State License 8 Board, reflecting that a business entity named “Clearview Home Improvements Inc., 9 dba Clearview Home Energy Solutions” held a State of California Contractor’s 10 License. As noted below, because Home Energy Solutions, Inc. and Clearview are 11 separate entities, the Court only considers allegations against and arguments of 12 dismissal by Home Energy Solutions. Thus, any information regarding Clearview’s 13 status is irrelevant and the Court declines to judicially notice the website. 14 Finally, Defendant asks the Court to judicially notice Senate Bill 838. Courts 15 may take judicial notice of legislative bills. California v. Infineon Techs. AG, 531 F. 16 Supp. 2d 1124, 1172 (N.D. Cal. 2007). The Court judicially notices the bill. 17 B. Analysis 18 It is first important to determine the identity of Defendant. From Plaintiff’s 19 perspective, Home Energy Solutions, Inc. and “Clearview” are one and the same. 20 But according to the documents the Court has judicially noticed, there are separate 21 articles of incorporation for Home Energy Solutions, Inc. and for Clearview Home 22 Improvements, Inc. (Exhibits 1 and 2 to ECF No. 27-2.) Clearview filed a public 23 statement indicating its fictitious business names are Clearview Construction and 24 Clearview Home Energy Solutions. (Exhibit 3 to ECF No. 27-2.) From these 25 documents, there is no apparent connection between Home Energy Solutions, Inc. 26 and the entity that Plaintiff generally calls “Clearview.” Plaintiff served Home 27 Energy Solutions, Inc., not any Clearview entity. (See ECF No. 5.) Although 1 entities, (Opp’n at 7–8), he has not alleged in his complaint how the two entities are 2 the same or even related. Therefore, the Court only considers the claims made 3 against Home Energy Solutions. 4 Turning to the merits of the allegations, Defendant first argues there is no 5 subject matter jurisdiction over this case. (Mot. at 14.) It is undisputed that Plaintiff 6 asserted federal causes of action, thus, federal question jurisdiction exists on the face 7 of the complaint. It appears that Defendant is arguing that because all of Plaintiff’s 8 federal claims fail for one reason or another, no federal question survives and there 9 is thus no subject matter jurisdiction over the remaining claims. Therefore, the Court 10 evaluates each contested claim. 11 1. Truth in Lending Act (“TILA”) Cause of Action 12 Defendant argues Plaintiff’s TILA claim fails for various reasons. First, 13 Defendant argues the claim is time barred. A one-year statute of limitations applies 14 to claims for TILA violations. 15 U.S.C. § 1640 (e).1 A TILA violation occurs, and 15 the statute of limitations begins to run, at the time the loan documents are signed. 16 King v. California, 784 F.2d 910, 915 (9th Cir. 1986). Plaintiff alleges this occurred 17 in March 2016. (FAC ¶ 43.) Plaintiff filed this lawsuit in 2019. It therefore appears 18 from the face of the complaint that the TILA claim is time barred. Plaintiff argues 19 the statute of limitations should be equitably tolled. (Opp’n at 15.) 20 “Equitable tolling is generally applied in situations ‘where the claimant has 21 actively pursued his judicial remedies by filing a defective pleading during the [23] 1 Plaintiff asserts, with no support or analysis, that TILA violations carry a three-year limitations 24 period. (Opp’n at 12.) Section 1640 provides that any action under this section must be brought within one year of the date of occurrence of the violation. It also provides that “[a]ny action under 25 this section with respect to any violation of section 1639, 1639b, or 1639c of this title may be brought . . . before the end of the 3-year period beginning on the date of the occurrence of the 26 violation.” Plaintiff does not allege a violation of section 1639, 1639b, or 1639c. (See FAC ¶ 71 (listing the sections of TILA which Plaintiff alleges were violated).) Thus, the one-year limitations [27] period applies. 1 statutory period, or where the complainant has been induced or tricked by his 2 adversary’s misconduct into allowing the filing deadline to pass.’” O’Donnell v. 3 Vencor, Inc., 465 F.3d 1063, 1068 (9th Cir. 2006). “Equitable tolling may be applied 4 if, despite all due diligence, a plaintiff is unable to obtain vital information bearing 5 on the existence of his claim.” Santa Maria v. Pac. Bell, 202 F.3d 1170, 1178 (9th 6 Cir. 2000), overruled on other grounds by Socop-Gonzalez v. INS, 272 F.3d 1176 , 7 1194–96 (9th Cir. 2001). “If a reasonable plaintiff would not have known of the 8 existence of a possible claim within the limitations period, then equitable tolling will 9 serve to extend the statute of limitations for filing suit until the plaintiff can gather 10 what information he needs.” Id. In the context of TILA, district courts “can evaluate 11 specific claims of fraudulent concealment and equitable tolling to determine if the 12 general [statute of limitations] rule would be unjust or frustrate the purpose of the 13 Act and adjust the limitations period accordingly.” King, 784 F.2d at 915 . 14 Plaintiff argues that at the time the salesman signed him up for PACE 15 financing, he did not understand that he would be obligated to pay any money, as he 16 was told he was receiving government funding. (Opp’n at 16.) The salesman used 17 his own computer to register Plaintiff for the transaction, and Plaintiff does not own 18 a computer. (Id.) Further, for the first 12 months, the loan was dormant and no 19 payments were due. (FAC ¶ 49.) Plaintiff received his first increased monthly 20 mortgage 13 months after the transaction occurred. (Opp’n at 17.)2 21 The Court finds it appropriate to toll the statute of limitations because at the 22 time Plaintiff signed the PACE documents, he alleges he was unaware he was 23 actually entering into a financial obligation. The statute of limitations should be 24 tolled until the time that Plaintiff “discover[ed] or had reasonable opportunity to [26] 2 These allegations are made generally in the complaint and more specifically in the opposition. [27] For purposes of judicial efficiency, the Court considers all of Plaintiff’s allegations for equitable 1 discover the fraud of nondisclosures that form the basis of the TILA action.” King, [2] 784 F.2d at 915 . Plaintiff alleges he did not understand he had to pay any money for 3 his new roof and home renovations until at least April 2017. But, even if the Court 4 tolls Plaintiff’s TILA claim until April 2017, his claim is untimely because he did 5 not file his complaint until 2019. The Court GRANTS the Motion to Dismiss this 6 claim. For the sake of completeness, the Court turns to Defendant’s second argument 7 for dismissal: that TILA does not apply to PACE financing. 8 In May 2018, Congress signed into law the Economic Growth, Regulatory 9 Relief, and Consumer Protection Act (“Growth Act”), Pub. L. No. 115-174, 132 Stat. 10 1296 (2018). Among other things, the Growth Act amended TILA to state that PACE 11 financing was to be subjected to ability-to-repay requirements, i.e., creditors may not 12 make a residential mortgage loan unless they “make[] a reasonable and good faith 13 determination based on verified and documented information that, at the time the 14 loan is consummated, the consumer has a reasonable ability to repay the loan.” Id.; 15 15 U.S.C. § 1639c(a)(1). 16 Plaintiff received PACE financing in 2016 prior to implementation of the 17 Growth Act. There is no evidence that prior to the Growth Act, PACE was subject 18 to TILA requirements, and there is no indication that the Growth Act is to be applied 19 retroactively. Therefore, Plaintiff has not sufficiently alleged that Defendant violated 20 TILA through the PACE financing. The Court DISMISSES this cause of action. If 21 Plaintiff believes he can sufficiently allege facts applying TILA to his case, he may 22 amend the cause of action to do so. 23 2. Fair Debt Collection Practices Act (“FDCPA”) and Rosenthal 24 Act Causes of Action 25 Plaintiff concedes that these two causes of action do not apply to Defendant. 26 (Opp’n at 18.) The Court therefore GRANTS the Motion to Dismiss them. [27] 1 3. Real Estate Settlement Procedures Act (“RESPA”) Cause of 2 Action 3 RESPA requires lenders and servicers to make certain communications to 4 consumers during the mortgage lending and modification process. See 12 U.S.C. 5 § 2601 et seq. Plaintiff alleges Defendants violated RESPA by failing to provide him 6 with a servicing statement as set forth in 12 U.S.C. § 2605 (a). (FAC ¶ 89.) He also 7 alleges that Defendants received money for referrals of services related to the 8 financing, charged Plaintiff for unnecessary services, and conspired to “up sell” him. 9 (Id. ¶ 90.)3 Plaintiff admits he “is not certain at this time exactly which Defendant 10 were [sic] actually the servicer(s) of the loan at any given time.” (Id. ¶ 88.) He 11 alleges Defendants violated RESPA through “the conspiratorial nature of the 12 misdeeds” and “Defendants’ general failure to properly advise Plaintiff as to the roles 13 and identities of the various entities that were handling financing at any given time.” 14 (Id.) 15 Section 2605(a) provides: “Each person who makes a federally related 16 mortgage loan shall disclose to each person who applies for the loan, at the time of 17 application for the loan, whether the servicing of the loan may be assigned, sold, or 18 transferred to any other person at any time while the loan is outstanding.” Subsection 19 (f) provides: “Whoever fails to comply with any provision of this section shall be 20 liable to the borrower for each such failure . . . .” 12 U.S.C. § 2605 (f). 21 Defendant first moves for dismissal of the RESPA claim because it is time22 barred. Actions brought pursuant to Section 2605 must be brought within three years 23 of the occurrence of the violation and actions brought pursuant to Sections 2607 or 24 2608 must be brought within one year of the occurrence of the violation. 12 U.S.C. 25 § 2614. Plaintiff argues the limitations period should be tolled. Generally, a RESPA 26 statutory limitations period may be equitably tolled. Merritt v. Countrywide Fin. [27] 1 Corp., 759 F.3d 1023, 1036 (9th Cir. 2014). As is true for TILA violations, RESPA 2 violations may be tolled “in the appropriate circumstances, . . . until the borrower 3 discovers or had reasonable opportunity to discover the violation.” Id. at 1040 4 (quoting King, 784 F.2d at 915 ). For the same reasons articulated above regarding 5 the tolling of the TILA statute of limitations, the Court finds it appropriate to toll the 6 RESPA limitations period until August 2017, when Plaintiff states he became aware 7 of the violation. Plaintiff filed his suit within three years of this date, thus, he has 8 sufficiently alleged his RESPA claim is timely. 9 Defendant next argues for dismissal of the RESPA claim because Plaintiff has 10 not alleged “the proper capacity of [it] and [the] contractor defendants and that their 11 actions fall within the scope of the federal statutory scheme.” (Mot. at 21.) The 12 Court understands Plaintiff’s argument that he is unsure of the role of each Defendant 13 at this time. However, Plaintiff does not allege that Defendant is a lender, and 14 Section 2605(a) applies only to those who “make[] a federally related mortgage 15 loan.” 12 U.S.C. § 2605 (a). Plaintiff has not sufficiently alleged that the RESPA 16 requirements apply to Defendant. 17 Finally, the Court notes that it is not clear whether PACE financing is 18 considered a loan or federally related mortgage for the purpose of compliance with 19 RESPA in the first place. The parties cite no authority, nor can the Court locate any, 20 discussing the applicability of RESPA to PACE financing. Accordingly, the Court 21 dismisses this cause of action without prejudice and encourages the parties to brief 22 the issue in the future. 23 4. Breach of Contract and Breach of Covenant of Good Faith 24 and Fair Dealing Causes of Action 25 Plaintiff states Defendant breached the agreement between them by failing to 26 provide him with an affordable loan given his income and age and failing to provide 27 him with a twenty-year repayment term per the terms of the written agreement. (FAC 1 improvements. (Id.) Defendant moves to dismiss this claim because Plaintiff did 2 not attach the contract or detail the parts of the contract that were breached. 3 Under California law, a claim for breach of contract premised on a written 4 agreement must provide the relevant terms thereof, either by quoting the contract 5 verbatim or attaching it to the complaint and incorporating it by reference. Otworth 6 v. S. Pac. Transp. Co., 166 Cal. App. 3d 452, 459 (1985). But “federal courts ‘have 7 generally recognized that relatively simple allegations will suffice to plead a breach 8 of contract claim even post-Twombly and Iqbal.’” Celebrity Chefs Tour, LLC v. 9 Macy’s, Inc., No. 13-CV-2714 JLS (KSC), 2014 WL 1664272 , at *4 (S.D. Cal. Apr. 10 25, 2014) (citing cases). 11 It appears that Plaintiff is alleging that a written agreement promised him “an 12 affordable loan” with a “20-year repayment term” and “energy savings [that would] 13 pay for themselves overtime.” He alleges that none of this occurred and he was 14 damaged as a result. Thus, he has alleged the specific terms of the written agreement 15 that were breached. Defendant’s argument that the subject contract actually “does 16 not contain any of [these] terms” is irrelevant, (see Mot. at 22) because the Court 17 accepts Plaintiff’s allegations as true at this stage, and Defendant did not provide the 18 Court with the contract. However, Defendant also argues that it (i.e., Home Energy 19 Solutions) is not a party to the contract, instead, Clearview contracted with Plaintiff. 20 (Id. at 15.) As noted above, Plaintiff pleads the entities as one and the same and does 21 not specify which entity contracted with him. Without naming the contracting party, 22 Plaintiff has not alleged a breach of contract claim. Therefore, the Court GRANTS 23 the Motion to Dismiss this claim with leave to amend so that Plaintiff may clearly 24 specify the parties to the contract and which terms were breached. 25 Next, every contract “imposes upon each party a duty of good faith and fair 26 dealing in its performance and its enforcement.” McClain v. Octagon Plaza, LLC, [27] 159 Cal. App. 4th 784, 796 (2008). Because Plaintiff fails to allege that a contract | ||he is unable to allege a breach of the duty of good faith and fair dealing that comes 2 ||as a part of that contract. The Court therefore GRANTS the Motion to Dismiss this 3 || cause of action. 4 ||IV. CONCLUSION 5 For the foregoing reasons, the Court GRANTS the Motion to Dismiss. 6 || Plaintiff's TILA and RESPA claims are dismissed with leave to amend to the extent 7 || Plaintiff can sufficiently allege these causes of action are timely and apply to PACE 8 ||financing. Plaintiff's breach of contract and breach of the covenant of good faith and 9 || fair dealing causes of action are also dismissed without prejudice. Plaintiff's FDCPA 10 |;and Rosenthal Act Causes of Action are dismissed with prejudice against this 11 || Defendant because Plaintiff admits they are inapplicable. 12 Plaintiff may file a second amended complaint on or before May 1, 2020. The 13 ||Court cautions Plaintiff that the amended complaint must be complete by itself 14 || without reference to his original pleading. Defendants not named and any claim not 15 ||re-alleged in his amended complaint will be considered waived. See Civ L.R. 15.1; 16 || Hal Roach Studios, Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1546 (9th Cir. 17 ||1989) (‘[A]n amended pleading supersedes the original.”); Lacey v. Maricopa 18 || County, 693 F.3d 896, 928 (9th Cir. 2012) (noting that claims dismissed with leave 19 ||\to amend which are not re-alleged in an amended pleading may be “considered 20 || waived if not repled”). 21 If Plaintiff fails to file an amended complaint or a motion requesting more time 22 || by May 1, 2020, Defendant Home Energy Solutions, Inc. will be dismissed from this 23 || case and the case will proceed against the remaining Defendants. 24 IT IS SO ORDERED. 25 f □ 26 || DATED: March 27, 2020 ( ill □□ □□ Ayphaads 27 United States District Judge