Deborah Curtis v. American Home Mortgage Servicing Inc.,, No. 1:2009cv01608 - Document 56 (E.D. Cal. 2010)
Court Description: MEMORANDUM OPINION and ORDER GRANTING Defendants' Motion to Dismiss 41 , 45 , signed by Chief Judge Anthony W. Ishii on 7/21/10: Defendants' motions to dismiss the complaint are GRANTED, the complaint is DISMISSED without prejudice, and the Clerk of the Court is DIRECTED to close this action. (CASE CLOSED) (Hellings, J)
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Deborah Curtis v. American Home Mortgage Servicing Inc., Doc. 56 1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT FOR THE 6 EASTERN DISTRICT OF CALIFORNIA 7 8 ) ) Plaintiff, ) v. ) ) OPTION ONE MORTGAGE CORP., a ) suspended California corporation, ) AMERICAN HOME MORTGAGE ) SERVICING, INC., a Delaware ) corporation, and DOES 1 though 50 ) inclusive, ) ) Defendants. ) ____________________________________) DEBORAH CURTIS, an individual, 9 10 11 12 13 14 15 1:09-CV-1608 AWI SMS MEMORANDUM OPINION AND ORDER GRANTING DEFENDANTS MOTION TO DISMISS (Documents #41 & #45) 16 17 18 BACKGROUND On November 19, 2009, Plaintiff filed an amended complaint. On February 18, 2010, 19 the court granted Defendants motions to dismiss the amended complaint, and the court dismissed 20 the complaint with leave to amend the complaint s Federal Truth in Lending Act (TILA) 21 rescission claim. The court found that to state a TILA rescission claim, Plaintiff needed to 22 allege in the complaint that she is financially capable of tendering the loan proceeds. 23 24 25 On March 19, 2010, Plaintiff filed a second amended complaint ( complaint ). The complaint alleges a violation of TILA and seeks rescission. On April 1, 2010, Defendant Sand Canyon Corporation, sued as Option One Mortgage 26 Corporation, filed a motion to dismiss the complaint. On April 5, 2010, American Home 27 Mortgage Servicing Inc. filed a motion to dismiss. Both Defendants contend that the complaint 28 still does not allege Plaintiff s ability to tender because the complaint does not allege that Dockets.Justia.com 1 2 Plaintiff is capable of tendering the loan s proceeds. On April 14, 2010, Plaintiff filed oppositions to Defendants motions. Plaintiff contends 3 that the complaint states she is capable and willing to tender the subject property and nothing 4 more is required under TILA. 5 On May 3, 2010 and May 10, 2010, Defendants filed reply briefs. Defendants argue that 6 Plaintiff must allege her financial ability to return the loan proceeds and not the property securing 7 the loan. 8 9 On June 22, 2010, the court reviewed the pending motions to dismiss. The court found that a definition of the term property , as used in the complaint, is necessary for the court to 10 resolve the pending motions to dismiss. 11 Plaintiff is referring to the real property that secures the loan or referring to the loan proceeds 12 Plaintiff received from Defendants. The court ordered Plaintiff to file an amendment to the 13 complaint that includes her definition of the term property as used in the complaint. 14 The court noted that it was unclear if by property On June 30, 2010, Plaintiff filed a brief defining the meaning of property as used in the 15 complaint. Plaintiff states that the word property as used in the complaint and opposition 16 briefs refers to the real property that secures the loan, which is the real property located at 3522 17 E. Stewart Court, Visalia, California. 18 19 LEGAL STANDARD Under Rule 12(b)(6) of the Federal Rules of Civil Procedure a claim may be dismissed 20 because of the plaintiff s failure to state a claim upon which relief can be granted. Fed. R. Civ. 21 P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal 22 theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. 23 Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 24 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all of the complaint s material 25 allegations of fact are taken as true, and the facts are construed in the light most favorable to the 26 non-moving party. Marceau v. Balckfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo 27 28 2 1 v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). The court must also assume that general 2 allegations embrace the necessary, specific facts to support the claim. Smith v. Pacific Prop. and 3 Dev. Corp., 358 F.3d 1097, 1106 (9th Cir. 2004). However, the court is not required to accept as 4 true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 5 inferences. In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. 6 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Although legal conclusions may 7 provide the framework of a complaint, they are not accepted as true and [t]hreadbare recitals of 8 elements of a cause of action, supported by mere conclusory statements, do not suffice. Ashcroft 9 v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. Fox Family Worldwide, Inc., 328 10 F.3d 1136, 1139 (9th Cir. 2003). As the Supreme Court has explained: 11 12 13 While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact). 14 15 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, a complaint must contain 16 sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. 17 Iqbal, 129 S.Ct. at 1949. A claim has facial plausibility when the plaintiff pleads factual content 18 that allows the court draw the reasonable inference that the defendant is liable for the misconduct 19 alleged. Iqbal, 129 S.Ct. at 1949. 20 21 22 23 24 The plausibility standard is not akin to a probability requirement, but it asks more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a defendant s liability, it stops short of the line between possibility and plausibility of entitlement to relief. ... Determining whether a complaint states a plausible claim for relief will . . . be a context specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged but it has not shown that the pleader is entitled to relief. 25 Iqbal, 129 S.Ct. at 1949-50. In sum, for a complaint to survive a motion to dismiss, the non26 conclusory factual content, and reasonable inferences from that content, must be plausibly 27 28 3 1 suggestive of a claim entitling the plaintiff to relief. Moss v. United States Secret Service, 572 2 F.3d 962, 969 (9th Cir. 2009). 3 4 ALLEGED FACTS The complaint alleges that on or about November 2006, Plaintiff approached Defendants 5 in regards to refinancing the property located at 3522 E. Stewart Court, Visalia, in the County of 6 Tulare, State of California. Defendants represented they could provide a fixed rate loan with low 7 monthly payments based upon Plaintiff s income. Plaintiff agreed to refinance the property at 8 3522 E. Stewart Court, Visalia. 9 The complaint alleges that during the loan process, Defendant deceptively and fraudulently 10 understated the Annual Percentage Rate (APR) by 3.185% and understated the finance charge and 11 total payments by $279,617.69, and the payment schedule provided by Defendants listed three 12 payment changes instead of six payment changes. The complaint alleges that Plaintiff s income 13 was falsified and the property value grossly overstated. The complaint alleges that on or about 14 November 30, 2006, unaware of Defendants deceptive and fraudulent actions, Plaintiff executed 15 the loan. 16 The complaint alleges that on or about October 2008, in attempting to modify her loan, 17 Plaintiff discovered that Defendants had under disclosed Plaintiff s APR and financed an amount 18 in a blatant violation of the TILA. 19 The complaint alleges that Plaintiff brought this discrepancy to Defendants attention in an 20 attempt to modify the loan instead of having to institute her right to rescission. The complaint 21 alleges Defendants refused to modify the loan with more favorable terms. 22 The complaint alleges that Plaintiff is fully able and willing to tender performance of her 23 obligations by tendering the property as required under 15 U.S.C. § 1635. Plaintiff states that by 24 property she is referring to the real property that secures the loan, which is the property located 25 at 3522 E. Stewart Court, Visalia, California. 26 // 27 28 4 1 2 DISCUSSION Plaintiff contends that Defendants violated TILA by understating Plaintiff s APR and by 3 understating Plaintiff s finance charges on the loan. Plaintiff contends that she now exercises her 4 right to rescission pursuant to 15 U.S.C.§ 1635(b) due to Defendants breach. The complaint 5 alleges that: Plaintiff is fully able and willing to tender performance of her obligations by 6 tendering the property as required under 15 U.S.C. § 1635(b). 7 TILA requires creditors to provide borrowers with clear and accurate disclosures of terms 8 dealing with things like finance charges, annual percentage rates of interest, and the borrower s 9 rights. Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). TILA also requires creditors to 10 clearly and conspicuously disclose borrowers rights to rescind a home mortgage loan in 11 accordance with regulations of the Federal Reserve Board. Jones v. E*Trade Mortg. Corp., 397 12 F.3d 810, 812 (9th Cir. 2005). The purpose of rescission under TILA is to return both parties to 13 the status quo. Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003). Title 15 14 U.S.C. § 1635(b) provides that: 15 16 17 18 19 20 21 22 23 When an obligor exercises his right to rescind . . . .under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest money, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. Upon the performance of the creditor's obligations under this section, the obligor shall tender the property to the creditor, except that if return of the property in kind would be impracticable or inequitable, the obligor shall tender its reasonable value. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. If the creditor does not take possession of the property within 20 days after tender by the obligor, ownership of the property vests in the obligor without obligation on his part to pay for it. The procedures prescribed by this subsection shall apply except when otherwise ordered by a court. 24 15 U.S.C. § 1635(b) (emphasis added). 25 The Ninth Circuit has held that in applying TILA, a trial judge ha[s] the discretion to 26 condition rescission on tender by the borrower of the property he had received from the lender. 27 28 5 1 Yamamoto, 329 F.3d at 1171. This court has found that Plaintiff cannot state a claim for 2 rescission under TILA unless she alleges that she is financially capable of tendering the loan 3 proceeds. See, e.g,, Gonzalez v. First Franklin Loan Services, 2010 WL 144862, *5 (E.D.Cal. 4 2010); Avina v. BNC Mortg., 2009 WL 5215751, *2 (N.D.Cal. 2009); Farmer v. Countrywide 5 Financial Corp., 2009 WL 1530973, at *5 (C.D. Cal. 2009); Pagtalunan v. Reunion Mortgage Inc., 6 2009 WL 961995, at *3 (N.D. Cal. 2009); Garza v. American Home Mortg., 2009 WL 188604, at 7 *5 (E.D. Cal. 2009). 8 Defendants contend that the complaint is subject to dismissal because Plaintiff has still not 9 alleged she is financially capable of tendering the loan proceeds. In response, Plaintiff contends 10 that she has stated a claim under Section 1625(b) because she is able and willing to tender the 11 property . Plaintiff admits that by property she is referring to the real property that secures the 12 loan. Thus, the issue is whether tendering the real property securing a loan satisfies Section 13 1625(b). 14 Cases discussing what must be tendered pursuant to Section 1625(b) have specifically 15 referred to a plaintiff s need to allege an ability to tender loan proceeds. See Almunir v. Aurora 16 Loan Service, LLC, 2010 WL 2106278, at *4 (E.D.Cal. 2010). Property as used in Section 17 1625(b) refers to whatever was received from the defendants. See Yamamoto, 329 F.3d at 1171 18 (stating borrower must tender property he received from lender). For example, in Semar v. Platte 19 Valley Federal Sav. & Loan Ass'n, 791 F.2d 699 (9th Cir. 1986), the plaintiff received a monetary 20 loan from the defendants. When discussing rescission under Section 1625(b), the Ninth Circuit 21 stated that upon rescission, the security interest is dissolved and the borrower returns the 22 property -in this case the loan proceeds- to the lender. Semar, 791 F.2d at 705. Thus, in 23 Semar, the Ninth Circuit defined property as used in Section 1625(b) as the loan proceeds and 24 not the real property that may secure a loan. 25 In addition, the language of Section 1635(b) implies the term property is whatever the 26 obligor received from the creditor. Section 1635(b) requires the obligor to tender the property 27 28 6 1 and requires the creditor to take any action necessary to reflect the termination of any security 2 interest created under the transaction. Because the real property secures the loan but is not the 3 property actually received from Defendants, Plaintiff must tender what she actually received the 4 loan proceeds and Defendants must take any actions necessary to reflect the termination of the 5 security interest. The security interest is the deed of trust on the real property. 6 Plaintiff must return to Defendants the property she received. In this action, the property 7 Plaintiff received is the loan proceeds and not the real property, or anything else, that secures the 8 loan. Plaintiff has alleged her willingness to provide Defendants with only the real property 9 securing her loan. However, this is not what Section 1635(b) requires. Section 1635(b) requires 10 Plaintiff to return the loan proceeds. Plaintiff s repeated failure to allege an ability to return the 11 loan proceeds requires the court to find Plaintiff is unable or unwilling to return the loan proceeds. 12 As such, Plaintiff has not alleged she is financially capable of tendering the property. Thus, 13 Plaintiff s TILA recession claim, brought under Section 1625(b), must be dismissed.1 14 15 ORDER Accordingly, Defendants motions to dismiss the complaint are GRANTED, the complaint 16 is DISMISSED without prejudice, and the Clerk of the Court is DIRECTED to close this action. 17 18 IT IS SO ORDERED. 19 Dated: 20 0m8i78 July 21, 2010 CHIEF UNITED STATES DISTRICT JUDGE 21 22 23 24 1 27 The court recognizes that leave to amend should ordinarily be granted when the court finds that a complaint fails to state a claim. Chang v. Chen, 80 F.3d 1293, 1296 (9th Cir. 1996). However, leave to amend is not required if the court determines that the pleading could not possibly be cured by the allegation of other facts. Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir.2001). Here, Plaintiff has already filed a second amended complaint and has still not provided the necessary allegations. Thus, no further leave to amend will be given. 28 7 25 26
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