Curtis v. Option One Mortgage Corp., No. 1:2009cv01982 - Document 38 (E.D. Cal. 2010)
Court Description: ORDER GRANTING 27 Motion to Dismiss and 26 Motion to Dismiss; ORDERED that the complaint is DISMISSED WITHOUT PREJUDICE, signed by Chief Judge Anthony W. Ishii on 07/21/2010. CASE CLOSED (Martin, S)
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Curtis v. Option One Mortgage Corp. Doc. 38 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, and ) DOES 1 though 50 inclusive, ) ) Defendant. ) ____________________________________) DEBORAH CURTIS, an individual, 9 10 11 12 13 14 1:09-CV-1982 AWI SMS ORDER GRANTING DEFENDANT’S MOTION TO DISMISS (Documents #26 & #27) 15 16 BACKGROUND 17 On July 22, 2009, Plaintiff filed a complaint in the Superior Court of the State of 18 California, County of Stanislaus. On November 10, 2009, Defendant removed the complaint to 19 the Eastern District of California, Fresno Division, because this court has federal question 20 jurisdiction over the complaint pursuant to 28 U.S.C. § 1331. On April 28, 2010, the court 21 dismissed the complaint with leave to amend the complaint’s TILA rescission claim. The court 22 found that to state a TILA rescission claim, Plaintiff needed to allege in the complaint that she is 23 financially capable of tendering the loan proceeds. 24 On May 10, 2010, Plaintiff filed a first amended complaint (“complaint”). The 25 complaint alleges a violation of TILA and seeks rescission. The complaint alleges that: 26 “Plaintiff is fully able and willing to tender performance of her obligations by tendering the 27 subject properties as required under 15 U.S.C. § 1635(b).” 28 Dockets.Justia.com 1 On May 20, 2010, American Home Mortgage Servicing, Inc. filed a motion to dismiss.1 2 On May 21, 2010, Option One Mortgage Corporation f/k/a/ Option One Mortgage Corporation 3 filed a motion to dismiss. Defendants contend that the complaint still does not allege Plaintiff’s 4 ability to tender because the complaint does not allege that Plaintiff is capable of tendering loan’s 5 proceeds. 6 On June 3, 2010 and June 9, 2010, Plaintiff filed oppositions to the motions to dismiss. 7 Plaintiff contends that because the complaint states she is capable and willing to tender the 8 “properties”, nothing more is required under TILA. 9 10 11 Defendants filed reply briefs. Defendants contend that Plaintiff must allege her financial ability to return the net loan proceeds received, and not the properties securing the loans. On June 25, 2010, the court reviewed the pending motions to dismiss. The court found 12 that a definition of the term “property”, as used in the complaint, is necessary for the court to 13 resolve the pending motions to dismiss. 14 Plaintiff is referring to the real properties that secure the loan or referring to the loan proceeds 15 Plaintiff received from Defendants. The court ordered Plaintiff to file an amendment to the 16 complaint that includes her definition of the term “properties” as used in the complaint. 17 The court noted that it was unclear if by “property” On July 2, 2010, Plaintiff filed a brief defining the meaning of “properties” as used in the 18 complaint. Plaintiff states that the word “properties” as used in the complaint and opposition 19 briefs refers to the real properties that secure the loans, which are the real properties located at 20 2585 Carriage Court, Turlock, County of Stanislaus, California and 1634 Arlington Court, 21 Turlock, County of Stanislaus, California. 22 23 LEGAL STANDARD Under Rule 12(b)(6) of the Federal Rules of Civil Procedure a claim may be dismissed 24 because of the plaintiff’s “failure to state a claim upon which relief can be granted.” Fed. R. Civ. 25 1 27 While not originally named as a Defendant in this action , on July 2, 2010 Plaintiff filed an amendment to the complaint that names American Home Mortgage Servicing, Inc. in place of Doe 1. 28 2 26 1 P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal 2 theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. 3 Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 4 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all of the complaint’s material 5 allegations of fact are taken as true, and the facts are construed in the light most favorable to the 6 non-moving party. Marceau v. Balckfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo 7 v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). The court must also assume that general 8 allegations embrace the necessary, specific facts to support the claim. Smith v. Pacific Prop. and 9 Dev. Corp., 358 F.3d 1097, 1106 (9th Cir. 2004). However, the court is not required “to accept as 10 true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable 11 inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. 12 Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Although legal conclusions may 13 provide the framework of a complaint, they are not accepted as true and “[t]hreadbare recitals of 14 elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft 15 v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. Fox Family Worldwide, Inc., 328 16 F.3d 1136, 1139 (9th Cir. 2003). As the Supreme Court has explained: 17 18 19 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). 20 21 Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, “a complaint must contain 22 sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” 23 Iqbal, 129 S.Ct. at 1949. “A claim has facial plausibility when the plaintiff pleads factual content 24 that allows the court draw the reasonable inference that the defendant is liable for the misconduct 25 alleged.” Iqbal, 129 S.Ct. at 1949. 26 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 27 28 3 1 2 3 4 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. 5 6 Iqbal, 129 S.Ct. at 1949-50. “In sum, for a complaint to survive a motion to dismiss, the non7 conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly 8 suggestive of a claim entitling the plaintiff to relief.” Moss v. United States Secret Service, 572 9 F.3d 962, 969 (9th Cir. 2009). 10 ALLEGED FACTS 11 This action concerns properties located at 2585 Carriage Court, Turlock, and 1634 12 Arlington Court, Turlock, both of which are located in the County of Stanislaus, State of 13 California. 14 The complaint alleges that on or about November 2006, Plaintiff approached Defendant in 15 regards to refinancing the property at 1634 Arlington Court, Turlock. Defendant represented it 16 could provide a fixed rate loan with low monthly payments based upon Plaintiff’s income. 17 Plaintiff agreed to refinance 1634 Arlington Court, Turlock. 18 The complaint alleges that during the loan process, Defendant deceptively and fraudulently 19 understated the Annual Percentage Rate (APR) by 2.358%, the finance charge and total payments 20 by $315,633.03 and the payments schedule listed three payment changes instead of six payment 21 changes. The complaint alleges that Plaintiff’s income was falsified and the property value 22 grossly overstated. The complaint alleges that “on or about December 20, 2009 [sic.], unaware of 23 Defendant’s deceptive and fraudulent actions, Plaintiff executed the refinance.” 24 The complaint alleges that, less than a month later, Defendant approached Plaintiff about 25 refinancing a second property, 2585 Carriage Court, Turlock, to be used as Plaintiff’s primary 26 residence. The complaint alleges that since Plaintiff was unaware of Defendant’s deception and 27 28 4 1 fraudulent actions regarding the first refinance, Plaintiff agreed to refinance 2585 Carriage Court, 2 Turlock. 3 The complaint alleges that Defendant deceptively and fraudulently understated the Annual 4 Percentage Rate by .252%, the finance charge and total payments by $147,309.67, and the 5 payments schedule misstated Plaintiff’s payment amounts. In addition, the complaint alleges 6 Plaintiff’s income was falsified, and the property value grossly overstated. 7 The complaint alleges on or about February 1, 2007, unaware of Defendant’s deceptive 8 and fraudulent actions, Plaintiff executed the refinance. 9 The complaint alleges that on or about October 2008, in attempting to modify the 10 refinance loans, Plaintiff discovered that Defendant had under disclosed Plaintiff’s APR and 11 financed an amount in a blatant violation of the Federal Truth in Lending Act (TILA). 12 The complaint alleges that Plaintiff brought this discrepancy to Defendant’s attention in an 13 attempt to modify the loans instead of having to institute her right to rescission. The complaint 14 alleges Defendant refused to modify the loans with more favorable terms. 15 The complaint alleges that “Plaintiff is fully able and willing to tender performance of her 16 obligations by tendering the subject properties as required under 15 U.S.C. § 1635.” Plaintiff 17 states that by “property” she is referring to the real properties that secure the loans. 18 19 DISCUSSION Plaintiff contends that Defendants violated TILA by understating Plaintiff’s APR and by 20 understating Plaintiff’s finance charges on the loan. Plaintiff contends that she now exercises her 21 right to rescission pursuant to 15 U.S.C.§ 1635(b) due to Defendants’ breach. The complaint 22 alleges that:“Plaintiff is fully able and willing to tender performance of her obligations by 23 tendering the subject peroperties as required under 15 U.S.C. § 1635(b). 24 TILA “requires creditors to provide borrowers with clear and accurate disclosures of terms 25 dealing with things like finance charges, annual percentage rates of interest, and the borrower’s 26 rights.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). TILA also requires creditors to 27 28 5 1 “clearly and conspicuously disclose” borrowers’ rights to rescind a home mortgage loan in 2 accordance with regulations of the Federal Reserve Board. Jones v. E*Trade Mortg. Corp., 397 3 F.3d 810, 812 (9th Cir. 2005). The purpose of rescission under TILA is to return both parties to 4 the status quo. Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9th Cir. 2003). Title 15 5 U.S.C. § 1635(b) provides that: 6 7 8 9 10 11 12 13 14 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. 15 15 U.S.C. § 1635(b) (emphasis added). 16 The Ninth Circuit has held that “in applying TILA, ‘a trial judge ha[s] the discretion to 17 condition rescission on tender by the borrower of the property he had received from the lender.’” 18 Yamamoto, 329 F.3d at 1171. This court has found that Plaintiff cannot state a claim for 19 rescission under TILA unless she alleges that she is financially capable of tendering the loans 20 proceeds. See, e.g,, Gonzalez v. First Franklin Loan Services, 2010 WL 144862, *5 (E.D.Cal. 21 2010); Avina v. BNC Mortg., 2009 WL 5215751, *2 (N.D.Cal. 2009); Farmer v. Countrywide 22 Financial Corp., 2009 WL 1530973, at *5 (C.D. Cal. 2009); Pagtalunan v. Reunion Mortgage Inc., 23 2009 WL 961995, at *3 (N.D. Cal. 2009); Garza v. American Home Mortg., 2009 WL 188604, at 24 *5 (E.D. Cal. 2009). 25 Defendants contend that the complaint is subject to dismissal because Plaintiff has still not 26 alleged she is financially capable of tendering the loans proceeds. In response, Plaintiff contends 27 28 6 1 that she has stated a claim under Section 1625(b) because she is able and willing to tender the 2 properties. Plaintiff admits that by “properties” she is referring to the real property that secures 3 the loans. Thus, the issue is whether tendering the real property that secure loans satisfies Section 4 1625(b). 5 Cases discussing what must be tendered pursuant to Section 1625(b) have specifically 6 referred to a plaintiff’s need to allege an ability to tender loan proceeds. See Almunir v. Aurora 7 Loan Service, LLC, 2010 WL 2106278, at *4 (E.D.Cal. 2010). “Property” as used in Section 8 1625(b) refers to whatever was received from the defendants. See Yamamoto, 329 F.3d at 1171 9 (stating borrower must tender property he received from lender). For example, in Semar v. Platte 10 Valley Federal Sav. & Loan Ass'n, 791 F.2d 699 (9th Cir. 1986), the plaintiff received a monetary 11 loan from the defendants. When discussing rescission under Section 1625(b), the Ninth Circuit 12 stated that upon “rescission, the security interest is dissolved and the borrower returns ‘the 13 property’ -in this case the loan proceeds- to the lender.” Semar, 791 F.2d at 705. Thus, in 14 Semar, the Ninth Circuit defined “property” as used in Section 1625(b) to be the loan proceeds 15 and not the real property that may secure a loan. 16 In addition, the language of Section 1635(b) implies that the term “property” is whatever 17 the obligor received from the creditor. Section 1635(b) requires the obligor to tender the 18 property and requires the creditor to take any action necessary to reflect the termination of any 19 security interest created under the transaction. Because the real property secures the loan but is 20 not the property actually received from Defendants, Plaintiff must tender what she actually 21 received – the loan proceeds – and Defendants must take any actions necessary to reflect the 22 termination of the security interest. The security interest are the deeds of trust on the real 23 properties. 24 Plaintiff must return to Defendants the property she received. In this action, the property 25 Plaintiff received is the loan proceeds and not the real property, or anything else, that secures the 26 loans. Plaintiff has alleged her willingness to provide Defendants with only the real property 27 28 7 1 securing her loan. However, this is not what Section 1635(b) requires. Section 1635(b) requires 2 Plaintiff to return the loans’ proceeds. Plaintiff’s repeated failure to allege an ability to return the 3 loans’ proceeds requires the court to find Plaintiff is unable or unwilling to return the loan 4 proceeds. As such, Plaintiff has not alleged she is financially capable of tendering the property. 5 Thus, Plaintiff’s TILA recession claim, brought under Section 1625(b), must be dismissed.2 6 7 ORDER Accordingly, Defendants’ motions to dismiss the complaint are GRANTED, the complaint 8 is DISMISSED without prejudice, and the Clerk of the Court is DIRECTED to close this action. 9 10 IT IS SO ORDERED. 11 Dated: 12 0m8i78 July 21, 2010 CHIEF UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 2 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 an amended complaint and has still not provided the necessary allegations. Thus, no further leave to amend will be given. 28 8 25 26
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