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Santana v. First NLC Financial Services

June 11, 2009


The opinion of the court was delivered by: Hon. Jeffrey T. Miller United States District Judge


Defendant Saxon Mortgage Services, Inc. ("Saxon") moves for judgment on the pleadings. Plaintiffs Susan Santana and Huri Moreno oppose the motion. Defendants First NLC Financial Services, LLC ("NLC Financial") and American Capital Financial Services, Inc. ("ACFS") have yet to appear in this action and did not file responses to the motion. Pursuant to Local Rule 7.1(d)(1), this matter is appropriate for decision without oral argument. For the reasons set forth below, the motion for judgment on the pleadings is granted.


Plaintiffs commenced this federal question action on December 2, 2008 by filing a complaint for rescission and for damages under the Truth in Lending Act ("TILA") and Home Ownership and Equity Protection Act ("HOEPA"). Defendant NLC Financial is authorized to conduct consumer loan operations in California, (Compl. ¶6), and is the lender of the underlying disputed mortgage transaction. Defendant ACFS is the loan broker for Plaintiffs in this action, and Defendant Saxon the loan servicer. (Compl. ¶7).

Prior to entering into the underlying mortgage transaction, Plaintiffs' home was subject to a mortgage with an unpaid balance of $269,012.40, an interest rate of 5.99%, and monthly payments of $1,292. (Compl. ¶13). In June 2006 a broker from ACFS contacted Plaintiff Santana with an offer to refinance her home. Even though Plaintiff Moreno did not live at the home and informed ACFS that he would not occupy nor make any loan payments, (Compl. ¶16), ACFS requested that he co-sign for the loan, which he did. On September 29, 2006, Plaintiffs borrowed an additional $20,704 and, after points, fees and property taxes, had a new loan in the principal amount of $306,000, a disclosed interest rate of 12.99%, and payments of $2,360.37 per month for 24 months, $3,075.80 for six months, $3,443.38 for six months, $3,472.94 for 323 months and a balloon payment of $230,493.45 on November 1, 2036. (Compl. ¶¶20, 21). Plaintiffs allege that they provided NLC with notice of rescission on July 10, 2008 and that NLC has not responded to its notice of rescission. (Compl. ¶¶36, 37).

Based upon the above generally described conduct, Plaintiffs seek to rescind the contract and prosecute their claims for damages under TILA, HOEPA, and Cal.Bus. and Prof. Code §17200, et seq. Saxon now moves for judgment on the pleadings on each claim. Plaintiffs oppose the motion.


Legal Standards

A Rule 12(c) motion challenges the legal sufficiency of an opposing party's pleadings. Fed.R.Civ.P. 12(c). Like a Rule 12(b)(6) motion, the court must assume the truthfulness of the material facts alleged in the complaint and all inferences reasonably drawn from the allegations must be construed in favor or the responding party. See General Conference Corp. of Seventh-Day Adventists v. Seventh-Day Adventist Congregational Church, 887 F.2d 228, 230 (9th Cir. 1989); Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1990). Defendants are not entitled to judgment on the pleadings if the complaint raises issues of fact, which, if proved would support the Plaintiffs' legal theories. See id.

For purposes of this motion, courts should grant 12(b)(6) relief only where a plaintiff's complaint lacks a "cognizable legal theory" or sufficient facts to support a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). Courts should dismiss a complaint for failure to state a claim when the factual allegations are insufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp v. Twombly, __550 U.S. __, 127 S.Ct. 1955 (2007) (the complaint's allegations must "plausibly suggest[]" that the pleader is entitled to relief); Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009) (under Rule 8(a), well-pleaded facts must do more than permit the court to infer the mere possibility of misconduct). The defect must appear on the face of the complaint itself. Thus, courts may not consider extraneous material in testing its legal adequacy. Levine v. Diamanthuset, Inc., 950 F.2d 1478, 1482 (9th Cir. 1991). The courts may, however, consider material properly submitted as part of the complaint. Hal Roach Studios, Inc. v. Richard Feiner and Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1989).

Finally, courts must construe the complaint in the light most favorable to the plaintiff. Concha v. London, 62 F.3d 1493, 1500 (9th Cir. 1995), cert. dismissed, 517 U.S. 1183 (1996). Accordingly, courts must accept as true all material allegations in the complaint, as well as reasonable inferences to be drawn from them. Holden v. Hagopian, 978 F.2d 1115, 1118 (9th Cir. 1992). However, conclusory allegations of law and unwarranted inferences are insufficient to defeat a Rule 12(b)(6) motion. In Re Syntex Corp. Sec. Litig., 95 F.3d 922, 926 (9th Cir. 1996).

The Motion

The HOEPA and TILA Claims

Saxon argues that Plaintiffs fail to state a claim under either HOEPA or TILA for failure to adequately disclose the Annual Percentage Rate ("APR") because the disclosed interest rate is less than the triggering amount required for application of these statutes. The APR trigger for purposes of ...

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