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Shelley v. Quality Loan Service Corp.

June 17, 2009

RICHARD SHELLEY PLAINTIFF,
v.
QUALITY LOAN SERVICE CORP., FREMONT INVESTMENT & LOAN, LITTON LOAN SERVICING, LLP, DEFENDANTS.



The opinion of the court was delivered by: Hon. Carmac J. Carney

[PROPOSED] ORDER GRANTING LITTON LOAN SERVICING, LP'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED (FRCP 12(b)(6))

Complaint filed: March 9, 2009

Defendant Litton Loan Servicing, L.P. ("Litton") seeks to dismiss plaintiff Richard Shelley's complaint on the basis that the allegations in the complaint fail to state a claim upon which relief can be granted. This Court considered Litton's Fed. R. Civ. P. 12(b)(6) motion to dismiss, Mr. Shelley's notice of non-opposition to Litton's motion, Litton's request for judicial notice, and the oral arguments of the parties at the June 15, 2009 hearing. For the reasons discussed below, this Court GRANTS Litton's motion to dismiss without leave to amend and DISMISSES this action with prejudice.

I. FACTUAL BACKGROUND

In or about May 2006, Mr. Shelley refinanced his property, located at 6721 Tillamook Avenue, Westminster, CA 92683 (the "Property"), by borrowing $273,000 (the "Loan") from Fremont Investment & Loan ("Fremont"). See Compl., ¶¶ 9-11. The Loan was secured by a deed of trust recorded on the Property. See Request for Judicial Notice ("RJN"), Ex. A (Deed of Trust). On or about July 10, 2008, Fremont allegedly assigned the Loan to Litton. See Compl., ¶ 14. Mr. Shelley fell behind in his mortgage payments, and on November 7, 2008, a notice of default and election to sell under deed of trust was recorded. See RJN, Ex. B (Notice of Default and Election to Sell under Deed of Trust). Mr. Shelley did not bring his loan account current, and on February 19, 2009, a notice of trustee's sale was recorded, setting the trustee's sale for March 11, 2009. See Compl., ¶ 15; RJN, Ex. C (Notice of Trustee's Sale).

Mr. Shelley now claims that during the course of the Loan transaction, Fremont failed to deliver to him two proper copies of a notice of the right to rescind. See Compl., ¶ 17. Mr. Shelley further claims that the disclosure statement issued did not include $6,485.00 in broker/application/processing fees, improperly disclosed the amount financed, and improperly calculated the annual percentage rate. Id., ¶¶ 17, 18.

Mr. Shelley sent Litton a letter on November 26, 2008 attempting to rescind the Loan. Id., ¶ 22. Mr. Shelley alleges that Litton has failed to return any money paid or terminate its security interest as required by 15 U.S.C. § 1635(b); Regulation Z §§ 226.15(d)(3), 226.23(d)(3). Id., ¶¶ 25, 26. Mr. Shelley, however, did not offer to tender the amount due under the Loan as required by the Truth in Lending Act ("TILA").

II. DISCUSSION

A. Pleading And Motion To Dismiss Standard

Under Federal Rules of Civil Procedure, Rule 8(a), to avoid dismissal, a complaint must include "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Co. v. Twombly, 550 U.S. 544, 547 (2007) ("Twombly"). Stated differently, a plaintiff must plead sufficient facts "to provide the 'grounds' of his 'entitle[ment] to relief,' [which] requires more than labels and conclusions, and [for which] a formulaic recitation of the elements of a cause of action will not do." Id. at 555 (citation omitted). Thus, a complaint cannot simply "le[ave] open the possibility that a plaintiff might later establish some 'set of undisclosed facts' to support recovery." Id. at 561 (citation omitted). Rather, the facts set forth in the complaint must be sufficient to "nudge the [ ] claims across the line from conceivable to plausible." Id. at 570.

A motion to dismiss tests the legal sufficiency of the claims alleged in the complaint. Cairns v. Franklin Mint Co., 24 F.Supp.2d 1013, 1023 (C.D. Cal. 1998). A claim is properly dismissed for "lack of a cognizable legal theory," "absence of sufficient facts alleged under a cognizable legal theory," or seeking remedies to which plaintiff is not entitled as a matter of law. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988); King v. California, 784 F.2d 910, 913 (9th Cir. 1986).

Although facts properly alleged must be construed most favorably to plaintiff, "conclusory allegations of law and unwarranted inferences are not sufficient to defeat a motion to dismiss." Associated Gen. Contractors v. Metro. Water Dist., 159 F.3d 1178, 1181 (9th Cir.) (citation omitted). "[T]he court is not required to accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994).

In the complaint, Mr. Shelley alleges a single cause of action, violation of TILA for rescission and damages -- which cannot ...


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