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Santos v. Countrywide Home Loans

August 14, 2009


The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge



Felipe Santos Jr. And Gemma Santos ("Plaintiffs") brought this action on May 21, 2009, against Countrywide Home Loans Inc. and Recontrust Company ("Defendants") alleging violations of the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et. seq., Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et. seq., California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 1700 et. seq., and seeking to quiet title on real property. This case arises from a mortgage transaction closed on December 21, 2005, against the property located at 12814 Montbatten Avenue, Bakersfield, CA 93313. Plaintiffs allege that Defendants unlawfully failed to provide Plaintiffs:

a. Good Faith Estimate; b. Promissory Note; c. Loan Application; d. HUD Brochures; e. Escrow Statements; F. Handbook on Adjustable Rate Mortgage; g. Adjustable Rate Rider(s); h. Variable Rate Disclosure; i. Business Affiliations Disclosure; j. Private Mortgage Insurance Disclosure; k. Broker's Arrangements; l. Disbursal Disclosures; m. Equal Credit Opportunity Act Disclosure; n. Fair Housing Act Disclosure; o. Privacy Disclosure; p. Patriot Act Disclosure; q. Appraisal Disclosure; r. Consumer Credit Score Disclosure; s. Hazard Insurance Disclosure; t. California Per Diem Interest Disclosure Complaint at 5-6. Based on these allegedly material omissions Plaintiffs request rescission of the mortgage transaction. Defendants filed this motion to dismiss on June 15, 2009.


A. Federal Rule of Civil Procedure 12(b)(6)

In reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court examines whether a complaint "contain[s] sufficient factual matter, accepted as true, 'to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The court must construe the pleading in the light most favorable to the party opposing the motion, and resolve all doubts in the pleader's favor. Hospital Bldg. Co. v. Rex Hospital Trustees, 425 U.S. 738, 740 (1976); Jenkins v. McKeithen, 395 U.S. 411, 421 (1969); Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003). In Ashcroft the Supreme Court affirmed the broad application of the "plausible" standard, announced in Twombly, for examining the sufficiency of pleadings under Federal Rule of Civil Procedure 8. Ashcroft 129 S.Ct. at 1953 (stating that the Court's decision in Twombly was based on "[the Court's] interpretation and application of Rule 8" and continuing that "[The Court's] decision in Twombly expounded the pleading standing standard for 'all civil actions'"). In applying the Twombly standard in Ashcroft the Court outlined a two step process for analyzing a complaint. Id. at 1950-51. First, a reviewing court identifies all legal conclusions "that are not entitled to the assumption of truth." Ashcroft 129 S.Ct. at 1949-51 (quoting Twombly, 550 U.S. at 555, parenthetically for the proposition that the Court "[is] not bound to accept as true a legal conclusion couched as a factual allegation"). Second, a court, "draw[ing] on its judicial experience and common sense", must determine in the specific context of the case whether the facts, if taken as true, establish a plausible claim for relief. Id. at 1950. A Rule 12(b)(6) dismissal can be based on either the failure to allege a cognizable legal theory or the failure to allege sufficient facts under a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990); Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.1984).

B. Leave to Amend

Rule 15(a) of the Federal Rules of Civil Procedure provides that leave to amend "shall be freely given when justice so requires. '[T]his mandate is to be heeded." Foman v. Davis, 371 U.S. 178, 182 (1962); Cal. Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1472 (9th Cir. 1987). "In exercising its discretion . . . a court must be guided by the underlying purpose of Rule 15 - to facilitate decision on the merits rather than on the pleadings or technicalities." Eldridge v. Block, 832 F.2d 1132, 1135 (9th Cir.1987) (citations omitted). "Thus, Rule 15's policy of favoring amendments to pleadings should be applied with extreme liberality." Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th Cir.1990). While the Court should freely give leave to amend if justice requires, the Court may deny leave to amend if the amendment would be futile or subject to dismissal. Gadda v. State Bar of Cal., 511 F.3d 933, 939 (9th Cir. 2007); Saul v. United States, 928 F.2d 829, 843 (9th Cir. 1991).


I. First Claim for Relief--Rescission

Plaintiffs' first claim against Defendants alleges Defendants failed to provide accurate material disclosures in closing the December 21, 2005, mortgage transaction with Plaintiffs. Due to this alleged material failure, Plaintiffs exercised their right of rescission pursuant to 15 U.S.C. § 1635 and 12 C.F.R. § 226.23. Defendants contend that even if they did fail to make material disclosures, Plaintiffs' claim is time-barred by the three year statute of limitations period provided for in 15 U.S.C. § 1635(f) and 12 C.F.R. § 226.23. For the following reasons the court finds Plaintiffs' claims as alleged in the complaint are time-barred, but grants leave to amend.

The mortgage transaction in question closed on December 21, 2005. Plaintiffs therefore had until December 21, 2008, to "notify the creditor of the rescission by mail, telegram or other means of written communication." 12 C.F.R. § 226.23(a)(2). On the face of the complaint, Plaintiffs do not appear to have given notice of rescission to Defendants until filing this suit on May 21, 2009. Plaintiffs rescission claim as it appears in the complaint is therefore time-barred and must be dismissed. The Court now inquires whether leave to amend is appropriate.

Plaintiffs have indicated in opposition to this motion that they provided notice to Defendants by certified mail on December 8, 2008. Plaintiffs have also provided the certified mail receipt indicating Defendants received Plaintiffs' notice of rescission letter on December 15, 2008. Defendants argue that regardless of any purported notice, Plaintiffs were required to file suit before the three year limitations period ...

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