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Keen v. American Home Mortgage Servicing

October 21, 2009



This matter is before the court on defendants Sand Canyon Corporation f/k/a Option One Mortgage Corporation ("Option One"), T.D. Service Company ("T.D."), American Home Mortgage Servicing, Inc. ("AHMSI"), AHMSI Default Services, Inc. ("ADSI"), and Wells Fargo Bank, N.A. ("Wells Fargo") (collectively, "defendants") motions to dismiss plaintiff's First Amended Complaint ("FAC") pursuant to Fed. R. Civ. P. 12(b)(6), and motion to strike attorneys' fees pursuant to Fed. R. Civ. P. 12(f). Plaintiff Cheri Keen ("plaintiff") opposes the motions. For the reasons set forth below,*fn1 defendants' motion to dismiss is GRANTED.*fn2


In June 2006, plaintiff and her daughter discussed purchasing a new home in the Sacramento area. (First Am. Compl. ("FAC"), filed June, 29, 2009 ¶ 21.) Plaintiff's daughter suggested contacting "Sipriani," a loan officer for Prime Equity Lending, Inc. that plaintiff's daughter knew through a friend. (Id.) Plaintiff claims that Sipriani solicited her to finance the residence through him, assuring her that he could get her the "best deal" and the "best interest rates." (Id. ¶ 22.) Plaintiff also claims that Sipriani informed her the loan would be fixed at approximately 5% with monthly payments of approximately $2,000 per month. Instead, Sipriani sold plaintiff a loan at 7.80% interest with an adjustable rate and an index based on a 6 month average of the monthly average yields. (Id. ¶¶ 23-24.) Plaintiff further alleges that she accurately provided her income with documentation during the application process, which was then misstated on the loan application by either Sipriani or Sarah Lee ("Lee"), a licensed real estate salesperson.

Plaintiff also claims that she never received a copy of any of the loan documents prior to closing, but that Sipriani informed her that she could refinance if the loan became unaffordable. (Id. ¶¶ 27-28.) At closing, plaintiff was only given a few minutes to sign the loan documents, which had not been thoroughly explained by anybody. (Id.) She was never given the opportunity to review the documents meaningfully. (Id.)

On or about July 31, 2006, plaintiff completed the loan on the property, and the terms of the loan were memorialized in a promissory note, which was secured by a Deed of Trust. (Id. ¶ 30.) The Deed of Trust allegedly identified Premier Trust Deed Services, Inc. as trustee and Option One as the lender.

A notice of default was filed in Sacramento County on January 2, 2009, and on February 10, 2009, an Assignment of Deed of Trust was recorded with the Sacramento County Recorder. (Id. ¶¶ 42-43.) On April 2, 2009, plaintiff asserts that she mailed a Qualified Written Request ("QWR") to defendant, AHMSI, which included a demand for cancellation of the pending Trustee Sale and rescission of the loan pursuant to the provisions of the Truth in Lending Act ("TILA"). (Id. ¶ 31.) Plaintiff claims that she never received certain disclosures that Option One was required to provide regarding finance charges. (Id. ¶ 36.) Plaintiff alleges that on April 3, 2009, T.D. sent her a Notice of Trustee Sale together with a Debt Validation Notice without any explanation as to T.D.'s relation to the loan. (Id. ¶ 45). On April 23, 2009, AHMSI sold plaintiff's home at a Trustee sale.

In her First Amended Complaint, plaintiff asserts claims for 1) violation of TILA, 15 U.S.C. §§ 1601 et seq.; 2) violation of the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), 3) negligence, 4) violation of the Real Estate Settlement Procedures Act ("RESPA'), 12 U.S.C. §§ 2601 et seq., 5) breach of fiduciary duty, 6) fraud, 7) violation of California Business and Professions Code § 17200; 8) breach of contract, 9) breach of implied covenant of good faith and fair dealing, and 10) wrongful foreclosure.


On a motion to dismiss, the allegations of the complaint must be accepted as true. Cruz v. Beto, 405 U.S. 319, 322 (1972). The court is bound to give plaintiff the benefit of every reasonable inference to be drawn from the "well-pleaded" allegations of the complaint. Retail Clerks Int'l Ass'n v. Schermerhorn, 373 U.S. 746, 753 n.6 (1963). Thus, the plaintiff need not necessarily plead a particular fact if that fact is a reasonable inference from facts properly alleged. See id.

Nevertheless, it is inappropriate to assume that the plaintiff "can prove facts which it has not alleged or that the defendants have violated the... laws in ways that have not been alleged." Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). Moreover, the court "need not assume the truth of legal conclusions cast in the form of factual allegations." United States ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). Ultimately, the court may not dismiss a complaint in which the plaintiff has alleged "enough facts to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949 (citing Bell Atlantic Corp. V. Twombly, 550U.S. 554, 570 (2007)). Only where a plaintiff has failed to "nudge [his or her] claims across the line from conceivable to plausible," is the complaint properly dismissed. Id. at 1952. "[A] court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514 (2002) (quoting Hudson v. King & Spalding, 467 U.S. 69, 73. (1984)).

In ruling upon a motion to dismiss, the court may consider only the complaint, any exhibits thereto, and matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. See Mir v. Little Co. Of Mary Hospital, 844 F.2d 646, 649 (9th Cir. 1988); Isuzu Motors Ltd. V. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998).



1. Statute of Limitations

Plaintiff's first claim for relief alleges a violation of the Truth in Lending Act ("TILA") against defendant Option One. Option One argues that the damages portion of plaintiff's TILA violation claim is time barred. (Def's. P. & A. in Supp. of MTD ("MTD"), July 27, 2009, 5:17.) Plaintiff asserts that the statutory period has not expired based on the doctrine of equitable tolling. (Pl.'s Opp'n to MTD ("Opp'n"), filed Sept. 9, 2009, 8:14-9:6.)

TILA provides that a plaintiff can bring an action to recover damages "within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). In King, the Ninth Circuit held that equitable tolling of civil damages claims brought under TILA might be appropriate "in certain circumstances." King v. State of California, 784 F.2d 910, 915 (9th Cir. 1986). The court noted that a borrower may not have a reasonable opportunity within one year to discover the fraud or nondisclosures that form the basis of a TILA action and that, through TILA, Congress "sought to protect consumer's choice through full disclosure and to guard against the divergent and at times fraudulent practices stemming from uninformed use of credit." Id. As such, the Ninth Circuit explained that "district courts... can evaluate specific claims of fraudulent concealment and equitable tolling to determine if the general rule would be unjust or frustrate the purpose of the Act and adjust the limitations period accordingly." Id. When determining whether the statute of limitations period has expired for the purposes of a motion to dismiss, a court can only grant the motion "if the assertions of the complaint, read with the required liberality, would not permit the plaintiff to prove that the statute was tolled." Supermail Cargo, Inc. v. U.S., 68 F.3d 1204, 1206 (9th Cir. 1995).

In this case, defendants contend, and plaintiff does not dispute, that the alleged TILA violations occurred no later than July 31, 2006, the date plaintiff entered into the loan agreement with defendants. (MTD 4:11.) Accordingly, since plaintiff did not bring her claim until April 16, 2009, more than one year has elapsed since the alleged TILA violation. Plaintiff argues that equitable tolling may apply to her TILA claim because it is based upon defendants' alleged failure to clearly and conspicuously disclose various terms of the loan. (FAC at ¶ 55.) However, plaintiff pleads no other facts to explain how defendants concealed the true facts or why plaintiff could not otherwise have discovered the TILA violations at the consummation of her loan. "Such factual underpinnings are all the more important... since the vast majority of [p]laintiff's] alleged violations under TILA are violations that are self-apparent at the consummation of the transaction." Cervantes v. Countrywide Home Loans, Inc., 2009 U.S. Dist. LEXIS 87997, at ** 13-14 (D. Ariz. Sept. 23, 2009) (holding that equitable tolling was not appropriate when plaintiffs simply alleged that defendants "fraudulently misrepresented and concealed the true facts related to the items subject to disclosure").

Accordingly, defendants' motion to dismiss plaintiff's claim for civil damages based on violation of TILA is GRANTED.

2. Rescission

Plaintiff also contends that as a result of Option One's failure to provide the required disclosure statements, plaintiff has a continuing right to rescission, which she attempts to initiate through her complaint. (FAC at ¶ 60.) Option One asserts that plaintiff's rescission claim must be dismissed because, under TILA, rescission is dependent on the borrower's ability to return the loan principal, which plaintiff has not adequately alleged.

15 U.S.C. § 1635(b) "adopts a sequence of rescission and tender that must be followed unless the court orders otherwise: within twenty days of receiving a notice of rescission, the creditor is to return any money or property and reflect termination of the security interest; when the creditor has met these obligations, the borrower is to tender the property."

Yamamoto v. Bank of N.Y., 329 F. 3d 1167, 1170 (9th Cir. 2003). The Ninth Circuit has held that rescission under TILA "should be conditioned on repayment of the amounts advanced by the lender." Id. (emphasis in original). A number of California district courts have required a plaintiff to plead facts relating to the ability to tender the loan principal in order to withstand a 12(b)(6) motion to dismiss and proceed with a claim for rescission under TILA. Garza v. Am. Home Mortgage, 2009 WL 188604 at *5 (E.D. Cal. Jan. 27, 2009) ("[R]escission is an empty remedy without [plaintiff's] ability to pay back what she has received."); Serrano v. Sec. Nat'l Mortg. Co., 2009 U.S. Dist. Lexis 71725 (S.D. Cal. Aug. 14, 2009) ("If Plaintiff continues to seek rescission under TILA, he must tender the owed amount or provide proof of his ability to tender."); Pesayco v. World Say., Inc., 2009 U.S. Dist. LEXIS 73299 (C.D. Cal. July 29, 2009) ("[A] claim ...

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