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Blomquist v. GMAC Mortgage

December 15, 2009


The opinion of the court was delivered by: Garland E. Burrell, Jr. United States District Judge


Defendants GMAC Mortgage ("GMAC"), Mortgage Electronic Registration Systems, Inc. ("MERS"), and ETS Services, LLC ("ETS") filed a motion on June 30, 2009, in which they state they seek dismissal with prejudice of all claims in Plaintiffs' First Amended Complaint ("FAC") against them. (Defs' Notice of Mot. 2:1-5.)


Plaintiffs allege federal claims against Defendant GMAC under the Truth In Lending Act ("TILA"), 15 U.S.C. § 1601, and the Real Estate Settlement Procedure Act ("RESPA"), 12 U.S.C. § 2605.

Plaintiffs also allege the following claims against Defendants GMAC, MERS, and ETS (collectively "Defendants" or "movants"): violation of the Rosenthal Act, violation of Business & Professions Code § 17200, negligence, fraud, breach of implied covenant of good faith and fair dealing, wrongful foreclosure, quiet title, set side of the trustee's sale, and cancellation of the trustee's deed. However, Defendants have not moved for dismissal of Plaintiffs' negligence claim. Further, Defendants seek dismissal of Plaintiffs' breach of contract, RICO, and breach of fiduciary duty claims, even though these claims are not alleged against the movants; therefore, this portion of the motion is denied as moot.

Plaintiffs' claims concern a "consumer credit transaction" which Plaintiffs allege closed on or about June 12, 2007 (hereinafter "subject loan" or "loan"), and the subsequent foreclosure on Plaintiffs' residence, which secured the loan by a deed of trust (hereinafter the "subject property"). (FAC ¶¶ 17, 32, 39.) Plaintiffs allege a notice of default on the loan was filed in Placer County, California on July 21, 2008, and that on or about November 3, 2008, Defendant ETS sent Plaintiffs a Notice of the Trustee Sale. (Id. ¶¶ 47.) Plaintiffs allegedly entered an agreement with Defendant GMAC to refinance the loan on or about November 20, 2008 (Id. ¶ 34.) Plaintiffs allege they paid Defendant GMAC $8,000 dollars to modify the loan, and on December 20, 2008 Plaintiffs paid an additional $2,000 to Defendant GMAC, who accepted the money and "advised Plaintiffs that the terms of the loan modification and repayment plan would be sent to them." (Id.) However, Plaintiffs allege no refinance loan documents have been sent to them, and Defendant ETS subsequently sold the subject property at a trustee's sale on March 3, 2009, without right and not in accordance with California law. (Id. ¶¶ 34, 46, 48.) Plaintiffs allege on March 31, 2009 they sent Defendant GMAC a Qualified Written Request under RESPA "which included a demand to cancel the pending Trustee Sale and to rescind the loan under TILA, to which GMAC has not yet responded. (Id. ¶ 35.)


"A Rule 12(b)(6) motion tests the legal sufficiency of a claim." Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). To avoid dismissal, Plaintiffs must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). When considering a dismissal motion, all "allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002). However, this "tenet . . . is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements." Ashcroft v. Iqbal, 556 U.S. , 129 S.Ct. 1937, 1940 (2009). Defendants request that judicial notice be taken of the following documents which are attached to their motion since the documents are referenced in Plaintiffs' FAC: the Deed of Trust, the Notice of Default and Election to Sell, the Notice of Trustee's Sale, and the Trustee's Deed Upon Sale. (Request for Judicial Notice ("RFJN"), Ex. A, C, D, E .) Plaintiffs do not dispute this request. Although a court may generally consider only allegations contained in a complaint, exhibits attached to the complaint, and matters properly subject to judicial notice when ruling on a 12(b)(6) motion, "a court may [also] consider a writing referenced in a complaint but not explicitly incorporated therein if the complaint relies on the document and its authenticity is unquestioned." Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007) (internal citation and quotations omitted). Since the documents in Defendants' request are referenced in the FAC, the Court considers the documents under the "incorporation by reference" doctrine. Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005)(internal citation and quotations omitted).

The Deed of Trust ("Deed") on the subject property is dated June 12, 2007 and shows Plaintiffs secured a $582,000.00 loan on the subject property, plus interest, which was to be paid in regular periodic payments, and in full by July 1, 2047. (RFJN Ex. A.) The Deed names Plaintiffs as Borrowers, Union Fidelity Mortgage, Inc. as Lender, Southland Title as Trustee, and Defendant MERS as Beneficiary. (Id.) The Notice of Default and Election to Sell shows Plaintiffs were in default of the loan in the amount of $7,898.65 as of July 21, 2008. (RFJN Ex. C.) The Notice of Trustee's Sale on the subject property is dated October 29, 2008 and is accompanied with a signed declaration of statutory compliance. (RFJN Ex. D.) The Trustee's Deed Upon Sale shows the trustee's sale occurred March 3, 2009. (RFJN Ex. E.) The Trustee's Deed Upon Sale states Defendant ETS, as the substituted Trustee, granted Defendant GMAC, the new Trustee, the Deed of Trust after Defendant GMAC paid $454,500.00 for the subject property. (RFJN Ex. E.)

Defendants also request that judicial notice be taken of the "Substitution of Trustee relating to the Deed of Trust" ("Trustee Substitution") and the "California Business Portal website maintained by the California Secretary of State" ("California business website"), which are not referenced in Plaintiffs' FAC. (RFJN Ex. B, F.) Plaintiffs do not oppose the request.

Matters properly subject to judicial notice are facts "not subject to reasonable dispute [, meaning they are] either (1) generally known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." FED.R.EVID. 201(b). Defendants' request for judicial notice is granted since the authenticity of what is requested to be judicially noticed is public information that is not disputed. See Kozy v. Countrywide Home Loans, No. 09-cv-00621-OWW-GSA, 2009 WL 4250412, at *6, n. 2 (E.D. Cal. November 18, 2009) (taking judicial notice of a publicly recorded loan document); O'Toole v. Northrop Grumman Corp., 499 F.3d 1218, 1225 (10th Cir. 2007) ("It is not uncommon for courts to take judicial notice of factual information found on the world wide web.")

The Substitution of Trustee was publically recorded in Placer County, California on July 21, 2008, and shows that Defendant ETS replaced Southland Title as the new Trustee of the loan as of July 18, 2008. (RFJN Ex. B.) The "California Business Portal website maintained by the California Secretary of State" shows "Mortgage Electronic Registration Systems, Inc.," was registered to do business in California as of June 1, 2009. (RFJN Ex. F.) Defendants argue this website is provided to counter Plaintiffs' allegation that Defendant MERS was not registered to do business in California at the time of the loan closing on June 12, 2007. (Def's Mot. 10:4-11:3.)


A. TILA claims

Defendants argue Plaintiffs' claim for rescission of the loan under TILA, based on the nondisclosure of loan documents, terminated when the subject property was sold at the trustee's sale on March 3, 2009. (Defs' Mot. 4:16-19). The Trustee's Deed Upon Sale shows the subject property was sold on March 3, 2009. (RFJN Ex. E.) Under 15 U.S.C. § 1635(f) of the TILA, "an obligor's right of rescission shall expire . . . upon the sale of the property . . .."

15 U.S.C. § 1635(f) (emphasis added). Since the subject property was sold on March 3, 2009, that sale "terminate[d] any right of rescission under TILA." Nool v. HomeQ Servicing, No. 1:09-CV-0885 OWW DLB, 2009 WL 2905745 (E.D. Cal. Sept. 4, 2009); see also Pagsolingnan v. Downey Savings and Loan Association F.A., No. C 09-2709 SI, 2009 WL 3681647, at *1 (N.D. Cal. Nov. 2, 2009)(dismissing without leave to amend since "Plaintiffs' claim for rescission under TILA [was] mooted by the foreclosure sale of the property."); Hallas v. Ameriquest Mortg. Co., 406 F.Supp.2d 1176, 1183 (D.Or. 2005) (finding "the foreclosure sale has terminated Plaintiff's right of rescission.") Therefore, Plaintiffs' TILA claim for rescission is dismissed with prejudice.

Defendants also seek dismissal of Plaintiffs' TILA claim for statutory damages, arguing TILA's one year statute of limitations period expired June 12, 2008, since the loan closed on June 12, 2007. (Defs' Mot. 6:14-19, RFJN Ex. A.) Plaintiffs counter this argument by pointing to allegations in their FAC, in which they allege the doctrine of equitable tolling suspends the statute of limitations. Defendants failed to address the tolling allegations in Plaintiffs' FAC or Plaintiffs' tolling argument. Therefore, this portion of Defendants' motion is denied.

Defendant GMAC also makes an unpersuasive conclusory argument that it is not a "creditor" and therefore cannot be held liable under TILA. This ...

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