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Mays v. U.S. Bank National Ass.

January 20, 2010


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


This case stems from the refinancing of a residential property. Plaintiffs essentially allege violations of TILA and fraud. Defendants U.S. Bank National Ass. ("U.S. Bank") and Wilshire Credit Corp. (Wilshire) removed this case from the Fresno County Superior Court and now have filed motions to dismiss and strike. For the reasons that follow, the motions will be granted.


From the complaint, in July 2006, Plaintiffs sought to refinance their home, which is located in Prather, California. Plaintiffs contacted a mortgage broker (Defendant Loanleaders of America, Inc.). An employee of the broker (Defendant Art) promised he could refinance the property in the amount of $280,000 at an interest rate of 6.95% for forty years. During a discussion about the loan, Plaintiffs asked about a document that showed that the last payment would be an amount over $100,000. Plaintiffs stated that they would not be interested in such a provision and Art assured them that the provision would be addressed in the final documents.

The broker obtained a loan for Plaintiffs through Defendant Right Away Mortgage. In August 2006, Donna Mays signed the loan documents. A deed of trust was created on August 15, 2006, and was recorded with the Recorder of Fresno County thereafter. After 5:00 p.m., possibly on August 18, 2009,*fn1 a notary was sent to Plaintiffs' home by Defendant Chicago Title company with the final loan documents. Upon reviewing the loan documents, Plaintiffs saw that the loan had a balloon payment in the amount of $154,353.65. Plaintiffs asked the notary about this, but the notary stated that he could not give legal advice. Because the documents were delivered after business hours, Plaintiffs had no one to contact regarding the discrepancy regarding the balloon payment. Prior to execution of the loan documents, the broker had instructed them not to make the last payment on their existing loan since it was part of the refinancing. Plaintiffs felt trapped and that they had no choice but to execute the documents in their current form.

Unbeknown to Plaintiffs, the loan was amortized for 40 years, but was payable in 30 years with a balloon payment, and had a prepayment penalty. Had Plaintiffs known these facts, they would not have assumed the loan. Further, Donna Mays was given a Notice of Right to Cancel, but the date by which to cancel was not written on the document.

From September 2006 to April 2008, Plaintiffs made regular and timely payments to Right Away and then to Wilshire (who is the current servicer of the loan). In 2008, Plaintiffs experienced financial hardship and contacted Wilshire with a request to modify the loan. Wilshire told Plaintiffs that the lender would not modify the loan while it was current and that they needed to fall behind before a modification would be considered. Plaintiffs obliged and stopped making payments as instructed by Wilshire.

Plaintiffs then sent Wilshire various documents, including some that evidenced their financial hardship. Wilshire informed Plaintiffs that their requested modification had been denied. No further attempts to prevent a foreclosure were discussed or offered to Plaintiffs.

In May, Plaintiffs received a notice of default. The notice was recorded on May 12, 2009. The amount demanded was $11,975.40. The amount included late charges. Also in May, Plaintiffs received an offer from Wilshire whereby Plaintiffs would pay $3,000 a month (nearly double the existing payment) for 11 months and Wilshire would consider letting Plaintiffs keep their home. Plaintiffs declined the offer.

On August 13, 2009, Wilshire caused a notice of trustee's sale to be served on Plaintiffs with a date for sale of September 8, 2009. On August 14, 2009, Donna Mays exercised her right of rescission by sending a letter to the lender and all other parties.

On August 17, 2009,*fn2 Plaintiffs filed suit in the Fresno County Superior Court. Defendants Wilshire and U.S. Bank (who is the assignee of the original lender Right Away) removed to this Court. Plaintiffs allege causes of action: (1) rescission under TILA for failing to give proper notice of right to cancel; (2) intentional misrepresentation under California Civil Code §§ 1709 and 1710; (3) rescission for fraud; and (4) violation of TILA and Federal Reserve Regulation Z.*fn3 Wilshire and U.S. Bank move to dismiss the first, third, and fifth causes of action, which are the only claims alleged against them.


Under Federal Rule of Civil Procedure 12(b)(6) , a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6) . A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9th Cir. 2008); Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all allegations of material fact are taken as true and construed in the light most favorable to the non-moving party. Marceau v. Blackfeet Hous. Auth., 540 F.3d 916, 919 (9th Cir. 2008); Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1999). The Court must also assume that general allegations embrace the necessary, specific facts to support the claim. Smith v. Pacific Prop. and Dev. Corp., 358 F.3d 1097, 1106 (9th Cir. 2004); Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994). But, the Court is not required "to accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9th Cir. 2008); Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). Although they may provide the framework of a complaint, legal conclusions are not accepted as true and "[t]hreadbare recitals of elements of a cause of action, supported by mere conclusory statements, do not suffice." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. Fox Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir. 2003). Furthermore, Courts will not assume that plaintiffs "can prove facts which [they have] not alleged, or that the defendants have violated . . . laws in ways that have not been alleged." Associated General Contractors of California, Inc. v. California State Council of Carpenters, 459 U.S. 519, 526 (1983). As the Supreme Court has recently explained:

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the 'grounds' of his 'entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, to "avoid a Rule 12(b)(6) dismissal, "a complaint must contain 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); see Twombly, 550 U.S. at 570; see also Weber v. Department of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

The plausibility standard is not akin to a 'probability requirement,' but it asks more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it stops short of the line between possibility and plausibility of 'entitlement to relief.' . . .

Determining whether a complaint states a plausible claim for relief will . . . be a context specific task that requires the reviewing court to draw on its judicial experience and common sense. But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not shown -- that the pleader is entitled to relief.

Iqbal, 129 S.Ct. at 1949-50. "In sum, for a complaint to survive a motion to dismiss, the nonconclusory 'factual content,' and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009).

In deciding whether to dismiss a claim under Rule 12(b)(6), the Court is generally limited to reviewing only the complaint, but it may take judicial notice of public records outside the pleadings, review materials which are properly submitted as part of the complaint, and review documents that are incorporated by reference in the Complaint if no party questions their authenticity. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005); Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001); Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996); MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir. 1986).

If a Rule 12(b)(6) motion to dismiss is granted, "[the] district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts." Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc). In other words, leave to amend need not be granted when amendment would be futile. Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).


1. First & Fifth Causes of Action -- ...

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