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Curtis v. Option One Mortgage Corp.

February 17, 2010


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


(Documents #23 & #27)


On July 31, 2009, Plaintiff filed a complaint in the Superior Court of the State of California, County of Tulare. On September 4, 2009, Defendants removed the complaint to the Eastern District of California, Fresno Division because this court has federal question jurisdiction over the complaint pursuant to 28 U.S.C. § 1331.

On November 19, 2009, Plaintiff filed an amended complaint ("complaint"). The complaint contains three causes of action: (1) A violation of the Truth in Lending Act ("TILA"), in which Plaintiff seeks rescission and damages; (2) A violation of California Civil Code § 2923.5; and (3) An Injunction to enjoin Defendants from commencing with a trustee's sale on Plaintiff's property.

On November 24, 2009, Defendant Sand Canyon Corporation, sued as Option One Mortgage Corporation, filed a motion to dismiss the complaint. On December 7, 2009, American Home Mortgage Servicing Inc. filed a motion to dismiss. On December 21, 2009, Plaintiff filed an opposition to Defendants' motions.


Under Rule 12(b)(6) of the Federal Rules of Civil Procedure 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 of the complaint's material allegations of fact are taken as true, and the facts are construed in the light most favorable to the non-moving party. Marceau v. Balckfeet 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). However, 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 legal conclusions may provide the framework of a complaint, they 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). As the Supreme Court has 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, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949. "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 Service, 572 F.3d 962, 969 (9th Cir. 2009).

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).


In deciding whether to dismiss a claim under Rule 12(b)(6), the court is generally limited to reviewing only the complaint, but the court may review materials which are properly submitted as part of the complaint and may take judicial notice of public records outside the pleadings. See 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). Further, under the "incorporation by reference" doctrine, courts may review documents "whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the plaintiff's pleading." Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005); Lapidus v. Hecht, 232 F.3d 679, 682 (9th Cir. 2000). The "incorporation by reference" doctrine also applies "to situations in which the plaintiff's claim depends on the contents of a document, the defendant attaches the document to its motion to dismiss, and the parties do not dispute the authenticity of the document, even though the plaintiff does not explicitly allege the contents of that document in the complaint." Knievel, 393 F.3d at 1076 (citing Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998)).

Defendants request that the court take judicial notice of the deed of trust concerning the property at issue in this action and other records concerning the deed of trust and the property's title. "In deciding whether to dismiss a claim under Fed.R.Civ.P. 12(b)(6), a court may look beyond plaintiff's complaint to matters of public record." Shaw v. Hahn, 56 F.3d 1128, 1129 n. 1 (9th Cir. 1995). Thus, the court will take judicial notice of the documents provided by Defendants.


This action concerns property located at 3522 E. Stewart Court, Visalia, in the County of Tulare, State of California.

The complaint alleges that on or about November 2006, Plaintiff approached Defendants in regards to refinancing the property at 3522 E. Stewart Court, Visalia. Defendants represented they could provide a fixed rate loan with low monthly payments based upon Plaintiff's income. Plaintiff agreed to refinance the property at 3522 E. Stewart Court, Visalia.

The complaint alleges that during the loan process, Defendant deceptively and fraudulently understated the Annual Percentage Rate (APR) by 3.185%, the finance charge and total payments by $279,617.69 and the payments schedule listed three payment changes instead of six payment changes. The complaint alleges that Plaintiff's income was falsified and the property value grossly overstated. The complaint alleges that on or about November 30, 2006, unaware of Defendants' deceptive and fraudulent actions, Plaintiff executed the loan.

The complaint alleges that on or about October 2008, in attempting to modify her loan, Plaintiff discovered that Defendants had under disclosed Plaintiff's APR and financed an amount in a blatant violation of the Federal Truth in Lending Act (TILA).

The complaint alleges that Plaintiff brought this discrepancy to Defendants' attention in an attempt to modify the loan instead of having to institute her right to rescission. The complaint alleges Defendants refused to modify the loan with more favorable terms. The complaint alleges Defendants have failed to provide Plaintiff with a good faith valuation regarding Plaintiff's options or offer a loan modification or workout plan in order to assist Plaintiff with avoiding foreclose.

The complaint alleges that Plaintiff is fully able and willing to tender performance of her obligations by tendering the reasonable value of the property by procuring a loan from another banking establishment for the reasonable value of the property at the time of rescission.


I. VIOLATION OF 15 U.S.C. § 1601 -- TILA

Plaintiff contends that Defendants violated TILA by understating Plaintiff's APR and by understating Plaintiff's finance charges on the loan. Plaintiff contends that she now exercises her right to rescission pursuant to 15 U.S.C.§ 1635(b) due to Defendants' breach. Plaintiff also contends that she has been damaged by Defendants' wrongful actions and seeks costs and reasonable attorney's fees.

"The purpose of the TILA is to ensure that users of consumer credit are informed as to the terms on which credit is offered them." Jones v. E*Trade Mortg. Corp., 397 F.3d 810, 812 (9th Cir. 2005); see also 15 U.S.C. § 1601. "TILA was enacted in 1968 'to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit." Yamamoto v. Bank of New York, 329 F.3d 1167, 1170 (9th Cir. 2003). The TILA requires creditors to "clearly and conspicuously disclose" borrowers' rights to rescind a home mortgage loan in accordance with regulations of the Federal Reserve Board. Jones, 397 F.3d at 812.

TILA "requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower's rights." Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). The failure to satisfy TILA's requirements subjects a lender to "statutory and actual damages [that are] traceable to a lender's failure to make the requisite disclosures." Id. (citing 15 U.S.C. §1640).

A. Rescission - Ability to Tender

Plaintiff alleges that she is entitled to rescission of her loan because Defendants failed to provide accurate material disclosures. Defendants contend this claim must be dismissed because Plaintiff has failed to allege her ability to tender the amount of the loan.

The purpose of rescission under TILA is to return both parties to the status quo. Yamamoto, 329 F.3d at 1172. Title 15 ...

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