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McGill v. Mortgage

March 3, 2010



This matter is before the court on the motion of defendants Wachovia Mortgage, FSB Loan ("Wachovia") and American Mortgage Network, Inc. ("AmNet") (collectively "defendants") to dismiss plaintiff Lanora McGill's ("plaintiff") first amended complaint ("FAC") pursuant to Federal Rule of Civil Procedure 12(b)(6).

Plaintiff opposes the motions. For the reasons set forth below,*fn1 defendants' motion is GRANTED.


Plaintiff brings this action against defendants Wachovia, AmNet, Quality Loan Service Corp. ("Quality"), Mortgage Electronic Registration Systems, Inc. ("MERS"), Consolidated Capital Mortgage ("Consolidated"), and Carey Fred Crone ("Crone"). (Pl.'s First Am. Compl. ("FAC"), filed Sept. 18, 2009, ¶¶ 8-9, 12.) Plaintiff's claims are all based upon activities relating to a residential mortgage loan transaction. (Id. ¶¶ 6, 17.)

On July 23, 2007, plaintiff obtained a loan from defendant AmNet on property located at 465 Arcade Boulevard, Sacramento, California (the "Property"). (Id. ¶ 31.) The loan was secured by a deed of trust which named AmNet as the lender and MERS as the beneficiary. (Id. ¶¶ 31-32.) In August 2007, defendant Crone approached plaintiff and solicited her to refinance the Property. (Id. ¶¶ 7, 23.) Plaintiff retained defendants Crone and Consolidated to act as her agents in negotiating the refinancing. (Id. ¶¶ 24-28.) Plaintiff eventually defaulted on the loan, and defendant Quality filed a Notice of Default on January 13, 2009. (Id. ¶ 43.)

Plaintiff alleges that on April 17, 2009 she mailed a Qualified Written Request ("QWR") to Wachovia, in which she included a demand to rescind the loan pursuant to the provisions of the federal Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601 et seq.. (Id. ¶ 33.) Plaintiff further alleges that Wachovia never responded to her demand. (Id.)

Plaintiff subsequently filed suit on July 20, 2009, alleging claims for (1) violation of TILA; (2) violation of the California Rosenthal Act, California Civil Code §§ 1788 et seq.; (3) negligence; (4) violation of Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2605, et seq.; (5) breach of fiduciary duty; (6) fraud; (7) violation California Business & Professions Code § 17200 et seq.; (8) breach of contract; (9) breach of implied covenant of good faith and fair dealing; (10) wrongful foreclosure; and (11) violation of California Welfare & Institutions Code §§ 15600 et seq. (Docket No. 1.)

Plaintiff bases several of her eleven claims on allegations that the defendants failed to provide her with requisite copies of certain loan documents prior to closing. (Id. ¶¶ 29, 40.) Additionally, plaintiff alleges that defendants unlawfully developed a scheme to "infuse capital into the home mortgage lending system" in order to induce a bankruptcy transaction and force plaintiff into foreclosure. (Id. ¶¶ 18, 47-48.)


Under Federal Rule of Civil Procedure 8(a), a pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). Under notice pleading in federal court, the complaint must "give the defendant fair notice of what the claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotations omitted). "This simplified notice pleading standard relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims." Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).

On a motion to dismiss, the factual 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). A plaintiff need not allege "'specific facts' beyond those necessary to state his claim and the grounds showing entitlement to relief." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949.

Nevertheless, 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). While Rule 8(a) does not require detailed factual allegations, "it demands more than an unadorned, the defendant-unlawfully-harmed-me accusation." Iqbal, 129 S.Ct. at 1949. A pleading is insufficient if it offers mere "labels and conclusions" or "a formulaic recitation of the elements of a cause of action." Id. at 1950 ("Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."); Twombly, 550 U.S. at 555. Moreover, 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).

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 Atl. Corp., 550 U.S. at 570). 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. While the plausibility requirement is not akin to a probability requirement, it demands more than "a sheer possibility that a defendant has acted unlawfully." Id. at 1949. This plausibility inquiry is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.


A. Defendants' Exhibits

In ruling upon a motion to dismiss, the court may consider matters which may be judicially noticed pursuant to Federal Rule of Evidence 201. Mir, 844 F.2d at 649; Isuzu Motors Ltd. v. Consumers Union of United States, Inc., 12 F. Supp. 2d 1035, 1042 (C.D. Cal. 1998). Rule 201 permits a court to take judicial notice of an adjudicative fact "not subject to reasonable dispute" because the fact is 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).

The court can take judicial notice of matters of public record, such as pleadings in another action and records and reports of administrative bodies. See Emrich v. Touche Ross & Co., 846 F.2d 1190, 1198 (9th Cir. 1988).

"Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff's claim." United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). "The defendant may offer such a document, and the district court may treat such a document as part of the complaint, and thus may assume that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6)."

Id. The policy concern underlying the rule is to prevent plaintiffs "from surviving a Rule 12(b)(6) motion by deliberately omitting references to documents upon which their claims are based." Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998).

Several of plaintiff's claims for relief are dependent upon Wachovia's status as a federal savings bank and AmNet's status as financial institution. Exhibits 1 and 3 contained in defendants' Request for Judicial Notice ("RFJN") address Wachovia's and AmNet's status, respectively. Accordingly, the court will treat the exhibits as part of the complaint and assume that their contents are true for purposes of the motions to dismiss. Ritchie, 342 F.3d at 908.


Plaintiff's first claim for relief alleges, inter alia, that defendant AmNet violated TILA by (1) failing to provide the required disclosures to plaintiff at the time of closing, and (2) failing to respond to plaintiff's letter of "rescission." (FAC ¶¶ 33, 58-60.) AmNet moves to dismiss the claim, arguing that (1) plaintiff's claim for rescission must fail because she has not pled the ability to tender payment, and (2) plaintiff's damages claim is time barred. (Def.'s Mot. to Dismiss ("MTD"), filed Oct. 22, 2009, 3:17-21.)

TILA "has the broad purpose of promoting 'the informed use of credit' by assuring 'meaningful disclosure of credit terms' to consumers." Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 560 (1980) (quoting 15 U.S.C. § 1601). The statute "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). A loan disclosure violation under TILA triggers two potential remedies for a borrower: rescission, 15 U.S.C. § 1635, and damages, 15 U.S.C. § 1640. Plaintiff seeks to rescind the loan and obtain damages pursuant to § 1640(a)(2).

1. Rescission Under TILA

In the present action, plaintiff alleges that defendant AmNet did not provide her with the required notice of her right to rescind in violation of 15 U.S.C. § 1635(a). (FAC ¶¶ 59-60.) AmNet moves to dismiss, arguing that plaintiff failed to plead the ability to tender payment. In response, plaintiff asserts that she need not plead the ability to tender "where it would be inequitable to do so." (Pl.'s Opp'n to MTD ("Pl.'s Opp'n"), filed Jan. 26, 2010, 6:14-15.)

In a consumer credit transaction where the creditor acquires a security interest in the borrower's principal dwelling, TILA provides the borrower with "a three-day cooling-off period within which [he or she] may, for any reason or for no reason, rescind" the transaction. McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 421 (1st Cir. 2007) (citing 15 U.S.C. § 1635). A creditor must "clearly and conspicuously disclose" this right to the borrower along with "appropriate forms for the [borrower] to exercise his right to rescind." 15 U.S.C. 1635(a). If a creditor fails to provide the borrower with the required notice of the right to rescind, the borrower has three years from the date of consummation to rescind the transaction. Id. § 1635(f); 12 C.F.R. § 226.23(a)(3) ("If the required notice or material disclosures are not delivered, the right to rescind shall expire 3 years after consummation.").

The Ninth Circuit has held that rescission under TILA "should be conditioned on repayment of the amounts advanced by the lender." Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1170 (9th Cir. 2003). District courts in this circuit have dismissed rescission claims under TILA at the pleading stage based upon the plaintiff's failure to allege an ability to tender loan proceeds. See, e.g., Ibarra v. Plaza Home Mortgage, No. 08-CV-01707-H, 2009 U.S. Dist. LEXIS 80581, at *22 (S.D. Cal. Sept. 4, 2009); Pesayco v. World Sav., Inc., 2009 U.S. Dist. LEXIS 73299, at *4 (C.D. Cal. July 29, 2009); Carnero v. Weaver, No. 08-CV-01707-H, 2009 U.S. Dist. LEXIS 62665, at *8 (N.D. Cal. July 20, 2009); Ing Bank v. Korn, No. C09-124Z, 2009 U.S. Dist. LEXIS 73329, at *7 (W.D. Wash. May 22, 2009); Garza v. Am. Home Mortgage, No. CVF 08-1477, 2009 U.S. Dist. LEXIS 7448, at *15 (E.D. Cal. Jan. 27, 2009) (stating that "rescission is an empty remedy without [the borrower's] ability to pay back what she has received").

Here, plaintiff's failure to plead the ability to tender payment is fatal to her rescission claim. See Boles, 2009 WL 650631, at *1 (determining that, in absence of demonstrated ability to tender, plaintiff did not demonstrate likelihood of success on merits of TILA claim); Garza, 2009 U.S. Dist. LEXIS 7448, at *15. Plaintiff did not plead any facts supporting the ability or willingness to tender payment in her FAC, and her subsequent filings are devoid of any assertions that would allow the court to make a reasonable inference that she once had or currently has the ability to tender. Moreover, ...

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