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Valle v. Mortgage Bank of California

May 5, 2010

ANTONIO DEL VALLE, ET AL., PLAINTIFFS,
v.
MORTGAGE BANK OF CALIFORNIA, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Oliver W. Wanger United States District Judge

MEMORANDUM DECISION GRANTING DEFENDANT JP MORGAN CHASE BANK'S MOTION TO DISMISS FIRST AMENDED COMPLAINT

(Doc. 30)

Plaintiffs Antonio and Elsie Del Valle have filed a First Amended Complaint ("FAC") pursuant to the Memorandum Decision and Order filed on November 10, 2009 ("November 10 Memorandum Decision"). The FAC names as Defendants Mortgage Bank of California ("Mortgage Bank"); JPMorgan Chase Bank, formerly known as Washington Mutual Bank ("JPMorgan" or "Chase Bank"); Quality Loan Service Corporation ("Quality Loan"); and Does 1-10.

The FAC alleges that Plaintiffs are the owners of the principal dwelling known as 11611 Peninsula Park Drive, Bakersfield, California. As "Conditions," the FAC alleges:

11. All Conditions precedent have been performed or have occurred and TILA violations may be asserted defensively now due to the non-judicial foreclosure filing and election to sell and as a recoupment or set off pursuant to 15 U.S.C. § 1637 et seq. 'This subsection [providing for the one year statute of limitations] does not bar a person from asserting a violation of this subchapter in an action to collect a debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action' (15 U.S.C. § 1640[c]), Delta Funding 561, 774 N.Y.S.2d Corp. v. Murdaugh, 6 AD. 3d 797 (2nd McNinch v. Mortgage Dept. 2004); , 250 B.R. 848 America, Inc. (In re McNinch) (Bankr.W.D.Pa.2000).

12. The mere loss of a statutory right to disclosure is an inquiry that gives the consumer standing for Article III purposes. (DeMando v. Morris, 206 F.3d 1300 (9th Cir.2000).

In the section of the FAC captioned "Statement of Facts," Plaintiffs allege:

13. The federally related mortgage transaction at the root of this case was closed, and documents were signed on or about June 16, 2007.

14. Prior to the closing, Plaintiffs were contacted by Defendants, regarding the refinancing of their mortgage loan.

15. Plaintiff subsequently entered into a mortgage loan transaction (hereinafter the 'Transaction') to include a Deed of Trust ('Deed of Trust') securing such Adjustable Rate Note ('Note') covering the Property, then and now the principal dwelling and home of the Plaintiffs and their family (see Complaint Exhibits '2' and '3')[.]

16. The Transaction required Plaintiffs to pay money arising out of a transaction in which money, property, or goods and services were the subject thereof and the same were primarily for personal, family and household purposes.

17. The security interest in the Deed of Trust was not created to finance the acquisition or initial construction of the Plaintiffs' property but to refinance previous consumer debts including the mortgage lien.

18. The Transaction is characterized as a Consumer Credit Transaction as that term is defined under 15 U.S.C. § 1602(h) and Reg. Z § 226.2(a).

19. The Transaction is characterized as a Closed-end Credit Transaction as that term is defined under Reg. Z § 226.2(10) where a security interest was retained in favor of the originator, Defendants as the assignee, transferee or servicer.

20. The Transaction is subject to all content requirements set forth in 15 U.S.C. § 1635(a), and 15 U.S.C. § 1638; Reg. Z §§ 226.17 - 226.23.

21. Further, the following documents related to the mortgage transaction were not lawfully provided by the Defendants to the Plaintiff [sic]:

a. Handbook on Adjustable Rate Mortgage;

b. HUD Brochures;

c. Variable Rate Disclosures;

d. Business Affiliations Disclosure;

e. Broker's Agreements;

f. Disbursal Disclosures;

g. Patriot Act Disclosure;'

h. Loan Origination Agreement.

22. Further, Plaintiffs received one copy each of the unsigned and undated Notice of Right to Cancel. (see Complaint Exhibits '6' and '7')[.]

23. The failure to accurately and effectively disclose a Truth in Lending Disclosure Statement with effective Notice to Cancel is a failure to provide accurately a material disclosure as that term is defined under 15 U.S.C. § 1602(u); Reg. Z § 226.23 (a)(3)n48.

24. Defendants ratified this transaction with an improper, ineffective, and unlawful omission of material disclosures as that term is defined under 15 U.S.C. § 1602(u); Reg. Z § 226.23(a)(3)n48.

25. A controversy has arisen due to Defendants' failure to provide accurate material disclosures so that Plaintiffs may tender any balance and extinguish the Transaction by operation of law.

26. On December 11, 2008, Plaintiffs sent a demand letter containing request for rescission of contract and offer to tender to Defendant CHASE BANK. (See Complaint Exhibits [sic] '8' and Exhibit '9'.)

27. Defendant CHASE BANK did not respond.

28. In the same mail envelope above, Plaintiffs also enclosed and sent to the Defendant CHASE BANK, the RESPA Qualified Written Request (QWR), TILA Request, and Notice of Rescission. (See Complaint Exhibit '10'.)

29. In its letter dated December 22, 2008, Defendant CHASE BANK forwarded the QWR to its Executive Response Team

30. On February 26, 2009, Defendant MORTGAGE BANK executed an assignment of Deed of Trust transferring to JP Morgan Chase Bank, National Association all beneficial interest under the Deed of Trust dated June 16, 2007. (see Complaint, Exhibit '11'.)

31. None of the Defendants are actual 'note holders' or 'holders in possession' of the alleged indebtedness.

32. On March 20, 2009, Plaintiffs through counsel sent a letter to Defendant CHASE BANK requesting the latter to produce for inspection within ten (10) days from receipt of the letter, the original Promissory Note which Plaintiffs signed together with a certification that the said note is in its (CHASE BANK) possession and failure of which would lead Plaintiffs to assume that Defendant CHASE BANK is not the owner of the actual note and without any right over client's property. (see Complaint Exhibit '13')[.]

33. Defendant CHASE BANK failed to respond which made Plaintiffs assume that defendant [sic] CHASE BANK is not the owner of the actual note and without any right over Plaintiffs' property.

34. As a result of the acts alleged above, Plaintiffs have suffered nausea, emesis, constant headaches, insomnia, embarrassment, and incurred an ascertainable loss.

The FAC alleges as Count I, Rescission under TILA and Regulation Z against all Defendants. After incorporating all preceding allegations, Count 1 alleges:

36. Plaintiffs received one copy each of the unsigned and undated Notice of Right to Cancel.

37. Each borrower must receive two Notices of Right to Cancel which clearly and conspicuously disclose: (1) the retention or acquisition of a security interest in the consumer's principal dwelling; the consumer's right to rescind the transaction; (3) how to exercise the right to rescind with a form for that purpose, designating the address of the creditor's place of business; (4) the effects of rescission; and (5) the date the rescission period expires (Regulation Z § 226.23(b)(1)(i-v). Defendants failed to comply with such requirements.

38. As a result of Defendants' failure to provide the Notice of Right to Cancel, the required mortgage documents and accurate material disclosures, Plaintiffs are entitled to and had exercised their right of rescission of the Transaction and offer to tender (see Complaint Exhibit '8').

39. Plaintiffs have a continuing right to rescind the Transaction until the third business day after receiving both the proper Notice of Right to Cancel and delivery of all material disclosures correctly made in a form the Plaintiff [sic] may keep pursuant to 15 U.S.C. § 1635(a) and Reg. Z § 226.23(a), and the three-day right is statutorily extended due to the foregoing material failures.

40. On December 11, 2008, Plaintiffs sent demand letter containing request for rescission of contract and offer to tender to the Defendant CHASE BANK (see Complaint Exhibit '8'.)

41. Defendant CHASE BANK did not respond.

42. In the same mail envelope above, Plaintiffs also enclosed and sent to the Defendant CHASE BANK, the RESPA Qualified Written Request (QWR), TILA Request, and Notice of Rescission. (see Complaint Exhibit '10')[.]

43. Rather than respond to the QWR, Defendant CHASE BANK wrote to the Plaintiffs that it forwarded the QWR to its Executive Response Team.

44. Notwithstanding the above, Plaintiffs hereby offer and tender to return to Defendant CHASE BANK their property at 11611 Peninsula Park Drive, Bakersfield, CA 93311 but said Defendant should also return all payments, interests, costs, expenses, and damages to the Plaintiffs with regard to the mortgage transaction ...


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