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Carter v. GMAC Mortgage

May 11, 2010

MICHAEL C. CARTER, PLAINTIFF,
v.
GMAC MORTGAGE, LCC; FIRST CALIFORNIA MORTGAGE, A CALIFORNIA CORPORATION; AND DOES 1 THROUGH 100, INCLUSIVE, DEFENDANTS.



MEMORANDUM AND ORDER RE: MOTIONS TO DISMISS

Plaintiff Michael C. Carter brought this action against defendants GMAC Mortgage, LLC ("GMAC") and First California Mortgage ("First California") alleging various federal and state claims arising out of plaintiff's mortgage transaction. Presently before the court are defendants' motions to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).

I. Factual and Procedural Background

On December 7, 2005, plaintiff obtained a loan from First California to purchase his home, located at 1664 Baroness Way in Roseville, California. (Compl. ¶¶ 6, 14; GMAC Req. Judicial Notice Ex. 1.) Plaintiff claims that he was channeled into this allegedly unaffordable loan through the conduct of First California, who allegedly exaggerated plaintiff's earnings and the value of the property to secure the loan. (Id. ¶ 14.) Plaintiff further alleges that he did not receive disclosures required to be provided to him by the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, at the time of loan origination. (Compl. ¶ 42.) The FAC alleges that GMAC "either assumed or was assigned said loan" and is therefore liable for these violations under "successor's liability law." (Id. ¶ ¶ 9, 13.)

Plaintiff filed the Complaint in California Superior Court in Placer County on February 18, 2010. (Docket No.1.) First California then removed the case to this court on March 18, 2010 with the consent of GMAC. (Id.) In his Complaint, plaintiff asserts ten causes of action against GMAC and First California. GMAC and First California now move to dismiss the Complaint for failure to state a claim upon which relief can be granted.

II. Discussion

On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff needs to plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," and where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 556-57).

In general a court may not consider items outside the pleadings upon deciding a motion to dismiss, but may consider items of which it can take judicial notice. Barron v. Reich, 13 F.3d 1370, 1377 (9th Cir. 1994). A court may take judicial notice of facts "not subject to reasonable dispute" because 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.

GMAC and First California each submitted a request for judicial notice. GMAC requests the court take notice of plaintiff's First Deed of Trust, publically recorded in the Placer County Recorder's Office. (Docket No. 7.) The court will take judicial notice of this document, since it is a matter of public record whose accuracy cannot be questioned. See Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001). First California requests the court take notice of several documents related to plaintiff's mortgage transaction found in its records and files. (Docket No. 9.) The court declines to take notice of these documents, since First California's files are not a source whose accuracy cannot be reasonably questioned under Federal Rule of Evidence 201(b).

A. TILA Claim

Plaintiff's first cause of action prays for damages and rescission of his loan under the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f.

1. Rescission

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); see 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."). "[Section] 1635(f) completely extinguishes the right of rescission at the end of the 3-year period." Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412, (1998); see also Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir. 2002) ("[S]section 1635(f) represents an 'absolute limitation on rescission actions' which bars any claims filed more than three years after the consummation of the transaction. (quoting King v. California, 784 F.2d 910, 913 (9th Cir. 1986))); Cazares v. Household Fin. Corp., 2005 U.S. Dist. LEXIS 39222, at *24-25 (C.D. Cal. 2005) (concluding that, "[i]f certain Plaintiffs did exercise their rights to rescind[ ] prior to the expiration of the three-year limitation period," such facts "would only entitle Plaintiffs to damages, not rescission" (citing Belini v. Wash. Mut. Bank, FA, 412 F.3d 17 (1st Cir. 2005))). The Complaint alleges that "[a] Qualified Written Request... will be mailed to [d]efendants... [which] includes a demand to rescind the loan...." (Compl. ¶ 23.) However, plaintiff's loan closed on December 7, 2005, putting his future notice of rescission, even if sent on the date of filing of the Complaint, well outside of the three-year limitations period. (GMAC Req. Judicial Notice Ex. 1.)

Moreover, plaintiff's rescission claim fails because he has not demonstrated an ability to tender payment of the net proceeds he received from the loan. 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) (emphasis in original). 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., Garza v. Am. Home Mortgage, 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"); Ibarra v. Plaza Home Mortgage, 2009 U.S. Dist. LEXIS 80581, at *22 (S.D. Cal. Sept. 4, 1009); Carnero v. Weaver, 2009 U.S. Dist. LEXIS 62665, at *8 (N.D. Cal. July 20, 2009); Pesayco v. World Sav., Inc., 2009 U.S. Dist. LEXIS 73299, at *4 (C.D. Cal. July 29, 2009); Ing Bank v. ...


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