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Carter v. GMAC Mortgage

August 5, 2010



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 is First California's motion to dismiss plaintiff's First Amended Complaint ("FAC") 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. (FAC ¶ 6; Docket No. 17.) 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 and falsely told plaintiff that the loan had a fixed interest rate when interest rate was actually adjustable. (FAC ¶¶ 14-16, 20.) Plaintiff further alleges that he did not receive required Notice of Right to Cancel as provided by the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1667f, at the time of loan origination. (FAC ¶ 72A.) The FAC also alleges that First California forged plaintiff's name on the Notice of Right to Cancel to make it appear as if he received adequate disclosures under TILA. (Id.)

Plaintiff filed his original 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.) Plaintiff filed the FAC after the court granted defendants' motions to dismiss the original complaint in its entirety on May 12, 2010. (Docket No. 17.) First California now moves to dismiss the causes of action in the FAC that apply to it.

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).

A. TILA Claim

Plaintiff's first cause of action prays for damages and rescission of his loan under TILA.

1. Rescission

As the court noted in its previous Order dismissing the original complaint, if a creditor in a loan transaction fails to provide a borrower with the required notice of the right to rescind, the borrower has three years from the date of consummation of the loan 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."). However, "[section] 1635(f) completely extinguishes the right of rescission at the end of the 3-year period," which cannot be tolled. 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 FAC again alleges that the original complaint, filed on February 18, 2010, served as plaintiff's notice of rescission. (FAC ¶ 72A.) However, plaintiff's loan closed on December 7, 2005, putting his notice of rescission well outside of the three-year limitations period. Accordingly, the court must dismiss plaintiff's request for rescission under TILA.

2. Damages

The statute of limitations for a TILA damages claim is one year from the date of the alleged TILA violation. 15 U.S.C. § 1640(e). Plaintiff argues that the statute of limitations should be tolled because the circumstances of the loan were hidden from him at the outset. "Equitable tolling may be applied if, despite all due diligence, a plaintiff is unable to obtain vital information bearing on the existence of his claim." Santa Maria v. Pac. Bell, 202 F.3d 1170, 1178 (9th Cir. 2000). Even if plaintiff is legally entitled to equitable tolling of his TILA damages claim, plaintiff has still not alleged any facts in the FAC that would warrant tolling the statute of limitations.

In the FAC, plaintiff simply asserts that he was unable to discover defendants' TILA violations until within the last year because he was not given time to review his loan documents at the time of closing, (FAC ¶ 33), and "did not have occasion to review that Application until within the past year" when he gave the documents in his possession to his attorney. (Id. ¶ 58.) The vague allegation that plaintiff did not have adequate time to review his loan documents at closing and then did not "have occasion" to later review them is insufficient to demonstrate that plaintiff exercised due diligence and nevertheless was unable to discover his TILA claim. See Hubbard v. Fidelity Fed. Bank, 91 F.3d 75, 79 (9th Cir. 1996) (holding that equitable tolling was inappropriate for a TILA claim where "nothing prevented [plaintiff] from comparing the loan contract, [] initial disclosures, and TILA's . . . requirements"). Plaintiff's ...

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