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Obenchain v. Wells Fargo Bank N.A.


November 12, 2010


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


Plaintiffs John and Gaema Obenchain ("Plaintiffs") seek redress from Defendants Wells Fargo Bank, N.A. and Bank of America, N.A. ("Defendants") based on alleged violations of the Truth in Lending Act ("TILA") and the California Business & Professions Code § 17200 et seq. Presently before the Court are Defendants' Motions to Dismiss Plaintiffs' Complaint for failure to state a claim upon which relief may be granted, pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn1 For the reasons set forth below, Defendants' Motions to Dismiss are both granted.


This action stems from a refinanced residential mortgage loan on Plaintiffs' property. Plaintiffs refinanced the loan on their home through Defendant Bank of America. The transaction was completed on August 2, 2007. Plaintiffs allege that they did not receive the required disclosures at the time of refinancing, including the notice of the right to cancel, in violation of TILA. On May 15, 2010, Plaintiffs' counsel notified Bank of America that they were in violation of TILA § 1635, and as such, Plaintiffs were exercising their right to rescind the transaction.*fn3


On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," to "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 citations and quotations omitted). Though "a complaint attacked by a Rule 12(b)(6) motion" need not contain "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." Id. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 2869 (1986)). A plaintiff's "factual allegations must be enough to raise a right to relief above the speculative level." Id. (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216 (3d ed. 2004) ("[T]he pleading must contain something more...than...a statement of facts that merely creates a suspicion [of] a legally cognizable right of action.")).

Further, "Rule 8(a)(2)...requires a 'showing,' rather than a blanket assertion, of entitlement to relief. Without some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing...grounds on which the claim rests." Twombly, 550 U.S. at 555 n.3 (internal citations omitted). A pleading must then contain "only enough facts to state a claim to relief that is plausible on its face." Id. at 570. If the "plaintiffs...have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed." Id.

Once the court grants a motion to dismiss, they must then decide whether to grant a plaintiff leave to amend. Rule 15(a) authorizes the court to freely grant leave to amend when there is no "undue delay, bad faith, or dilatory motive on the part of the movant." Foman v. Davis, 371 U.S. 178, 182 (1962). In fact, leave to amend is generally only denied when it is clear that the deficiencies of the complaint cannot possibly be cured by an amended version. See DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992); Balistieri v. Pacifica Police Dept., 901 F. 2d 696, 699 (9th Cir. 1990) ("A complaint should not be dismissed under Rule 12(b)(6) unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.") (internal citations omitted).


Plaintiffs allege violations of state and federal law and requests relief accordingly. However, the issue before the Court is not the substance of these various claims, but whether Plaintiffs have plead enough facts on the federal claim as a general matter, for any to stand. While the complaint does not need detailed factual allegations, it must still provide sufficient facts alleged under a cognizable legal theory. See supra.

A. TILA Claim

Plaintiffs seek to rescind his loan pursuant to the Truth in Lending Act ("TILA"), 15 U.S.C. § 1600 et. seq., as well as declaratory and injunctive relief preventing Defendants from taking any action to foreclose on the property at issue. Defendants argue that Plaintiffs' claim is time-barred because civil damages are subject to a one-year statute of limitations, and claims for rescission have a three-year statute of limitations.

For a plaintiff to collect civil damages from a defendant who failed to provide disclosures mandated by TILA, the statute of limitations requires plaintiff to file suit within one year from the "date of occurrence" of the alleged violation.

15 U.S.C. § 1640(e). The "date of occurrence" is the date the transaction is consummated, which in the case of a mortgage loan, is when the plaintiff closed on the loan. See Walker v. Washington Mut. Bank FA, 63 F. App'x. 316, 317 (9th Cir. 2003).

To sustain a claim for rescission under TILA, a consumer may elect to cancel their residential mortgage loan within three days of either the consummation of the transaction or delivery of required disclosures and rescission forms. 15 U.S.C. § 1635(f)(3). If the required disclosures are not provided, then the right to cancel the transaction extends to three years after the date the loan closed. 15 U.S.C. § 1635(f).

In the instant case, Plaintiffs are time-barred from asserting civil damages under 15 U.S.C. § 1640, as the date of occurrence (the date of refinancing) was more than one year from the date the case was filed. Any relief sought under 15 U.S.C. § 1635 similarly does not stand, as the section does not apply "to a transaction which constitutes a refinancing or consolidation of the principal balance...secured by an interest in the same property." 15 U.S.C. § 1635(e)(2). Taking the facts in the light most favorable to Plaintiffs, the Court lacks sufficient information to determine whether a claim can be sustained as the case is currently stated. Accordingly, both Defendants' Motions to Dismiss Plaintiffs' TILA claim are granted.

B. Plaintiff's Remaining Causes of Action

Plaintiffs' federal claim presently dismissed, the Court declines to exercise supplemental jurisdiction over the remaining state cause of action. The Court need not address the merits of Defendants' Motions to Dismiss with respect to the remaining state law causes of action, as those issues are now moot.


As a matter of law, and for the reasons set forth above, both Defendants' Motions to Dismiss Plaintiffs' Complaint (ECF Nos. 6 and 7) are GRANTED with leave to amend.*fn4 Plaintiffs have not demonstrated any bad faith or other malicious conduct, and therefore may file an amended complaint not later than twenty (20) days after the date this Memorandum and Order is filed electronically. If no amended complaint is filed within said twenty (20)-day period, without further notice, Plaintiffs' claims will be dismissed without leave to amend.


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