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Will David Mitchell and Carol Louise Mitchell v. Bank of America

January 31, 2011


The opinion of the court was delivered by: M. James Lorenz United States District Court Judge


Defendant Real Time Resolution, Inc. ("RTR") moves to dismiss plaintiffs' complaint for failure to state a claim. The motion has been fully briefed.


Plaintiffs refinanced their residence with Countrywide Home Loans, Inc. as evidenced by two promissory notes signed by plaintiffs that were secured by the property. The transaction closed on March 3, 2006. In their complaint plaintiffs allege they received only one copy of the Notice of Right to Cancel and it did not contain the date of the transaction or the date of expiration of the right to cancel. Additionally, plaintiffs allege they rescinded their loans by sending a Rescission Notice to defendants Countrywide and Bank of New York on February 28, 2009 and to US Bank on March 2, 2009, but defendants failed to respond to the rescission demand. (Compl. at ¶¶ 35, 36.)

The complaint asserts three causes of action against defendant RTR: violation of the Truth in Lending Act ("TILA"); quiet title; and violation of California Business Professions Code § 17200 based on the alleged TILA violation. RTR contends all claims fail as a matter of

Legal Standard

A plaintiff must "plead a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). This statement must be sufficient to "give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47 (1957). Rule 12(b)(6) provides that a complaint may be dismissed for "failure to state a claim upon which relief may be granted." FED. R. CIV. P. 12(b)(6). A

complaint may be dismissed as a matter of law if it lacks a cognizable legal theory or states insufficient facts under a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir.1984).

The factual allegations of a complaint must be "enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955, 1965 (2007). A plaintiff must plead more than conclusory allegations to show "plausible liability" and avoid dismissal. at 1966 n. 5. The pleading standard of Rule 8 "demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation" and a complaint does not suffice "if it tenders 'naked assertion[s]' devoid of 'further factual enhancement.'" Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 127 S. Ct. at 1966).



Liability under TILA applies to creditors and their assignees. See 15 U.S.C. §§ 1640, 1641. Loan servicers cannot be held liable under TILA unless they owned the loan obligation at some point in time. 15 U.S.C. § 1641(f)(1) ("A servicer of a consumer obligation arising from a consumer credit transaction shall not be treated as an assignee of such obligation for purposes of this section unless the servicer is or was the owner of the obligation."); see also Mulato v. WMC Mortg. Corp., 2009 WL 3561536 *6 (N.D.Cal., Oct. 27, 2009) ("As a loan servicer that has not been alleged to own Plaintiff's mortgage notes, Chase cannot be held liable for TILA violations."). Here, plaintiffs allege on information and belief that RTR is a creditor by assignment within the meaning of 15 U.S.C. § 1602(f), as well as the loan servicer. (Compl. at ¶

In the complaint, plaintiffs state that the Notice of Rescission was sent to Countrywide, Bank of New York and US Bank and acknowledge that it was not sent to RTR. Nevertheless and without legal authority, plaintiffs contend that notice of rescission to RTR is presumed: "Plaintiffs mailed their rescission notice to Countrywide, the entity that they were directed to send their payments, and effectively delivered their notice of rescission to Defendant RTR. (Opp. at 9.)

The language of Regulation Z, states in relevant part: "To exercise the right to rescind, the consumer shall notify the creditor of the rescission by mail, telegram or other means of written communication." 12 C.F.R. 226.23(a)(2)(emphasis added). It is well-established that "when the statute's language is plain, the sole function of the courts -- at least where the disposition required by the text is not absurd -- is to enforce it according to its terms." Lamie v. U.S. Trustee, 124 S. Ct. 1023, 1030 (2004). When considering an agency's construction of the statute which it administers, if a court determines that "Congress has directly spoken to the precise question at issue," then "that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of ...

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