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Wes W. Johnson v. Homecomings Financial

September 19, 2011


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


Defendants GMAC Mortgage, LLC; Homecomings Financial, LLC; Executive Trustee Services, Inc.; Deutsche Bank National Trust Company; Deutsche Bank Trust Company Americas as Trustee for RALI 2007QA1; and Pite Duncan, LLP move to dismiss plaintiff's first amended complaint under Federal Rule of Civil Procedure 12(b)(6). The motion has been fully briefed. The Court finds this matter suitable for determination on the papers submitted and without oral argument pursuant to Civil Local Rule 7.1(d)(1).


Plaintiff refinanced his mortgage loan on residential property located in Nevada with defendant Homecomings Financial on November 28, 2006. On June 25, 2008, plaintiff "notified Homecomings and Executive Trustee Services that he was rescinding the Loan pursuant to TILA . . . ." (FAC at ¶ 18.) Because of plaintiff's failure to make payments on the loan, on November 19, 2008, plaintiff's property was subject to a foreclosure sale and the property was transferred to Deutsche Americas and Deutsche National. (FAC at ¶¶ 20-21.)

As a result of the alleged wrongful foreclosure based upon his rescission of the loan, plaintiff also alleges that his credit rating was damaged.

The FAC asserts 19 causes of action under Unfair Lending Practices, N.R.S. 598D.100; conspiracy to commit fraud and conversion; permanent injunction; declaratory relief; wrongful foreclosure*fn1 ; fraud through omission; quiet title; tortuous breach of the implied duty of good faith and fair dealing; civil conspiracy; racketeering under NRS 207.470; unjust enrichment; fraud in the inducement; extinguishment of liens; violation of 15 U.S.C. § 1681s-2, Fair Credit Reporting Act; violation of 15 U.S.C. § 1692, the Fair Debt Collection Practices Act ("FDCPA"); 15 U.S.C. § the Truth in Lending Act ("TILA"); and breach of contract.

"The focus of any Rule 12(b)(6) dismissal . . . is the complaint." Schneider v. California Dept. of Corrections, 151 F.3d 1194, 1197 n.1 (9th Cir. 1998). A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. IV. P. 8(a). A Rule 12(b)(6) motion tests the sufficiency of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal pursuant to Rule 12(b)(6) is proper only where there is either a "lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory." Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir .1988). "While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need 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. Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks, brackets and citations omitted). In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of all factual allegations and must construe them in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996).

After accepting as true all non-conclusory allegations and drawing all reasonable inferences in favor of the plaintiff, the Court must determine whether the complaint alleges a plausible claim to relief. See Ashcroft v. Iqbal 129 S. Ct 1937, 1950 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)(A complaint cannot survive a motion to dismiss unless it provides "sufficient factual matter, . . . to 'state a claim to relief that is plausible on its face.'"). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."

at 1949. In determining facial plausibility, whether a complaint states a plausible claim is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 1950.

In determining the propriety of a Rule 12(b)(6) dismissal, a court may not look beyond the complaint for additional facts, e.g., facts presented in plaintiff's memorandum in opposition to a defendant's motion to dismiss or other submissions. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998); see also 2 OORE'S FEDERAL PRACTICE, § 12.34[2] (Matthew Bender 3d ed.) ("The court may not . . . take into account additional facts asserted in a memorandum opposing the motion to dismiss, because such memoranda do not constitute pleadings under Rule 7(a).").


Rescission under TILA

Like the original complaint, plaintiff's FAC asserts that by giving notice of rescission of the mortgage loan he executed, the loan was in fact rescinded. And as a result of the rescission, plaintiff asserts that the foreclosure of the property and all subsequent activity related to his credit reports were wrongful. Plaintiff's TILA and quiet title claim under NRS 645F.440 are the basis for rescission of the loan agreement. In sum, plaintiff's allegation concerning TILA is the same as that provided in the original: "Homecomings has negligently and willfully violated TILA and its regulations." (Compl. at ¶ 35; FAC at ¶ 190.) As the Court previously noted, "[t]his is a woefully inadequate allegation -- it fails to provide any ground for his entitlement to relief and instead is a legal conclusion." (Order filed August 5, 2010 at 3.)

Further, plaintiff's FAC fails to make any allegation concerning his compliance with the rescission statute. 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). 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 WL 188604 at *5(E.D. Cal. 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 WL 2901637 at *8 (S.D. Cal.2009); Ing Bank v. Korn, 2009 WL 1455488 at *1 (W.D. Wash.2009).

Johnson contends that:

Plaintiff need not TENDER any funds regarding the note in order to foreclose, in that under information and belief, the note has been severed from the Deed of Trust making the note unsecured and the Deed of Trust a "cloud on the title" of Plaintiff [sic].

(FAC at ¶ 148.)

Plaintiff is incorrect. First, in order to rescind the loan, plaintiffs must allege the ability to tender the loan proceeds, Yamamoto v. Bank of New York, 329 F.3d 1167, 1171 (9th Cir. 2003); see also Nichols v. Greenpoint Mort. Funding Inc.,, 2008 WL 3891126, *5 (C.D. Cal., Aug. 19, 2008)(rescission "is a means to return the parties to the status quo ante, as if the loan never existed."). There is no exception to the tender rule based on plaintiff's belief that the note was severed from the Deed of Trust. Because plaintiff has not made an offer of complete tender, he may not seek rescission of the loan.

Second, plaintiff's legal theory concerning the "note-split-from the deed" theory has been rejected repeatedly. Vega v. CTX Mortg. Co., LLC, 761 F. Supp.2d 1095 (D. Nev. 2011); In re Mortgage Elec. Registration Sys. (MERS) Litig., 2011 U.S. Dist. LEXIS 7232 at *5, 2011 WL 251453 (D.Ariz. Jan. 25, 2011)(rejecting the "note-split-from-the-deed" ...

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