Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-02757/USCOURTS-casd-3_09-cv-02757-1/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1441 Petition for Removal

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Plaintiffs’ original complaint was dismissed by this Court. Cook v. Wells Fargo Bank,

2010 U.S. Dist. LEXIS 29956, 12-13 (S.D. Cal. Mar. 26, 2010).

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CHRISTOPHER R. COOK, an

individual; DEBRA K. POWERS-COOK,

an individual,

Plaintiffs,

CASE NO. 09cv2757 WQH (NLS)

ORDER

vs.

WELLS FARGO BANK, a foreign

corporation authorized to do business in

California; DOES 1 through 10 inclusive,

Defendants.

HAYES, Judge:

The matter before the Court is Defendant Wells Fargo Bank’s Motion to Dismiss

Plaintiff’s First Amended Complaint. (Doc. #11). 

BACKGROUND

On April 20, 2010 Plaintiffs filed this First Amended Complaint1

 (“FAC”). (Doc.

#10). Plaintiffs allege five causes of action: (1) violations of the Truth in Lending Act

(“TILA”), (2) Declaratory Relief, (3) Breach of Fiduciary Duty, (4) Fraud, and (5)

Negligent Misrepresentation. Id. On May 4, 2010, Defendant filed a Motion to Dismiss

Plaintiffs’ FAC. (Doc. #11). 

Plaintiffs allege they are the owners of property located at 507 Ocean Bluff Way,

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Encinitas, California 92024. (Doc. #10 ¶ 19). Plaintiffs allege they obtained a mortgage on

their property from Defendant in the amount of $1,500,000.00 on October 19, 2007. Id.

¶ 20. Plaintiffs allege Defendant “acquired a security interest, namely a Deed of Trust, on

the Property.” Id. ¶ 22. Plaintiffs allege they “paid settlement fees, finance charges,

interest and other costs” as part of the loan transaction. Id. ¶ 21.

Plaintiffs allege they mailed a Notice of Rescission rescinding the loan contract

pursuant to TILA to Defendant on May 16, 2009, “[a]fter discovering a defective

disclosure related to the right to cancel.” Id. ¶ 23. Plaintiffs allege 16 instances of

“deceptive or misleading disclosures” within the loan contract, which they allege violate

“both state and federal law.” Id. ¶ 27. Plaintiffs rely on the alleged violations of state and

federal law as the basis for the rescission claim, and assert these violations extend their

“right to rescind the transaction up to three years after [the] consummation [of the loan].” 

Id. ¶¶ 27-28. 

 In the alleged Notice of Rescission, attached to the FAC as exhibit 1, Plaintiffs

offered to tender “an amount due after appropriate credits [had been] made by [Defendant]

to the account.” Id., Ex. 1. Plaintiffs allege Defendant “failed to take any action necessary

or appropriate to reflect the termination of any security interest created under the

transaction” within 20 days of receipt of the Notice of Rescission. Id. ¶ 25. Plaintiffs

allege Defendant “indicated that it [would] proceed with a foreclosure on the property”

after Plaintiffs sent the Notice of Rescission. Id. ¶ 25. 

STANDARD OF REVIEW

Federal Rule of Civil Procedure 12(b)(6) permits dismissal for “failure to state a

claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). Federal Rule of Civil

Procedure 8(a) provides: “A pleading that states a claim for relief must contain . . . a short

and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.

P. 8(a)(2). Dismissal under Rule 12(b)(6) is appropriate where the Complaint lacks a

cognizable legal theory or sufficient facts to support a cognizable legal theory. See

Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). 

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To sufficiently state a claim for relief, a Complaint “does not need detailed factual

allegations” but the “[f]actual 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). “[A] plaintiff’s

obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels

and conclusions, and a formulaic recitation of the elements of a cause of action will not

do.” Id. (quoting Fed. R. Civ. P. 8(a)(2)). When considering a motion to dismiss, a court

must accept as true all “well-pleaded factual allegations.” Ashcroft v.Iqbal, --- U.S. ----,

129 S. Ct. 1937, 1950 (2009). However, a court is not “required to accept as true

allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable

inferences.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see,

e.g., Doe I v. Wal-Mart Stores, Inc., 572 F.3d 677, 683 (9th Cir. 2009) (“Plaintiffs’ general

statement that Wal-Mart exercised control over their day to day employment is a

conclusion, not a factual allegation stated with any specificity. We need not accept

Plaintiffs’ unwarranted conclusion in reviewing a motion to dismiss.”). “In sum, for a

Complaint to survive a motion to dismiss, the non-conclusory factual content, and

reasonable inferences from that content, must be plausibly suggestive of a claim entitling

the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009)

(quotations omitted).

ANALYSIS

I. TILA Violations

Plaintiffs allege they are entitled to actual and statutory damages as a result of TILA

violations. (Doc. #10 ¶ 33). Plaintiffs request the Court grant “a temporary restraining

order, a temporary injunction and permanent injunction declaring that Plaintiffs have the

right to rescind the loan, are entitled to possession of the Property due to rescission and that

Defendant cannot proceed with any foreclosure action.” Id. ¶ 36.

A. Statute of Limitations

Defendant contends the statute of limitations bars Plaintiffs’ TILA claim. (Doc. #11

at 4). Plaintiffs concede that any TILA claims for damages arising from Defendant’s

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2

A list of “material disclosures” for purposes of triggering the three-year right to

rescission is found in 12 section C.F.R. 226.23 n.48 (2009) and includes “the required

disclosures of the annual percentage rate, the finance charge, the amount financed, the total of

payments, the payment schedule, and the disclosures and limitations referred to in Sections

226.32(c) and (d) and 226.35(b)(2).

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alleged misconduct related to the loan transaction itself are time barred, but contend their

TILA claim based on Defendant’s alleged violations of the rescission provisions within

TILA is timely. (Doc. #12 at 2).

A cause of action for damages arising under TILA must be brought “within one year

from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e) (2009). Courts

generally measures the statutory period in section 1640(e) from the date of the credit

transaction, or the date the loan was consummated. See King v. State of Cal., 784 F.2d 910,

914 (9th Cir. 1986) (holding generally that, “the limitations period in Section 1640(e) runs

from the date of consummation of the transaction”). A borrower has the right to rescind the

transaction within three years, pursuant to 15 U.S.C. section 1635, when a lender fails to

make material disclosures required under TILA.2

 See also 12 C.F.R. § 226.23 (2009). 

Plaintiffs allege Defendant failed to make material disclosures, including the correct

amount financed, the finance charge, the annual percentage rate, and other information,

extending their “right to rescind the transaction up to three years after its consummation.” 

(Doc. # 10 ¶ 27–28). Plaintiffs allege their loan was consummated on October 19, 2007,

and Plaintiffs filed this action on October 29, 2009. Id. at 6. This is within the three-year

limitations period for rescission therefore Plaintiffs’ rescission claim under TILA is not

time barred. See Id. at ¶¶ 27a, 28; 15 U.S.C. § 1635; 12 C.F.R. § 226.23 (2009).

A lender that fails to respond properly to a Notice of Rescission violates TILA

Section 1635 and gives rise to damages separate from those time-barred damages claims

arising from failures to deliver material disclosures. 15 U.S.C. § 1635(b), 1640(e); See also

Miguel v. Country Funding Corp., 309 F.3d 1161, 1165 (9th Cir. 2002) (“15 U.S.C.

Section 1640(e) provides the borrower one year from the refusal of cancellation to file suit”

if the borrower provided the lender an effective rescission notice). Plaintiffs allege

Defendant violated TILA Section 1635 by failing to respond within 20 days to Plaintiffs’

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May 16, 2009 Notice of Rescission and allege entitlement to damages based on this failure

to respond. (Doc. #10 at ¶ 34). Plaintiffs commenced this action on October 19, 2009, well

within one year of this alleged violation of section 1635(b). Plaintiffs’ claim for damages

based on Defendant’s failure to respond to Plaintiffs’ Notice of Rescission within 20 days

is not time barred. 

B. Tender

Defendant contends Plaintiffs’ TILA claim fails because “bare and conclusory

allegations of Plaintiffs’ ability to tender are insufficient to support this element of

Plaintiffs’ TILA rescission claim.” (Doc. #11 at 5). Defendant further contends Plaintiffs

“do not... have an ability to truly tender the full amount owing on the loan. Instead,

Plaintiffs seek to tender a reduced amount determined by the court over a period of time.” 

Id. Plaintiffs contend “there is no more direct possible way for the Plaintiffs to allege they

have the ability to tender the amounts due to rescind this agreement.” (Doc. #12 at 4). 

TILA section 1635(b) sets forth a sequential scheme of rescission and tender,

whereby the creditor must return all money and property paid to the borrower and terminate

the security interest within 20 days of receiving a notice of rescission. 15 U.S.C. § 1635. 

Upon the creditor’s completion of this obligation, the borrower must tender the property

received from the creditor under the loan. The Federal Reserve Board Regulation Z section

226.23 implements section 1635(b) and provides for a substantially similar sequence of

obligations upon rescission. 12 C.F.R. section 226.23.

In 1980, Congress amended section 1635(b), qualifying the sequence of obligations

upon rescission and stating that “[t]he procedures prescribed by this subsection shall apply

except when otherwise ordered by a court.” 15 U.S.C. § 1635(b) (1995). The Court of

Appeals for the Ninth Circuit has held the authority to alter the rescission procedures of

section 1635(b) grants courts the discretion to condition rescission on the satisfaction of the

tender requirement. See Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1171 (9th Cir. 2003). 

A decision to condition rescission on tender “must be determined on a case-by-case basis,”

taking into consideration “the equities present in a particular case . . . including the nature

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of the violations and borrower’s ability to repay the proceeds.” Yamamoto, 329 F.3d at

1171, 1173. This Court has held it “will require Plaintiffs to plead facts that would

establish their ability to tender before it will reach the substance of their TILA claims.” 

Cook v. Wells Fargo Bank, 2010 U.S. Dist. LEXIS 29956, 12-13 (S.D. Cal. Mar. 26, 2010).

In the FAC, Plaintiffs allege they “possess sufficient liquid assets at their disposal to

tender the loan proceeds . . . .” (Doc. #10 at 12). These allegations are vague and lack

factual specificity regarding Plaintiffs’ ability to tender. In particular, it is unclear what the

phrase “at their disposal” means. Plaintiffs’ first cause of action for TILA violations is

dismissed.

II. Declaratory Relief

Defendant contends Plaintiffs’ “cause of action for declaratory relief is nothing more

than a reassertion of Plaintiffs’ other claims” and should be dismissed. (Doc. #11 at 7). 

Plaintiffs contend declaratory relief is necessary to determine “what terms Plaintiffs shall

tender back the original principal of the loan. Whether Plaintiffs are entitled to possession of

the real property secured by the loan and whether an injunction is necessary to restrain

Defendants from taking further actions which would injure Plaintiffs...” Id. at 8. 

Plaintiffs allege a claim for a determination “of the parties’ rights and duties as is

necessary and appropriate at this time under the circumstances, and a declaration as to

whether Defendant violated federal and state lending laws.” (Doc. #10 at 13). The TILA

claim will resolve the “rights and duties” of the Plaintiffs. See Horton v. Cal. Credit Corp.

Ret. Plan, 2009 U.S. Dist. LEXIS 71176 (S.D. Cal. Aug. 13, 2009) (Plaintiff’s TILA claim

would resolve the same issues Plaintiff’s declaratory relief claim would resolve). The court

concludes that Declaratory relief would not address any issues that are not addressed by

Plaintiffs’ other claims. See Exxon Shipping Co. v. Airport Depot Diner, 120 F.3d 166, 168-

170 (9th Cir. 1997) (“a declaratory judgment action must serve some purpose in resolving a

dispute. If the relief serves no purpose . . . the district court should not grant it.”). 

Plaintiffs’ second cause of action for declaratory relief is dismissed.

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II. State Law Claims

The Notice of Removal asserts that federal question jurisdiction exists pursuant to

28 U.S.C. Section 1331 by virtue of the TILA claims. (Doc. # 1 at 3). Neither the FAC nor

the Notice of Removal assert that diversity jurisdiction exists. The Notice of Removal

asserts this court has supplemental jurisdiction over the state law claims pursuant to

28 U.S.C. Section 1367 and 28 U.S.C. Section 1441(c). (Id.).

The federal supplemental jurisdiction statute provides: “[I]n any civil action of

which the district courts have original jurisdiction, the district courts shall have

supplemental jurisdiction over all other claims that are so related to claims in the action

within such original jurisdiction that they form part of the same case or controversy under

Article II of the United States Constitution.” 28 U.S.C. § 1367(a). A district court may

decline to exercise supplemental jurisdiction over a state law claim if:

(1) the claim raises a novel or complex issue of State law,

(2) the claim substantially predominates over the claim or claims over which

the district court has original jurisdiction

(3) the district court has dismissed all claims over which it has original

jurisdiction, or

(4) in exceptional circumstances, there are other compelling reasons for

declining jurisdiction.

28 U.S.C. § 1367(c). Because the Court has dismissed all of the federal law claims, the

Court declines to exercise supplemental jurisdiction over the state law claims pursuant to

28 U.S.C. Section 1367(c)(3). See Ove v. Gwinn, 264 F.3d 817, 826 (9th Cir. 2001) (“A

court may decline to exercise supplemental jurisdiction over related state-law claims once it

has dismissed all claims over which it has original jurisdiction.”); San Pedro Hotel Co.,

Inc. v. City of Los Angeles, 159 F.3d 470, 478 (9th Cir. 1998) (district courts not required to

provide explanation when declining jurisdiction pursuant to 28 U.S.C. Section 1367(c)(3)).

CONCLUSION

IT IS HEREBY ORDERED that Defendant Wells Fargo’s Motion to Dismiss (Doc.

# 11) is GRANTED. Plaintiff may file a motion for leave to amend the complaint within

thirty (30) days of the date of this order. Plaintiff must obtain a hearing date pursuant to

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the Local Rules of Civil Procedure before filing any motion for leave to amend. In the

event no motion is filed, the Court will close the case.

DATED: July 7, 2010

WILLIAM Q. HAYES

United States District Judge

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