Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_09-cv-01316/USCOURTS-caed-1_09-cv-01316-1/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1601 Truth in Lending

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

ANTONIO DEL VALLE, et al., )

)

)

)

Plaintiffs, )

)

vs. )

)

)

MORTGAGE BANK OF CALIFORNIA, )

et al., )

)

)

Defendants. )

)

)

No. CV-F-09-1316 OWW/DLB

MEMORANDUM DECISION GRANTING 

DEFENDANT JP MORGAN CHASE

BANK'S MOTION TO DISMISS

FIRST AMENDED COMPLAINT

(Doc. 30)

Plaintiffs Antonio and Elsie Del Valle have filed a First

Amended Complaint (“FAC”) pursuant to the Memorandum Decision and

Order filed on November 10, 2009 (“November 10 Memorandum

Decision”). The FAC names as Defendants Mortgage Bank of

California (“Mortgage Bank”); JPMorgan Chase Bank, formerly known

as Washington Mutual Bank (“JPMorgan” or “Chase Bank”); Quality

Loan Service Corporation (“Quality Loan”); and Does 1-10. 

The FAC alleges that Plaintiffs are the owners of the

principal dwelling known as 11611 Peninsula Park Drive, 

1

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 1 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Bakersfield, California. As “Conditions,” the FAC alleges:

11. All Conditions precedent have been

performed or have occurred and TILA

violations may be asserted defensively now

due to the non-judicial foreclosure filing

and election to sell and as a recoupment or

set off pursuant to 15 U.S.C. § 1637 et seq. 

‘This subsection [providing for the one year

statute of limitations] does not bar a person

from asserting a violation of this subchapter

in an action to collect a debt which was

brought more than one year from the date of

the occurrence of the violation as a matter

of defense by recoupment or set-off in such

action’ (15 U.S.C. § 1640[c]), Delta Funding

Corp. v. Murdaugh, 6 AD. 3d 561, 774 N.Y.S.2d

797 (2 Dept. 2004); McNinch v. Mortgage nd

America, Inc. (In re McNinch), 250 B.R. 848

(Bankr.W.D.Pa.2000).

12. The mere loss of a statutory right to

disclosure is an inquiry that gives the

consumer standing for Article III purposes. 

(DeMando v. Morris, 206 F.3d 1300 (9th

Cir.2000).

In the section of the FAC captioned “Statement of Facts,”

Plaintiffs allege:

13. The federally related mortgage

transaction at the root of this case was

closed, and documents were signed on or about

June 16, 2007.

14. Prior to the closing, Plaintiffs were

contacted by Defendants, regarding the

refinancing of their mortgage loan.

15. Plaintiff subsequently entered into a

mortgage loan transaction (hereinafter the

‘Transaction’) to include a Deed of Trust

(‘Deed of Trust’) securing such Adjustable

Rate Note (‘Note’) covering the Property,

then and now the principal dwelling and home

of the Plaintiffs and their family (see

Complaint Exhibits ‘2' and ‘3')[.]

16. The Transaction required Plaintiffs to

pay money arising out of a transaction in

2

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 2 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

which money, property, or goods and services

were the subject thereof and the same were

primarily for personal, family and household

purposes.

17. The security interest in the Deed of

Trust was not created to finance the

acquisition or initial construction of the

Plaintiffs’ property but to refinance

previous consumer debts including the

mortgage lien.

18. The Transaction is characterized as a

Consumer Credit Transaction as that term is

defined under 15 U.S.C. § 1602(h) and Reg. Z

§ 226.2(a).

19. The Transaction is characterized as a

Closed-end Credit Transaction as that term is

defined under Reg. Z § 226.2(10) where a

security interest was retained in favor of

the originator, Defendants as the assignee,

transferee or servicer.

20. The Transaction is subject to all

content requirements set forth in 15 U.S.C. §

1635(a), and 15 U.S.C. § 1638; Reg. Z §§

226.17 - 226.23.

21. Further, the following documents related

to the mortgage transaction were not lawfully

provided by the Defendants to the Plaintiff

[sic]:

a. Handbook on Adjustable Rate 

Mortgage;

b. HUD Brochures;

c. Variable Rate Disclosures;

d. Business Affiliations

Disclosure;

e. Broker’s Agreements;

f. Disbursal Disclosures;

g. Patriot Act Disclosure;’

h. Loan Origination Agreement.

3

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 3 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

22. Further, Plaintiffs received one copy

each of the unsigned and undated Notice of

Right to Cancel. (see Complaint Exhibits ‘6'

and ‘7')[.]

23. The failure to accurately and

effectively disclose a Truth in Lending

Disclosure Statement with effective Notice to

Cancel is a failure to provide accurately a

material disclosure as that term is defined

under 15 U.S.C. § 1602(u); Reg. Z § 226.23

(a)(3)n48.

24. Defendants ratified this transaction

with an improper, ineffective, and unlawful

omission of material disclosures as that term

is defined under 15 U.S.C. § 1602(u); Reg. Z

§ 226.23(a)(3)n48.

25. A controversy has arisen due to

Defendants’ failure to provide accurate

material disclosures so that Plaintiffs may

tender any balance and extinguish the

Transaction by operation of law.

26. On December 11, 2008, Plaintiffs sent a

demand letter containing request for

rescission of contract and offer to tender to

Defendant CHASE BANK. (See Complaint

Exhibits [sic] ‘8' and Exhibit ‘9'.)

27. Defendant CHASE BANK did not respond.

28. In the same mail envelope above,

Plaintiffs also enclosed and sent to the

Defendant CHASE BANK, the RESPA Qualified

Written Request (QWR), TILA Request, and

Notice of Rescission. (See Complaint Exhibit

‘10'.)

29. In its letter dated December 22, 2008,

Defendant CHASE BANK forwarded the QWR to its

Executive Response Team

30. On February 26, 2009, Defendant MORTGAGE

BANK executed an assignment of Deed of Trust

transferring to JP Morgan Chase Bank,

National Association all beneficial interest

under the Deed of Trust dated June 16, 2007. 

(see Complaint, Exhibit ‘11'.)

4

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 4 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

31. None of the Defendants are actual ‘note

holders’ or ‘holders in possession’ of the

alleged indebtedness.

32. On March 20, 2009, Plaintiffs through

counsel sent a letter to Defendant CHASE BANK

requesting the latter to produce for

inspection within ten (10) days from receipt

of the letter, the original Promissory Note

which Plaintiffs signed together with a

certification that the said note is in its

(CHASE BANK) possession and failure of which

would lead Plaintiffs to assume that

Defendant CHASE BANK is not the owner of the

actual note and without any right over

client’s property. (see Complaint Exhibit

‘13')[.]

33. Defendant CHASE BANK failed to respond

which made Plaintiffs assume that defendant

[sic] CHASE BANK is not the owner of the

actual note and without any right over

Plaintiffs’ property.

34. As a result of the acts alleged above,

Plaintiffs have suffered nausea, emesis,

constant headaches, insomnia, embarrassment,

and incurred an ascertainable loss.

The FAC alleges as Count I, Rescission under TILA and

Regulation Z against all Defendants. After incorporating all

preceding allegations, Count 1 alleges:

36. Plaintiffs received one copy each of the

unsigned and undated Notice of Right to

Cancel.

37. Each borrower must receive two Notices

of Right to Cancel which clearly and

conspicuously disclose: (1) the retention or

acquisition of a security interest in the

consumer’s principal dwelling; the consumer’s

right to rescind the transaction; (3) how to

exercise the right to rescind with a form for

that purpose, designating the address of the

creditor’s place of business; (4) the effects

of rescission; and (5) the date the

rescission period expires (Regulation Z §

226.23(b)(1)(i-v). Defendants failed to

5

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 5 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

comply with such requirements.

38. As a result of Defendants’ failure to

provide the Notice of Right to Cancel, the

required mortgage documents and accurate

material disclosures, Plaintiffs are entitled

to and had exercised their right of

rescission of the Transaction and offer to

tender (see Complaint Exhibit ‘8').

39. Plaintiffs have a continuing right to

rescind the Transaction until the third

business day after receiving both the proper

Notice of Right to Cancel and delivery of all

material disclosures correctly made in a form

the Plaintiff [sic] may keep pursuant to 15

U.S.C. § 1635(a) and Reg. Z § 226.23(a), and

the three-day right is statutorily extended

due to the foregoing material failures.

40. On December 11, 2008, Plaintiffs sent

demand letter containing request for

rescission of contract and offer to tender to

the Defendant CHASE BANK (see Complaint

Exhibit ‘8'.)

41. Defendant CHASE BANK did not respond.

42. In the same mail envelope above,

Plaintiffs also enclosed and sent to the

Defendant CHASE BANK, the RESPA Qualified

Written Request (QWR), TILA Request, and

Notice of Rescission. (see Complaint Exhibit

‘10')[.]

43. Rather than respond to the QWR,

Defendant CHASE BANK wrote to the Plaintiffs

that it forwarded the QWR to its Executive

Response Team.

44. Notwithstanding the above, Plaintiffs

hereby offer and tender to return to

Defendant CHASE BANK their property at 11611

Peninsula Park Drive, Bakersfield, CA 93311

but said Defendant should also return all

payments, interests, costs, expenses, and

damages to the Plaintiffs with regard to the

mortgage transaction of said property. [see

15 U.S.C. § 1635(b) and Reg. Z 226.15(d)(1),

226.23(d)1)].

6

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 6 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

45. After Plaintiffs’ notice of rescission

and offer to tender, by operation of law, the

Defendants have 20 days to take action which

included (1) cancellation of the Promissory

Note, (2) cancellation of the Deed of Trust,

and (3) return of all monies of the

Transaction.

46. Failure to lawfully respond gives rise

to statutory and actual damages under 15

U.S.C. § 1640.

The FAC alleges as Count 2, quiet title against all

Defendants. After incorporating all preceding allegations, Count

2 alleges:

48. Plaintiffs are the owners of the SUBJECT

PROPERTY known as 11611 Peninsula Park Drive,

Bakersfield, CA 93311 per the Deed of Trust

executed by the Plaintiffs.

49. The basis of Plaintiffs’ interest in

title is a Deed of Trust from Defendants,

granting the SUBJECT PROPERTY to Plaintiffs,

and recorded in the Official Records of the

County of Kern.

50. Plaintiffs are seeking to quiet title

against the claims of Defendants as follows:

Defendants are seeking to hold themselves out

as the fee simple owners of the subject

properties [sic], when in fact Plaintiffs

have an interest in such properties [sic]

held by Defendants, when Defendants have no

right, title, interest, or estate in the

SUBJECT PROPERTY, and Plaintiffs’ interest is

adverse to Defendants’ claims of ownership.

51. Plaintiffs therefore seek a judicial

declaration that the title to the SUBJECT

PROPERTY is vested in Plaintiffs alone and

that Defendants and their successors be

declared to have no estate, right, title, or

interest in the SUBJECT PROPERTY and that

said Defendants, and each of them, be forever

enjoined from asserting any estate, right,

title, or interest in the SUBJECT PROPERTY,

adverse to Plaintiffs herein.

7

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 7 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

The FAC prays for relief as follows:

1. Rescission of this Transaction;

2. Termination of any security interest in

Plaintiffs’ Property created under the

Transaction;

3. Order Defendants to return of [sic] any

money or property given by the Plaintiffs to

anyone, including the Defendants, in

connection with this Transaction;

4. Statutory damages of no less than

$2,000.00 if Defendants fail to respond

properly to Plaintiffs’ rescission notice;

5. Enjoin Defendants during pendency of this

action, permanently thereafter, from

instituting, prosecuting, or maintaining a

proceeding on the Plaintiffs’ Property, from

recording any deeds or mortgages regarding

the Property, except a lawful release of

lien, and from otherwise taking any steps to

deprive Plaintiffs’ ownership of the

Property;

6. Order that, if Defendants fail to further

respond lawfully to Plaintiffs’ notice of

rescission, Plaintiffs have no duty to

tender, but in the alternative, if tender is

required, determine the amount of the tender

obligation in light of Plaintiffs’ claims,

and order Defendants to accept tender on

reasonable terms over a reasonable period of

time, [sic] 

7. Reasonable attorney’s fee [sic] and costs

of suit, [sic]

8. Actual damages in an amount to be

determined at trial, [sic]

9. For such other and further relief as the

Court may deem just and proper.

Defendant JPMorgan Chase Bank, as purchaser of the loans and

other assets of Washington Mutual Bank from the Federal Deposit

Insurance Corporation, acting as receiver for Washington Mutual

8

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 8 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Bank and pursuant to its authority under the Federal Deposit

Insurance Act, 12 U.S.C. § 1821(D), erroneously sued individually

as JPMorgan Chase Bank and Washington Mutual Bank, moves to

dismiss the FAC for failure to state a claim upon which relief

can be granted.

I. GOVERNING STANDARDS

A motion to dismiss under Rule 12(b)(6) tests the

sufficiency of the complaint. Novarro v. Black, 250 F.3d 729,

732 (9 Cir.2001). Dismissal is warranted under Rule 12(b)(6) th

where the complaint lacks a cognizable legal theory or where the

complaint presents a cognizable legal theory yet fails to plead

essential facts under that theory. Robertson v. Dean Witter

Reynolds, Inc., 749 F.2d 530, 534 (9 Cir.1984). In reviewing a th

motion to dismiss under Rule 12(b)(6), the court must assume the

truth of all factual allegations and must construe all inferences

from them in the light most favorable to the nonmoving party. 

Thompson v. Davis, 295 F.3d 890, 895 (9 Cir.2002). However, th

legal conclusions need not be taken as true merely because they

are cast in the form of factual allegations. Ileto v. Glock,

Inc., 349 F.3d 1191, 1200 (9 Cir.2003). “A district court th

should grant a motion to dismiss if plaintiffs have not pled

‘enough facts to state a claim to relief that is plausible on its

face.’” Williams ex rel. Tabiu v. Gerber Products Co., 523 F.3d

934, 938 (9 Cir.2008), quoting Bell Atlantic Corp. v. Twombly,

th

550 U.S. 544, 570 (2007). “‘Factual allegations must be enough

to raise a right to relief above the speculative level.’” Id. 

9

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 9 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

“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.” Bell Atlantic, id. at 555. 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. Id. at 556. The

plausibility standard is not akin to a “probability requirement,’

but it asks for more than a sheer possibility that a defendant

has acted unlawfully, Id. Where a complaint pleads facts that

are “merely consistent with” a defendant’s liability, it “stops

short of the line between possibility and plausibility of

‘entitlement to relief.’” Id. at 557. In Ashcroft v. Iqbal, ___

U.S. ___, 129 S.Ct. 1937 (2009), the Supreme Court explained:

Two working principles underlie our decision

in Twombly. First, the tenet that a court

must accept as true all of the allegations

contained in a complaint is inapplicable to

legal conclusions. Threadbare recitations of

the elements of a cause of action, supported

by mere conclusory statements, do not suffice

... Rule 8 marks a notable and generous

departure from the hyper-technical, codepleading regime of a prior era, but it does

not unlock the doors of discovery for a

plaintiff armed with nothing more than

conclusions. Second, only a complaint that

states a plausible claim for relief survives

a motion to dismiss ... Determining whether a

complaint states a plausible claim for relief

will ... be a context-specific task that

requires the reviewing court to draw on its

judicial experience and common sense ... But

10

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 10 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

where the well-pleaded facts do not permit

the court to infer more than the mere

possibility of misconduct, the complaint has

alleged - but it has not ‘show[n]’ - ‘that

the pleader is entitled to relief.’ ....

In keeping with these principles, a court

considering a motion to dismiss can choose to

begin by identifying pleadings that, because

they are no more than conclusions, are not

entitled to the assumption of truth. While

legal conclusions can provide the framework

of a complaint, they must be supported by

factual allegations. When there are wellpleaded factual allegations, a court should

assume their veracity and then determine

whether they plausibly give rise to an

entitlement to relief.

 Immunities and other affirmative defenses may be upheld on

a motion to dismiss only when they are established on the face of

the complaint. See Morley v. Walker, 175 F.3d 756, 759 (9th

Cir.1999); Jablon v. Dean Witter & Co., 614 F.2d 677, 682 (9th

Cir. 1980) When ruling on a motion to dismiss, the court may

consider the facts alleged in the complaint, documents attached

to the complaint, documents relied upon but not attached to the

complaint when authenticity is not contested, and matters of

which the court takes judicial notice. Parrino v. FHP, Inc, 146

F.3d 699, 705-706 (9 Cir.1988). th

II. REQUEST FOR JUDICIAL NOTICE

JPMorgan requests the Court take judicial notice of the

following documents:

A. Deed of Trust executed on June 16, 2007

and recorded on June 25, 2007 in the Kern

County Recorder’s Office as Instrument Number

0207133178;

B. Assignment of Deed of Trust executed on

11

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 11 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

February 26, 2009 and recorded on April 22,

2009 in the Kern County Recorder’s Office as

Instrument Number 0209056822;

C. Substitution of Trustee executed on

February 26, 2009 and recorded on April 13,

2009 in the Kern County Recorder’s Office as

Instrument Number 0209051489;

D. Notice of Default in the amount of

$15,084.00 recorded on April 3, 2009 in the

Kern County Recorder’s Office as Instrument

Number 0209047432

Plaintiffs pose no objection to the Request for Judicial

Notice. The Court may take judicial notice of matters of public

record pursuant to Rule 201, Federal Rules of Evidence.

III. TENDER.

JPMorgan moves to dismiss Counts I and II on the ground that

Plaintiffs fail to allege or make an actual tender.

In the November 10 Memorandum Decision, the Court ruled:

Chase Bank moves to dismiss these claims for

relief [under TILA] because Plaintiffs have

not alleged the ability to tender the balance

on the Note.

Chase Bank cites, inter alia, Yamamoto v.

Bank of New York, 329 F.3d 1167 (9th

Cir.2003), cert. denied, 540 U.S. 1149

(2004).

In Yamamoto, a TILA rescission case, the

Ninth Circuit held that the trial court has

discretion to reorder the sequence of

rescission events to assure performance,

including by dismissing a case, where it was

clear that the plaintiff lacked the ability

to effectuate rescission. 329 F.3d at 1173. 

In Yamamoto, the borrowers testified that

they could not fulfill TILA’s tender

requirement. The district court gave them 60

days before dismissing their rescission claim

in an attempt to do so. When the borrowers

were unable to provide evidence that they

12

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 12 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

could tender the proceeds, the district court

granted summary judgment in favor of the

lender. The Ninth Circuit affirmed:

Tampon argues that the district

court could not deny her rescission

for failure to pay back loan

proceeds without first determining

whether TILA was violated, and

without recognizing that TILA and

Federal Reserve Board Regulation Z

implementing it, 12 C.F.R. §

226.23(d), automatically voided

BNY’s security interest in her

property once she exercised her

right to rescind. She posits that

language added in 1981 to

Regulation Z indicates that a court

has no discretion to change the

substantive provisions of the Act,

which is what she contends the

court did when it required tender

prematurely ....

TILA was enacted in 1968 ‘to assure

a meaningful disclosure of credit

terms to that the consumer will be

able to compare more readily the

various credit terms available to

him and avoid the uninformed use of

credit.’ 15 U.S.C. § 1601(a). If

required disclosures are not made,

the consumer may rescind. See 15

U.S.C. § 1635(a). Section 1635(b)

governs the return of money or

property when a borrower exercises

the right to rescind. It provides

that the borrower is not liable for

any finance or other charge, and

that any security interest becomes

void upon such a rescission. The

statute adopts a sequence of

rescission and tender that must be

followed unless the court orders

otherwise: within twenty days of

receiving a notice of rescission,

the creditor is to return any money

or property and reflect termination

of the security interest; when the

creditor has met these obligations,

13

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 13 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

the borrower is to tender the

property.

Section 226.23 of Regulation Z

implements § 1635(b). It tracks

the statute and states:

(d) Effects of rescission.

(1) When a consumer rescinds a

transaction, the security interest

giving rise to the right of

rescission becomes void and the

consumer shall not be liable for

any amount, including any finance

charge.

(2) Within 20 calendar days after

receipt of a notice of rescission,

the creditor shall return any money

or property that has been given to

anyone in connection with the

transaction and shall take any

action necessary to reflect the

termination of the security

interest.

(3) If the creditor has delivered

any money or property, the consumer

may retain possession until the

creditor has met its obligation

under paragraph (d)(2) of this

section. When the creditor has

complied with that paragraph, the

consumer shall tender the money or

property to the creditor ....

(4) The procedures outlined in

paragraphs (d)(2) and (3) of this

section may be modified by court

order.

12 C.F.R. § 226.23.

TILA’s provision permitting a court

to modify procedures was added in

1980 as part of the Truth in

Lending Simplification and Reform

Act ... These changes followed in

the wake of decisions by this court

and others which held that the

14

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 14 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

statute need not be interpreted

literally as always requiring the

creditor to removes its security

interest prior to the borrower’s

tender of proceeds.

Id. at 1169-1171. Yamamoto cited Palmer v.

Wilson, 502 F.2d 860, 862-863 (9 Cir.1974): th

Since Palmer we have recognized

that in applying TILA, ‘a trial

judge ha[s] the discretion to

condition rescission on tender by

the borrower of the property he has

received from the lender.’ ... As

we explained, whether a decree of

rescission should be conditional

depends upon ‘the equities present

in a particular case, as well as

consideration of the legislative

policy of full disclosure that

underlies the Truth in Lending Act

and the remedial-penal nature of

the private enforcement provisions

of the Act.’ ... Indeed, in LaGrone

we held that rescission should be

conditioned on repayment of the

amounts advanced by the lender ...

We noted that the TILA violations

there were not egregious (failure

to disclose an acceleration clause

and amount financed in the broker’s

statement, and to delineate

additional data from mandatory

data), and that the equities

favored the creditor who would

otherwise have been left in an

unsecured position in the

borrower’s intervening bankruptcy

....

Id. at 1171. Yamamoto cited Semar v. Platte

Valley Federal Savings & Loan Association,

791 F.2d 699, 705-706 (9 Cir.1986), that th

the courts have no discretion to alter TILA’s

substantive provisions:

Trying to fit within Semar, Tampon

argues that subsection (d)(4) of

Regulation Z is a substantive

provision that does not allow for

15

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 15 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

modification of (d)(1) - the

subsection that provides for

automatic voiding of BNY’s security

interest upon rescission - because

(d)(4) only permits a court to

order modification of the

procedures set out in subsections

(d)(2) and (d)(3). While it is

true that (d)(4) confers discretion

to modify (d)(2) and (d)(3), not

(d)(1), the argument only goes so

far as it begs the question of when

a transaction is ‘rescinded.’ For

Tampon to prevail, rescission must

be accomplished automatically upon

her decision to rescind,

communicated by a notice of

rescission, without regard to

whether the law permits her to

rescind on the grounds asserted. 

We believe this makes no sense

when, as here, the lender contests

the ground upon which the borrower

rescinds. 

If BNY had acquiesced in Tampon’s

notice of rescission, then the

transaction would have been

rescinded automatically, thereby

causing the security interest to

become void and triggering the

sequence of events laid out in

subsections (d)(2) and (d)(3). But

here, BNY contested the notice and

produced evidence sufficient to

create a triable issue of fact

about compliance with TILA’s

disclosure requirements. In these

circumstances, it cannot be that

the security interest vanishes

immediately upon the giving of

notice. Otherwise, a borrower

could get out from under a secured

loan simply by claiming TILA

violations, whether or not the

lender has actually committed any. 

Rather, under the statute and the

regulation, the security interest

‘becomes void’ only when the

consumer ‘rescinds’ the

transaction. In a contested case,

16

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 16 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

this happens when the right to

rescind is determined in the

borrower’s favor. 

...

Thus, a court may impose conditions

on rescission that assure that the

borrower meets her obligations once

the creditor has performed its

obligations. Our precedent is

consistent with the statutory and

regulatory regime of leaving courts

free to exercise equitable

discretion to modify rescission

procedures. This also comports

with congressional intent that ‘the

courts, at any time during the

rescission process, may impose

equitable conditions to insure that

the consumer meets his obligations

after the creditor has performed

his obligations as required by the

act.’ ....

As rescission under § 1635(b) is an

on-going process consisting of a

number of steps, there is no reason

why a court that may alter the

sequence of procedures after

deciding that rescission is

warranted, may not do so before

deciding that rescission is

warranted when it finds that,

assuming grounds for rescission

exist, rescission still could not

be enforced because the borrower

cannot comply with the borrower’s

rescission obligations no matter

what. Such a decision lies within

the court’s equitable discretion,

taking into consideration all the

circumstances including the nature

of the violations and the

borrower’s ability to repay the

proceeds. If, as was the case

here, it is clear from the evidence

that the borrower lacks capacity to

pay back what she has received

(less interest, finance charges,

etc.), the court does not lack

17

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 17 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

discretion to do before trial what

it could do after.

Whether the call is correct must be

determined on a case-by-case basis,

in light of the record adduced. 

Here, for example, at oral argument

Tampon pressed upon us the

possibility that borrowers could

refinance or sell the property

between the time a court grants

rescission and when pay back is

required, yet to do so they must

have an order in hand. We express

no opinion on this, for there is

nothing at all to this effect in

the record. We simply decide that

in the circumstances of this case,

the court did not lack discretion

to modify the sequence of

rescission events to assure that

Tampon could repay the loan

proceeds before going through the

empty (and expensive) exercise of a

trial on the merits.

Id. at 1171-1173. See also Ing Bank v. Korn,

2009 WL 1455488 at *1

(W.D.Wash.2009)(granting defendant’s motion

to dismiss TILA rescission claim in reliance

on citation to Yamamoto discussion of

judicial discretion to condition rescission

on tender); Boles v. Merscorp, Inc., 2009 WL

650631 at *1 (C.D.Cal.2009)(denying

plaintiff’s motion for reconsideration of its

prior order to plaintiff because, in the

absence of a demonstrated ability to tender,

plaintiff has not demonstrated a likelihood

of success on the merits of its TILA claim);

Garza v. American Home Mortg., 2009 WL 188604

at *5 (E.D.Cal.2009)(observing that Yamamoto

held that a court may require borrowers to

prove the ability to repay a loan to plead

rescission, and granting defendant’s motion

to dismiss TILA rescission claim in light of

complaint’s failure to allege ability to

tender, since “[r]escission is an empty

remedy without [plaintiff]’s ability to pay

back what she has received.”); Alcaraz v.

Wachovia Mortg., FSB, 2009 WL 160308 at * 4

(E.D.Cal.2009)(refusing to dismiss

18

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 18 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

plaintiff’s rescission claims under TILA even

though the complaint failed to allege the

ability to tender because the court was

troubled by the assertion of a factual issue

to defeat plaintiff’s rescission claim);

American Mortg. Network, Inc. v. Shelton, 486

F.3d 815, 821 (4 Cir.2007)(affirming grant th

of summary judgment in favor of defendant on

plaintiffs’ TILA claims because “[o]nce the

trial judge ... determined that [plaintiffs]

were unable to tender the loan proceeds, the

remedy of unconditional rescission was

inappropriate.”); but see Ing Bank v. Ahn,

2009 WL 2083965 at * 2 (N.D.Cal.2009):

Yet Yamamoto did not hold that a district

court must, as a matter of law, dismiss a

case if the ability to tender is not pleaded. 

Rather, all of these cases indicate that it

is within the trial court’s discretion to

choose to dismiss where the court concludes

that the party seeking rescission is

incapable of performance. 

Plaintiffs refer to Exhibit 8 to the

Complaint, a letter to Washington Mutual Bank

from Plaintiffs’ counsel, dated December 11,

2008:

I represent the Consumer concerning

the loan transaction which they

entered into with Washington Mutual

Bank on June 13, 2007. I have been

authorized by my client to rescind

this transaction and hereby

exercise that right pursuant to the

Federal Truth in Lending Act, 15

U.S.C. § 1635, Regulation Z §

226.23. In addition, the Consumer

reserves all rights to raise

additional or alternative grounds

for rescission under state or

federal law.

The Truth in Lending disclosure

statement received by my clients

was defective in a number of ways. 

As a result, my clients’ right of

rescission has been extended for

three years from the date of the

transaction. See 15 U.S.C.

1635(f). The material defects

19

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 19 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

include but are not limited to the

following:

(a) The broker’s fee was not

included in the finance charge.

(b) As a result of the failure to

include the broker’s fee in the

finance charge, the prepaid finance

charge and finance charge are

understated and the APR is also

understated.

(c) The disclosed payments do not

equal the total of payments.

(d) Loan Origination Fee.

(e) Settlement Charges.

My clients wish to keep their home. 

They would like to discuss tender

arrangements for the amount due

(the amount financed less all loan

charges and costs associated with

the loan and all payments made to

date) with you once you have

effected rescission. Please

provide me with an itemization of

the loan disbursements, the loan

charges, the current principal

balance, and all payments received

from my client [sic], so that we

may determine the exact amount

needed for tender.

The security interest held by

Washington Mutual Bank is void upon

mailing of this notice. See 15

U.S.C. § 1635; Regulation Z §

226.23. Pursuant to Regulation Z,

you have twenty days after receipt

of this notice of rescission to

return to my clients all monies

paid and to take all action

necessary or appropriate to reflect

termination of the security

interest.

We are prepared to discuss a tender

obligation, should it arise, and

20

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 20 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

satisfactory ways in which my

clients may meet this obligation. 

Please be advised that if you do

not cancel the security interest

and return all consideration paid

by our client within 20 days of

receipt of this letter, you will be

responsible for actual and

statutory damages pursuant to 15

U.S.C. § 1640(a).

However, neither in this letter or in the

Complaint do Plaintiffs represent they have

the ability to tender the loan amount, less

costs, fees and payments. The prayer for

relief in the Complaint states:

10. Order that, if Defendants fail

to further respond lawfully to

Plaintiffs’ notice of rescission,

Plaintiffs have no duty to tender,

but in the alternative, if tender

is required, determine the amount

of the tender obligation in light

of Plaintiffs’ claims, and order

Defendants to accept tender on

reasonable terms over a period of

time.

Plaintiffs, noting the discretion in

Yamamoto, contend:

[I]n the case at bar, Plaintiffs

cannot tender an exact and definite

amount since Defendant unfairly

failed to provide them ‘with an

itemization of the loan

disbursements, the loan charges,

the current principal balance, and

all payments received ... so that

we may determine the exact amount

needed for tender’ despite

Plaintiffs’ unequivocal and clear

demand. Because of the detrimental

act of Defendant JP Morgan,

Plaintiffs are deemed to have

substantially complied with the

offer to tender.

Plaintiffs are missing the point; the issue

is whether, if the alleged violations of TILA

21

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 21 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

are assumed to be true, do Plaintiffs have

the ability to tender the amount due on the

loan (less finance charges paid, etc.). It

is certainly inferable from Exhibit 8 and the

prayer in the Complaint that Plaintiffs do

not have that ability. Plaintiffs cite no

authority that their tender can be “on

reasonable terms over a period of time.” 

See American Mortg. Network, Inc. v. Shelton,

486 F.3d 815, 821 (4 Cir.2007): th

The equitable goal of rescission

under TILA is to restore the

parties to the ‘status quo ante.’

... Clearly, it was not the intent

of Congress to reduce the mortgage

company to an unsecured creditor or

to simply permit the debtor to

indefinitely extend the loan

without interest.

Defendants’ motion to dismiss the First and

Second Claims for Relief is GRANTED WITH

LEAVE TO AMEND. Plaintiffs shall plead facts

from which it may be ascertained, consistent

with Rule 11, Federal Rules of Civil

Procedure, that they have the present ability

to tender the loan payments.

As to the cause of action in the Complaint for quiet title, the

November 10 Memorandum Decision, after noting that Plaintiff “do

not allege that they have paid the loan or tendered the unpaid

amount of the loan to Defendants,” dismissed the quiet title

cause of action with leave to amend: “Plaintiffs shall plead

facts from which it may be ascertained, consistent with Rule 11,

Federal Rules of Civil Procedure, that they have the present

ability to tender the loan amounts.”

In responding to this aspect of the motion to dismiss,

Plaintiffs essentially re-hash arguments considered in and

rejected by the November 10 Memorandum Decision. Given the

22

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 22 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

Court’s order that Plaintiffs plead facts from which it may be

ascertained that they have the present ability to tender the loan

amounts, Plaintiffs’ arguments amount to a meritless motion for

reconsideration of the November 10 Memorandum Decision. 

Plaintiffs again argue:

In the case at bar, there is no way that

Plaintiffs could tender an exact and definite

amount since Defendant CHASE BANK unfairly

failed to provide them ‘with an itemization

of the loan disbursements, the loan charges,

the current principal balance, and all

payments received ... so that we may

determine the exact amount needed for tender’

despite Plaintiffs unequivocal and clear

demand. Because of the detrimental act of

Defendant, Plaintiffs are deemed to have

substantially complied with the offer to

tender. Accordingly, rescission of mortgage

[sic] contract should be effected. Or, in

the alternative, this issue can be resolved

by the court during the trial phase of the

case. Whether Plaintiffs are ready, willing,

and able to tender is a factual question more

properly addressed at a later stage in the

proceedings.

Plaintiffs also refer to the allegation in Paragraph 44 of the

FAC where “Plaintiffs hereby offer and tender to return to

Defendant CHASE BANK their property .... but said Defendant

should also return all payments, interests, costs, expenses, and

damages to the Plaintiffs with regard to the mortgage transaction

of said property.” 

Plaintiffs’ attempt to tender the property subject to the

Deed of Trust is not a valid tender under TILA pursuant to 15

U.S.C. § 1635(b). See Ralph J. Rohner & Frederick H. Miller,

Truth in Lending 654 (ABA Section of Business Law

23

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 23 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

2006)(indicating that the “issue of whether a particular tender

involves money or property ... should be governed by what was

obtained from the creditor ... [and] [t]hus a loan should require

the consumer to tender money ...”); Powers v. Sims & Levin, 542

F.2d 1215, 1221-1222 (4 Cir.1976)(finding that the borrowers’ th

right to rescission of a loan used to both pay off a prior loan

and to improve the borrowers’ home may be conditioned on the

borrowers’ “tender to the lender of all of the funds spent by the

lender in discharging the earlier indebtedness of the borrowers

as well as the value of the home improvements”); Yamamoto,

supra, 329 F.3d at 1171 (“[I]n applying TILA, ‘a trial judge

ha[s] discretion to condition rescission on tender by the

borrower of the property he had received from the lender.’”

(emphasis added)(quoting Ljepava v. M.L.S.C. Props., Inc. 511

F.2d 935, 944 (9 Cir.1975); McKenna v. First Horizon Home Loan th

Corp., 475 F.3d 418, 421 (1 Cir.2007)(“Rescission essentially st

restores the status quo ante; the creditor terminates its

security interest and returns any monies paid by the debtor in

exchange for the latter’s return of all disbursed funds or

property interests.”). Here, the FAC alleges that Plaintiffs

already owned the Subject Property when they obtained the loan

and that “[t]he security interest in the Deed of Trust was not

created to finance the acquisition or initial construction of

Plaintiffs’ property but to refinance previous consumer debts

including mortgage lien debt.” Therefore, the property received

by Plaintiffs and which they are obligated to tender is the loan

24

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 24 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

proceeds.

Plaintiffs have failed to comply with the November 10

Memorandum Decision and obviously do not have the present ability

to tender the loan amounts. Whether or not Plaintiffs know the

exact amount to be tendered, they must have knowledge of what

they paid on the loan, including the defaulted amounts; simple

arithmetic would result in a reasonable estimate from which

Plaintiffs could allege, consistently with Rule 11, whether or

not they have the present ability to tender the loan amounts.

There is no purpose in continuing with this lawsuit if Plaintiffs

cannot or will not allege the tender requirement as ruled in the

November 10 Memorandum Decision. Because Plaintiffs have not

alleged, as required by the November 10 Memorandum Decision,

facts from which it may be ascertained, that they have the

present ability to tender the loan payments, Plaintiffs cannot

proceed with Count I. At the hearing, Plaintiffs conceded that

they do not have the present ability to tender the loan amounts. 

Further prosecution of the claimed violations of TILA will be

futile, because without the present ability to tender, rescission

under TILA is not effective.

As to Count II for quiet title, Plaintiffs argue that the

loan should be rescinded because JPMorgan “has no interest in the

promissory note.” Plaintiffs refer to the allegations in the FAC

that JPMorgan failed to produce the original promissory note for

inspection upon Plaintiffs’ request, thereby leading Plaintiffs

to assume that JPMorgan is not the owner of the actual note and

25

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 25 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

without any right over Plaintiffs’ property.

In so far as nonjudicial foreclosure is concerned,

Plaintiffs’ position is meritless. California law “does not

require possession of the note as a precondition to non-judicial

foreclosure under a Deed of Trust.” Alicea v. GE Money Bank,

2009 WL 2136969 at *2 (N.D.Cal., July 16, 2009); see also Molina

v. Washington Mutual Bank, 2010 WL 431439 at *6 (S.D.Cal., Jan.

29, 2010); Castenada v. Saxon Mortgage Servs., Inc., ___

F.Supp.2d ___, 2009 WL 4640673 at *7 (E.D.Cal.2009); Nool v.

HomeQ Servicing, 653 F.Supp.2d 1047, 1053 (E.D.Cal.2009); 

Chilton v. Federal Nat. Mortgage Ass’n, 2009 WL 5197869

(E.D.Cal., Dec. 23, 2009).

As explained in Gaitan v. Mortgage Electronic Registration

System, 2009 WL 3244729 at *12 (C.D.Cal.2009):

A basic requirement of an action to quiet

title is an allegation that plaintiffs ‘are

the rightful owners of the property, i.e.,

that they have satisfied their obligations

under the Deed of Trust.’ Kelley v. Mortgage

Elec. Reg. Sys., Inc. ..., 2009 WL 2475703 at

*7 (N.D.Cal., Aug.12, 2009). ‘[A] mortgagor

cannot quiet his title against the mortgagee

without paying the debt secured.’ Watson v.

MTC Financial, Inc. ..., 2009 WL 2151782

(E.D.Cal., Jul. 17, 2009), quoting Shimpones

v. Stickney, 219 Cal. 637, 649 (1934).

Because Plaintiffs have not alleged, as required by the

November 10 Memorandum Decision, facts from which it may be

ascertained, that they have the present ability to tender the

loan payments, Plaintiffs cannot proceed with Count II. 

Plaintiffs conceded at the hearing that they do not have the

26

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 26 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

present ability to tender the loan amounts. Further prosecution

of the quiet title claim will be futile, because without the

present ability to tender, there is no basis to quiet title to

Plaintiffs. 

Plaintiffs were given the opportunity to amend to allege

their present ability to tender the loan proceeds. Because the

FAC does not so allege and Plaintiffs concede they cannot do so,

Counts I and II are DISMISSED WITH PREJUDICE.

IV. COUNT ONE.

JPMorgan moves to dismiss Count I to the extent that

Plaintiffs’ pray for damages in connection with their TILA claim.

The November 10 Memorandum Decision ruled:

Chase Bank moves to dismiss these claims for

relief as barred by the one-year statute of

limitations set forth in 15 U.S.C. § 1640(e):

“Any action under this section may be brought 

... within one year from the date of the

occurrence of the violation.” See Meyer v.

Ameriquest Mortg. Co., 342 F.3d 899, 902 (9th

Cir.2003):

There is some debate on whether the

period of limitations commences on

the date the credit contract is

executed, see Wachtel v. West, 476

F.2d 1062, 1065 (6 Cir.1973), or th

at the time the plaintiff

discovered, or should have

discovered, the acts constituting

the violation, see NLRB v. Don

Burgess Construction Corp., 596

F.2d 378, 382 (9 Cir.1979). But th

we need not decide this question

here, because even under the more

expansive Don Burgess rule, the

one-year period has run. See Katz

v. Bank of California, 640 F.2d

1024, 1025 (9 Cir.1981). th

27

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 27 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

The failure to make the required

disclosures occurred, if at all, at

the time the loan documents were

signed. The Meyers were in full

possession of all information

relevant to the discovery of a TILA

violation and a § 1640(a) damages

claim on the day the loan papers

were signed. The Meyers have

produced no evidence of undisclosed

credit terms, or of fraudulent

concealment or other action on the

part of Ameriquest that prevented

the Meyers from discovering their

claim.

Here, the Note and Deed of Trust are dated

June 16, 2007. Plaintiffs did not file this

action until July 24, 2009. Therefore, Chase

Bank argues, Plaintiffs’ claims for damages

for violation of TILA and Regulation Z are

time-barred.

At the hearing, Plaintiffs conceded that

these claims for damages relief under TILA

are time-barred by the one-year statute of

limitations and cannot be resurrected by the

doctrine of equitable tolling. 

Defendant’s motion to dismiss the First and

Second Claims for Relief for damages relief

under TILA is GRANTED WITH PREJUDICE.

To the extent the FAC prays for damages for violation of

TILA, Plaintiffs’ claim is barred by the statute of limitations

and the November 10 Memorandum Decision. Resurrection of the

claim is vexatious and unnecessarily multiplies the litigation. 

1

 CONCLUSION

For the reasons stated:

The dismissal of Counts I and II on the grounds stated above 1

makes unnecessary resolution of JPMorgan’s alternative grounds for

dismissal of the FAC and the Court expresses no opinion with regard

to them.

28

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 28 of 29
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1. Defendant JPMorgan’s motion to dismiss the First Amended

Complaint is GRANTED AND THE ACTION DISMISSED WITH PREJUDICE;

2. Counsel for JPMorgan shall prepare and lodge a form of

order and judgment within five (5) court days following service

of this Memorandum Decision.

IT IS SO ORDERED.

Dated: May 5, 2010 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

29

Case 1:09-cv-01316-OWW -DLB Document 41 Filed 05/05/10 Page 29 of 29