Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_18-cv-01503/USCOURTS-casd-3_18-cv-01503-0/pdf.json

Nature of Suit Code: 370
Nature of Suit: Other Fraud
Cause of Action: 28:1441fd Removal - Fair Debt Collection Practices Act

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18cv1503-LAB (LL)

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

KECIA M. FLANAGAN,

Plaintiff,

v.

CITIMORTGAGE, INC. et al.,

Defendant.

Case No.: 18cv1503-LAB (LL)

ORDER REQUIRING 

SUPPLEMENTAL BRIEFING ON 

TILA AND FDCPA CLAIMS

This action was removed from state court on the basis of federal question 

jurisdiction. The complaint includes only two claims, a Fair Debt Collection 

Practices Act claim, and a federal Truth in Lending Act claim. 

TILA Claim

The complaint alleges that in 2010, Plaintiff Kecia Flanagan executed a note 

and deed of trust on the residential property that is at issue here. (Compl., & 27.) 

Her thirteenth cause of action is for violations of the federal Truth in Lending Act 

(TILA). She argues that because Defendants failed to make proper disclosures, 

she retained the right of rescission under TILA. She alleges that because 

Defendants did not rescind the note, she is now entitled to damages.

Failure to cancel a loan after receiving timely notice of rescission is a 

violation of TILA, for which damages are available. Brewer v. IndyMac Bank, 609 

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18cv1503-LAB (LL)

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F. Supp. 2d 1104, 1114 (E.D. Cal. 2009). The limitations period following refusal 

to rescind under these circumstances is one year. Id. (citing 15 U.S.C. ' 1640(e)).

The complaint is lengthy and not very clear, but it appears Flanagan first 

began having trouble making mortgage payments in 2014. (See Compl., & 31 

(alleging that a notice of default was recorded in November, 2014).) She asked 

CitiMortgage for “assistance,” but when CitiMortgage refused to offer a workout 

option, she borrowed money to cure the default. (Id., & 32.) Then in June, 2016, 

she began experiencing financial hardship and contacted Citimortgage again to 

ask for “assistance in lowering her payment and interest rate.” (Id., & 33.) She 

then pursued loan modification. (Id., & 35–37.) 

The complaint concludes that Flanagan “retained a right to rescind the Note 

within three years of execution of the Note,” (Compl., & 168), which apparently was 

some time in 2013.1 It then alleges that because of “Defendants’ failure to rescind 

the Note,” Flanagan is entitled to statutory damages. (Id.), & 169.) It appears to 

the Court that the claim is insubstantial, and that it may not be adequately alleged. 

For example, Flanagan never alleges she sought rescission within three years of 

executing the note, or even after. Apparently she believes Defendants were 

required to rescind it some time before the three-year limitations period expired. 

But according to the complaint, she was not experiencing financial trouble, and 

was making payments on time. Nothing in the complaint suggests she requested 

rescission at the time, or that the right was invoked in some other way. In fact, the 

complaint’s allegations strongly suggest she would not have wanted rescission at 

that time.

 

1 A right of rescission under TILA expires three years after the alleged violation, 

even if the required disclosures were never made. Sitthidet v. First Horizon 

Home Loans, 633 Fed. Appx. 407, 407 (9th Cir. 2016) (citing Beach v. Ocwen 

Fed. Bank, 523 U.S. 410, 412–13 (1998)). 

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Defendant CitiMortgage, Inc. and Mortgage Electronic Registrations 

Systems, Inc. (“MERS”) filed one motion to dismiss, without requesting dismissal 

of the TILA claim. Defendant North Star Homes, LP filed another motion to dismiss 

and sought dismissal of the TILA claim, but only as to this Defendant. Neither one 

raised this point, and neither one sought dismissal of the TILA claim on the basis 

of the one-year statute of limitations. Nevertheless, because Flanagan never 

alleges she invoked her right of rescission, it would appear her claim for failure to 

rescind is insubstantial. 

FDCPA Claim

The complaint appears to be claiming that Defendants CitiMortgage and 

Clear Recon Corp. (“CRC”) were debt collectors under the FDCPA, and that by 

threatening to proceed with and actually completing a non-judicial foreclosure, they 

violated the FDCPA. It does not appear to be alleging they or anyone else did 

anything that violated the FDCPA, other than within the course of non-judicial 

foreclosure proceedings. (Complaint, && 59–77.) CitiMortgage was allegedly 

assigned the deed of trust in 2014, although Flanagan disputes that this was validly 

done. (Id., & 30.) CRC was substituted as trustee in 2016, although Flanagan 

disputes the validity of this substitution as well. (Id., & 43.) 

FDCP claims cannot be based on enforcement of a deed of trust or 

enforcement of a security interest under such a deed. Gaytan v. Nationstar 

Mortgage, LLC, 2014 WL 12513582, at *2 (S.D. Cal., June 16, 2014) (discussing 

cases). Furthermore, mortgage servicing companies are not debt collectors within 

the meaning of the Act. Id. (citing Lal v. Am. Home Servicing, Inc., 680 F. Supp. 

2d 1218, 1224 (E. D. Cal. 2010). Assignees of debts are also not debt collectors, 

as long as the debt was not in default at the time it was assigned. Id.

Order

It appears Flanagan may have no substantial federal claim. If so, the Court 

may have no jurisdiction. See Merrell Dow Pharmaceuticals, Inc. v. Thompson, 

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478 U.S. 804, 823 n.3 (1986). The Court is required to raise and address 

jurisdictional questions, sua sponte if necessary, whenever a doubt arises. Mt. 

Healthy City School Dist. Bd. of Ed. v. Doyle, 429 U.S. 274, 278 (1977).

Flanagan is ORDERED to file a supplemental brief by March 1, 2019, 

explaining addressing the Court’s concerns about FDCPA and TILA claims. Also 

by March 1, CitiMortgage, MERS, and North Star Homes must file one joint brief 

addressing the same concerns. Both sides should also address the one-year 

statute of limitations for TILA failure-to-rescind claims. The Court recognizes this 

defense can be waived. But in the interests of economy and because it could affect 

jurisdiction, the Court directs the parties to raise and address this issue now, rather 

than reserving it for later in the litigation. Each brief should not exceed seven 

pages, not counting any appended material.

If the Court determines one or both claims are substantial enough to support 

its jurisdiction, the briefing will nevertheless be considered along with the argument 

raised in the briefing on the two motions to dismiss.

IT IS SO ORDERED.

Dated: February 19, 2019

Hon. Larry Alan Burns

Chief United States District Judge

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