Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-02378/USCOURTS-casd-3_11-cv-02378-0/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 28:1441 Petition for Removal

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

DAVID LOUDON,

Plaintiff,

CASE NO. 11-cv-2378 – IEG (WVG)

ORDER:

(1) GRANTING IN PART

DEFENDANT DEUTSCHE BANK’S

MOTION TO DISMISS, [Doc. No. 6];

(2) REMANDING STATE LAW

CLAIMS; and

(3) DENYING AS MOOT

DEFENDANT MTC FINANCIAL’S

MOTION TO DISMISS, [Doc. No. 5].

vs.

DEUTSCHE BANK NATIONAL TRUST

COMPANY FOR DSLA MORTGAGE

LOAN TRUST 2004-AR4, doing business as

Central Mortgage Company; MTC

FINANCIAL INC., doing business as Trustee

Corps; and DOES 1-100, inclusive,

Defendants.

Presently before the Court are two motions to dismiss, brought by: (1) Defendant MTC

Financial Inc., dba Trustee Corps (“MTC Financial”), [Doc. No. 5]; and (2) Defendants Deutsche

Bank National Trust Company as Trustee for DSLA Mortgage Loan Trust 2004-AR4 and Central

Mortgage Company (collectively, “Deutsche Bank”), [Doc. No. 6]. Plaintiff David Loudon filed

an opposition to each motion. Having considered the parties’ arguments, and for the reasons set

forth below, the Court GRANTS IN PART Deutsche Bank’s motion to dismiss, REMANDS the

state law claims, and DENIES AS MOOT MTC Financial’s motion to dismiss.

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BACKGROUND

Plaintiff is the owner of real property located at 12717 Benavente Way, San Diego, CA

92129 (“Property”). On November 8, 2004, he took out a loan in the amount of $516,000.00 with

Downey Savings and Loan Association, F.A., secured by a promissory note and a deed of trust on

the Property. (Compl., Ex. A [Doc. No. 1].) The Deed of Trust listed DSL Service Company as

the “trustee.” (Id.) On December 13, 2005, Downey assigned the Deed of Trust and the

promissory note to Mortgage Electronic Registration Systems, Inc. (“MERS”). (Defendant MTC

Financial’s RJN, Ex. B [Doc. No. 5-2].) The assignment was recorded on December 29, 2005. 

(Id.) On November 15, 2010, MERS assigned all of the beneficial interest under the Deed of Trust

to Deutsche Bank. (Id., Ex. C.) This assignment was recorded on December 3, 2010. (Id.)

On December 7, 2010, Deutsche Bank mailed a Notice of Default and Election to Sell

under Deed of Trust to Plaintiff, indicating that Plaintiff was in default and that the amount in

arrears as of that date was $33,784.04. (Id., Ex. D.) Attached to the Notice of Default was a

Declaration per CA Civil Code Section 2923.5, indicating that the servicer attempted to contact

Plaintiff as required by § 2923.5 by sending a first-class letter to Plaintiff’s last known mailing

address and by attempting to contact Plaintiff by telephone at least 3 times at 3 different hours on 3

different days. (Id.) The Notice of Default was recorded on December 13, 2010. (Id.)

On August 18, 2011, Deutsche Bank executed a Substitution of Trustee, substituting

Defendant MTC Financial as the trustee under the Deed of Trust. (Id., Ex. E.) The Substitution of

Trustee was recorded on August 25, 2011. (Id.) On August 26, 2011, MTC Financial recorded a

Notice of Trustee’s Sale against the Property, setting the sale for September 19, 2011. (Id., Ex. F.) 

The Property was sold to Deutsche Bank at a trustee’s sale on September 23, 2011, and a Trustee’s

Deed Upon Sale was recorded on September 29, 2011. (Id., Ex. G.)

Plaintiff commenced this action on October 5, 2011, by filing a complaint in the Superior

Court for the County of San Diego. His complaint alleges seven causes of action: (1) violation of

California Civil Code § 2923.5; (2) fraud; (3) intentional misrepresentation; (4) violation of

California Civil Code § 2923.6; (5) violation of California Civil Code § 1572; (6) violation of

California Business & Professions Code § 17200; and (7) violations of the federal Truth in

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Lending Act (“TILA”), 15 U.S.C. § 1601 et seq. Defendant MTC Financial removed the case to

this Court on October 13, 2011, on the basis of federal question jurisdiction premised on Plaintiff’s

TILA claim. (See Notice of Removal [Doc. No. 1].) MTC Financial filed its motion to dismiss on

October 27, 2011. Plaintiff filed his opposition on November 14, 2011, and MTC Financial

replied on November 17, 2011. Deutsche Bank filed its motion to dismiss on November 10, 2011. 

Plaintiff filed his opposition on November 22, 2011. The Court subsequently took both motions to

dismiss under submission pursuant to the Civil Local Rule 7.1(d)(1).

LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure tests

the legal sufficiency of the pleadings. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “To

survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to

‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949

(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “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. 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. (internal citation omitted). “Dismissal can be based on the lack of a cognizable

legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri

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

In ruling on a motion to dismiss, the court must “accept all factual allegations in the

complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” 

Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). The court, however, need not accept “legal

conclusions” as true. Iqbal, 129 S. Ct. at 1949. Thus, “a formulaic recitation of the elements of a

cause of action will not do.” Twombly, 550 U.S. at 555. It is also improper for the court to assume

that plaintiff “can prove facts that it has not alleged.” Associated Gen. Contractors of Cal., Inc. v.

Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). On the other hand, “[w]hen there are

well-pleaded factual allegations, a court should assume their veracity and then determine whether

they plausibly give rise to an entitlement to relief.” Iqbal, 129 S. Ct. at 1950.

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DISCUSSION

MTC Financial raises several arguments in its motion to dismiss. First, MTC Financial

argues that all of the claims against it should be dismissed because its conduct was privileged

under California Civil Code §§ 47 and 2924(d). Second, MTC Financial argues that all of the

claims against it should be dismissed because it owes no duties to Plaintiff other than those

specifically stated in the Deed of Trust and in the statutes. Third, MTC Financial argues that all of

the claims against it fail because it was acting as an agent for a disclosed principal. Fourth, MTC

Financial argues that all of the claims fail due to Plaintiff’s failure to make an unambiguous offer

of tender. Fifth, MTC Financial argues that each of the causes of action against it is defective and

fails to state a claim upon which relief can be granted.

Deutsche Bank argues that each of Plaintiff’s claims against it should be dismissed because

it fails to state a claim upon which relief can be granted. First, Deutsche Bank argues that the first

and fourth causes of action for violations of the California Civil Code §§ 2923.5 and 2923.6 fail

because it complied with the requirements of those sections and, even if it did not, those sections

do not offer any remedy to Plaintiff. Second, Deutsche Bank argues that the second, third, and

fifth causes of action for fraud and intentional misrepresentation fail because Plaintiff failed to

plead them with the required specificity. Third, Deutsche Bank argues that the sixth cause of

action for violation of California’s unfair competition law (“UCL”) fails because Plaintiff cannot

state any underlying violation to which a UCL claim could be tethered. Fourth, Deutsche Bank

argues that the seventh cause of action for TILA and related violations fails because Deutsche

Bank was not the original lender and because any claim is barred by the statute of limitations.

I. Federal claim for relief

Plaintiff’s seventh cause of action alleges that Defendants Deutsche Bank and Central

Mortgage Company “failed to include and disclose certain charges in the finance charge shown on

the [Truth in Lending] statement” in violation of TILA, 15 U.S.C. § 1605, and Regulation Z, 12

C.F.R. § 226.4. Specifically, Plaintiff appears to allege that the amount financed listed on the

Settlement Statement is different from the sum listed on the original promissory note. Plaintiff

further alleges that Defendants violated TILA and Regulation Z, 12 C.F.R. §§ 226.18(c), (d), and

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226.22, by calculating the annual percentage rate based upon these improperly calculated and

disclosed amounts. As a result of these violations, Plaintiff seeks rescission of the transaction.

The Court, however, does not need to reach the merits of Plaintiff’s TILA claim for

rescission because it is clear from the face of the complaint that this claim has expired. Section

1635 governs the borrower’s right under TILA to rescind a “consumer credit transaction . . . in

which a security interest . . . is or will be retained or acquired in any property which is used as the

principal dwelling of the person to whom credit is extended.” 15 U.S.C. § 1635(a); see also 12

C.F.R. § 226.15(a). While the borrower’s right of rescission must normally be exercised within a

three-day period, TILA extends that period to three years under certain circumstances. See 15

U.S.C. § 1635(f); 12 C.F.R. § 226.15(a)(3). Crucially, § 1635(f) unambiguously states that the

borrower’s right of rescission “shall expire three years after the date of consummation of the

transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that

the information and forms required under this section or any other disclosures required under this

part have not been delivered” to the borrower. In this case, Plaintiff consummated the current loan

transaction on November 8, 2004. (Compl., Ex. A.) Accordingly, Plaintiff’s right of rescission

expired three years after that, on November 8, 2007. See 15 U.S.C. § 1635(f). Plaintiff did not

commence this suit until almost four years later, on October 5, 2011.

Moreover, the expiration of the right of rescission not only bars Plaintiff’s claim, but also

deprives the Court of subject matter jurisdiction as to this claim. The Supreme Court held that

“§ 1635(f) completely extinguishes the right of rescission at the end of the 3-year period.” Beach

v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). The Supreme Court stated:

Section 1635(f) . . . takes us beyond any question whether it limits more than the

time for bringing a suit, by governing the life of the underlying right as well. The

subsection says nothing in terms of bringing an action but instead provides that the

“right of rescission [under the Act] shall expire” at the end of the time period. It

talks not of a suit’s commencement but of a right’s duration, which it addresses in

terms so straightforward as to render any limitation on the time for seeking a

remedy superfluous. There is no reason, then, even to resort to the canons of

construction that we use to resolve doubtful cases, such as the rule that the creation

of a right in the same statute that provides a limitation is some evidence that the

right was meant to be limited, not just the remedy.

Id. at 417 (internal citations omitted). As the Ninth Circuit observed, § 1635(f) acts as a statute of

repose, “depriving the courts of subject matter jurisdiction when a § 1635 claim is brought outside

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the three-year limitation period.” Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir.

2002). In the present case, because Plaintiff did not attempt to rescind his transaction within the

three-year limitation period, his right to rescission expired, and the Court lacks subject matter

jurisdiction over this claim. See id. at 1164-66.

Accordingly, the Court GRANTS Deutsche Bank’s motion to dismiss Plaintiff’s seventh

cause of action for TILA violations and DISMISSES this cause of action WITH PREJUDICE.

II. State law claims

With Plaintiff’s sole federal law claim dismissed, only state law claims remain. The Court

has supplemental jurisdiction over these claims. Under 28 U.S.C. § 1367(c)(3), however, the

Court “may decline to exercise supplemental jurisdiction over a claim . . . if . . . [it] has dismissed

all claims over which it has original jurisdiction.” A district court’s decision whether to exercise

supplemental jurisdiction after dismissing every claim over which it had original jurisdiction is

“purely discretionary.” Carlsbad Tech., Inc. v. HIF Bio, Inc., 129 S. Ct. 1862, 1866 (2009);

accord Lacey v. Maricopa Cnty., 649 F.3d 1118, 1137 (9th Cir. 2011). In exercising its discretion,

the court may look to a host of factors, “including the circumstances of the particular case, the

nature of the state law claims, the character of the governing state law, and the relationship

between the state and federal claims.” City of Chicago v. Int’l College of Surgeons, 522 U.S. 156,

173 (1997); see also United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966). In the usual

case, where federal claims are dismissed before trial, “‘the balance of factors ... will point toward

declining to exercise jurisdiction over the remaining state law claims.’” Gini v. Las Vegas Metro.

Police Dep’t, 40 F.3d 1041, 1046 (9th Cir. 1994) (citation omitted); accord Religious Tech. Ctr. v.

Wollersheim, 971 F.2d 364, 367-68 (9th Cir. 1992) (per curiam); Scholar v. Pacific Bell, 963 F.2d

264, 268 n.4 (9th Cir. 1992); Schultz v. Sundberg, 759 F.2d 714, 718 (9th Cir. 1985).

In this case, looking at the balance of factors—including the fact that this case is still in its

infancy, that the present motions to dismiss are the only motions that have been filed to date, and

that the motions to dismiss raise some unsettled issues of state law—the Court believes it is more

appropriate to decline to exercise supplemental jurisdiction over the remaining state law claims

and to remand those claims to state court. See Lacey, 649 F.3d at 1137; Gini, 40 F.3d at 1064.

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CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART Deutsche Bank’s motion to

dismiss as to Plaintiff’s seventh cause of action for TILA and related violations and DISMISSES

that cause of action WITH PREJUDICE. The Court also declines to exercise supplemental

jurisdiction over the remaining state law claims and, therefore, REMANDS the remaining state

law claims to state court. The Clerk of Court is directed to remand the case forthwith.

In light of the foregoing, the Court DENIES AS MOOT MTC Financial’s motion to

dismiss and the remaining portions of Deutsche Bank’s motion to dismiss. The clerk is directed to

close the case.

IT IS SO ORDERED.

Date: January 24, 2012 ________________________________

IRMA E. GONZALEZ

United States District Judge

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