Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_09-cv-02228/USCOURTS-casd-3_09-cv-02228-1/pdf.json

Nature of Suit Code: 371
Nature of Suit: Truth in Lending
Cause of Action: 15:1601 Truth in Lending

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ARMANDO IBARRA, an individual,

 Plaintiff,

CASE NO. 09-CV-02228-IEG (POR)

ORDER GRANTING IN PART

AND DENYING IN PART

DEFENDANT’S MOTION TO

DISMISS PLAINTIFF’S FIRST

AMENDED COMPLAINT

[Doc. No. 33]

vs.

LOAN CITY, a California corporation

authorized to do business in California,

AURORA LOAN SERVICES INC., a

foreign corporation authorized to do business

in California; CAL-WESTERN

RECONVEYANCE CORPORATION, a

California corporation authorized to do

business in California; WACHOVIA

FINANCIAL SERVICES, INC., fka

WORLD SAVINGS BANK, FSB, a

FEDERAL SAVINGS BANK and registered

foreign corporation doing business in

California; HARBORSIDE FINANCIAL

NETWORK, a California corporation

authorized to do business in California, and

DOES 1 through 50, inclusive, 

 Defendants.

Presently before the Court is Defendant Aurora Loan Services LLC’s (“Aurora”) motion to

dismiss Plaintiff Armando Ibarra’s (“Plaintiff”) First Amended Complaint. (Doc. No. 33.) Plaintiff

filed an opposition, and Aurora filed a reply. 

The Court finds the motion suitable for disposition without oral argument pursuant to Local

Case 3:09-cv-02228-IEG-POR Document 45 Filed 04/20/10 Page 1 of 6
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Civil Rule 7.1(d)(1). For the reasons stated herein, the Court grants in part and denies in part the

motion to dismiss.

BACKGROUND

This matter concerns the refinancing of Plaintiff’s principal residence in Chula Vista, San

Diego (the “Property”). The following facts are drawn from Plaintiff’s First Amended Complaint

(“FAC”) unless otherwise noted. 

On September 6, 2006, Plaintiff obtained a loan from Loan City, brokered by Equipoint

Financial Network, Inc. d/b/a Harborside Financial Network (“Harborside”). According to

Plaintiff, Aurora later assumed the loan. In early 2009, foreclosure proceedings were initiated. 

Also in early 2009, Plaintiff discovered that he had not been provided certain notices and

disclosures at the time of the loan origination in violation of the Truth in Lending Act (“TILA”). 

On July 9, 2009, Plaintiff sent a letter to Loan City, World Savings, and Harborside rescinding the

loan contract. Five days later on July 14, 2009, Plaintiff sent the same letter to Aurora. 

On August 18, 2009, Plaintiff initiated the action in the Superior Court for the County of

San Diego, naming Aurora, Loan City, Cal-Western Reconveyance Corp., Wachovia Financial

Services, Inc., and Harborside as defendants. The defendants subsequently removed the case to

this Court. (Doc. No. 1.) In September of 2009, Aurora purchased the property at the trustee’s

sale.

On January 27, 2010, the Court granted in part Aurora’s motion to dismiss Plaintiff’s

original Complaint for failure to state a claim, and denied as moot Aurora’s motion to strike. (Doc.

No. 31.) The Court dismissed with prejudice all causes of action in the Complaint, except for

Plaintiff’s cause of action for violation of TILA, which was dismissed with leave to amend. 

On February 3, 2010, Plaintiff timely filed the FAC, which sets forth one cause of action

for violation of TILA. (Doc. No. 32.) Plaintiff seeks rescission and damages for violation of

TILA, 15 U.S.C. § 1601, et seq., and TILA’s implementing regulation (“Regulation Z”), 12 C.F.R.

§ 226, which sets out TILA’s general disclosure requirements. Subsequently, Aurora filed the

instant motion to dismiss the FAC. (Doc. No. 33.) 

//

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DISCUSSION

I. Legal Standard

A complaint must contain “a short and plain statement of the claim showing that the

pleader is entitled to relief.” Fed. R. Civ. P. 8(a) (2009). A motion to dismiss pursuant to Rule

12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of the claims asserted in

the complaint. Fed. R. Civ. P. 12(b)(6); Navarro v. Block, 250 F.3d 729, 731 (9th Cir. 2001). The

court must accept all factual allegations pled in the complaint as true, and must construe them and

draw all reasonable inferences from them in favor of the nonmoving party. Cahill v. Liberty

Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.1996). To avoid a Rule 12(b)(6) dismissal, a

complaint need not contain detailed factual allegations, rather, it must plead “enough facts to state

a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570

(2007). 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.” 

Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556).

However, “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.” Twombly, 550 U.S. at 555 (citation omitted). A court need not accept “legal

conclusions” as true. Iqbal, 129 S.Ct. at 1949. In spite of the deference the court is bound to pay

to the plaintiff’s allegations, it is not proper for the court to assume that “the [plaintiff] can prove

facts that [he or she] has not alleged or that defendants have violated the . . . laws in ways that

have not been alleged.” Associated Gen. Contractors of Cal., Inc. v. Cal. State Council of

Carpenters, 459 U.S. 519, 526 (1983). 

II. Analysis of Aurora’s Motion to Dismiss

As the Court previously determined in its January 27, 2010 Order dismissing Plaintiff’s

original Complaint, Plaintiff fails to state a claim for damages for failure to provide disclosures at the

time of the loan origination. Plaintiff’s claim is barred by the one-year statute of limitations for

actions for damages under TILA. See 15 U.S.C. § 1640(e). Plaintiff initiated suit on August 18, 2009,

nearly three years after the loan origination. Also, as the Court previously determined in its January

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Because the Notice of Right to Cancel provided by the lender improperly omitted the

rescission expiration date (FAC, Ex. C), Plaintiff was permitted to exercise his right to rescind the loan

within three years after it was consummated. See 15 U.S.C. § 1635(f) (the borrower may rescind the

loan within three years after it was consummated if the creditor fails to deliver the notice and required

material disclosures).

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27, 2010 Order, Plaintiff fails to state a claim for rescission. Plaintiff’s right to rescind under TILA

expired on September 8, 2009 when the Property was sold at the trustee’s sale. Section 1635(f) of

TILA provides that the right of rescission expires at the latest, “three years after the date of

consummation of the transaction or upon the sale of the property, whichever occurs first.” 15 U.S.C.

§ 1635(f). Accordingly, the Court dismisses these claims with prejudice. 

Plaintiff also alleges he is entitled to damages for violation of TILA’s rescission provision

because Aurora failed to respond within twenty days to Plaintiff’s notice of rescission, sent on July

14, 2009.1 (FAC ¶¶ 24, 28, 33.) Section 1635(b) of TILA sets forth the actions a creditor must take

upon receiving a notice of recission:

When an obligor exercises his right to rescind under subsection (a) of this section,

he is not liable for any finance or other charge, and any security interest given by the

obligor, including any such interest arising by operation of law, becomes void upon

such a rescission. Within 20 days after receipt of a notice of rescission, the creditor

shall return to the obligor any money or property given as earnest money,

downpayment, or otherwise, and shall take any action necessary or appropriate to

reflect the termination of any security interest created under the transaction. . . .

15 U.S.C. § 1635(b). Section 1640 permits a plaintiff to bring an action for damages against “any

creditor who fails to comply with any requirement imposed under [TILA], including any requirement

under section 1635.” Id. § 1640(a). A creditor can generally be held liable for actual and statutory

damages, as well as attorney’s fees and costs. Id. § 1640.

Aurora argues that Plaintiff fails to state a claim for three reasons. First, Aurora argues that

it cannot be liable under TILA because it is a loan servicer and is listed as beneficiary solely for

administrative purposes in servicing the loan. Only creditors can be liable under TILA. Id. §

1640(a). Liability does not extend to a loan servicer as an assignee of a creditor “unless the servicer

is or was the owner of the obligation.” Id. § 1641(f). A servicer is not treated as the “owner of the

obligation” on the basis of an assignment “solely for the administrative convenience of the servicer

in servicing the obligation.” Id. § 1641(f)(2). 

The statute is clear that Aurora cannot be held liable under TILA if it is a servicer assigned the

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The Court may take judicial notice of the Deed of Trust and Trustee’s Deed Upon Sale, which

are public records. See Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986),

abrogated on other grounds by Astoria Federal Sav. & Loan Ass’n v. Solimino, 501 U.S. 104, 111

(1991). 

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loan solely for administrative purposes. However, construing the facts and all reasonable inferences

from them in favor of Plaintiff, the Court finds it plausible that Aurora was an assignee of the loan for

more than just administrative purposes. Plaintiff alleges Aurora owns the loan. (FAC ¶¶ 12, 22.) In

addition, the Trustee’s Deed Upon Sale lists Aurora as the foreclosing beneficiary. (Aurora’s Mot.

to Dismiss, Ex. 5.) Aurora argues that it was only assigned MERS’ nominal interest in the loan, and

points to the Deed of Trust, which names MERS as the nominal beneficiary. (Request for Judicial

Notice in Supp. of Mot. to Dismiss, Ex. 1.)2

 However, this document and Aurora’s bare assertions

are not conclusive. 

Aurora next argues that Plaintiff is not entitled to damages because Plaintiff has not alleged

an ability to tender the loan proceeds. Aurora contends that if the Court, in its discretion, modifies

the rescission-tender chronology set forth in Section 1635(b) to require Plaintiff to first allege an

ability to tender before he can be entitled to rescission, then Aurora could not have violated the statute

by failing to respond to the notice of rescission. As discussed above, Plaintiff’s right to rescind under

TILA expired on September 8, 2009 when the Property was sold at the trustee’s sale. The Court

declines to engage in a discussion of what it would have done had Plaintiff’s rescission claim not been

barred by the sale of the Property.

Finally, Aurora contends that the content of Plaintiff’s notice of rescission is ambiguous. This

argument is without merit. The letter, titled “Request for Loan Modification (And Notice of

Rescission),” clearly states that Plaintiff’s counsel is “authorized to rescind this loan transaction and

hereby exercise[s] that right.” (FAC, Ex. A.) The letter concludes by requesting that Aurora contact

Plaintiff’s counsel if it would like to enter into negotiations, “so that our client may consider

withdrawing this Notice of Rescission.” (FAC, Ex. A.)

//

//

//

//

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CONCLUSION

The Court GRANTS IN PART Aurora’s motion to dismiss with prejudice Plaintiff’s FAC, to

the extent Plaintiff asserts claims under TILA for rescission and for damages relating to the loan

origination. The Court DENIES Aurora’s motion, to the extent Plaintiff asserts a claim for damages

for violation of TILA’s rescission provision. 

IT IS SO ORDERED.

DATED: April 20, 2010

IRMA E. GONZALEZ, Chief Judge

United States District Court

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