Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_09-cv-04511/USCOURTS-cand-3_09-cv-04511-1/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1441 Petition for Removal- Property Damage

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United States District Court

For the Northern District of California

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 The Notice of Removal does not state the date when the original complaint was filed. 

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

KEVIN HUGHES,

Plaintiff,

 v.

RESIDENTIAL MORTGAGE CAPITAL, et al.,

Defendants. /

No. C 09-4511 SI

ORDER DISMISSING TILA CLAIM

WITHOUT LEAVE TO AMEND;

REMANDING STATE CLAIMS TO

SUPERIOR COURT FOR THE COUNTY

OF NAPA

Defendant RMC’s motion to dismiss the second amended complaint is scheduled for a hearing

on March 26, 2010. Pursuant to Civil Local Rule 7-1(b), the Court determines that the matter is

appropriate for resolution without oral argument, and VACATES the hearing. For the reasons set forth

below, the Court DISMISSES plaintiff’s amended claim under the Truth In Lending Act without leave

to amend, declines supplemental jurisdiction over the fourteen state law claims, and REMANDS the

case to the Superior Court of the State of California, County of Napa. 

BACKGROUND

On August 13, 2009, plaintiff Kevin Hughes filed a first amended complaint in the Superior

Court of the State of California, County of Napa.1

 The complaint named Residential Mortgage Capital,

Indymac Federal Bank, Quality Loan Service Corporation, and Does 1-100 as defendants, and alleged

twenty-one causes of action, including claims under the Truth in Lending Act (“TILA”), 15 U.S.C.

§ 1601 et seq., the Real Estate and Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq., and

Case 3:09-cv-04511-SI Document 23 Filed 03/17/10 Page 1 of 3
United States District Court

For the Northern District of California

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the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961 et seq. On

September 24, 2009, defendant Residential Mortgage Capital (“RMC”) removed the case to this Court

on the basis of federal question jurisdiction. On October 22, 2009, RMC filed a notice stating that

defendant Quality Loan Service Corporation (“Quality”) consented to the removal. 

In an order filed December 29, 2009, the Court granted RMC’s motion to dismiss the first

amended complaint. With respect to plaintiff’s TILA claim, which sought damages against RMC, the

Court held that the claim appeared to be untimely, that plaintiff had not pled a basis for equitable tolling,

and that there were numerous substantive problems with the claim. The Court also dismissed the

RESPA and RICO claims for failure to state a claim, and did not address the state law claims because

it was unclear whether plaintiff could state a federal claim. The Court granted plaintiff leave to amend

all claims.

On January 19, 2010, plaintiff filed a second amended complaint. The only federal claim alleged

in the second amended complaint is a claim for rescission under TILA against “Doe noteholders.”

SAC ¶¶ 123-28. All of the remaining state law claims are alleged against the various named defendants.

The second amended complaint also alleges that a foreclosure sale took place on January 15, 2010. Id.

¶ 4. RMC has moved to dismiss the second amended complaint. It is unclear from the docket whether

the other defendants have been served with the second amended complaint.

DISCUSSION

The Court sua sponte analyzes whether plaintiff has stated a claim under TILA because this

claim is the only basis for federal jurisdiction, and no defendant can move to dismiss this claim as it is

alleged only against Doe defendants. 

Plaintiff alleges that when he refinanced his home he was not provided with the disclosures and

notice of rescission mandated by TILA, and he seeks the remedy of rescission. However, plaintiff’s

right to rescind under TILA terminated upon the January 15, 2010 foreclosure sale of plaintiff’s

property. TILA implementing Regulation Z provides that “the right to rescind shall expire 3 years after

consummation, upon transfer of all of the consumer’s interest in the property, or upon sale of the

property, whichever occurs first.” 12 C.F.R. § 226.23; see Meyer v. Ameriquest Mortgage Co., 342 F.3d

Case 3:09-cv-04511-SI Document 23 Filed 03/17/10 Page 2 of 3
United States District Court

For the Northern District of California

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899, 902 (9th Cir. 2003) (holding “[o]nce the Meyers sold their home, took control of the loan proceeds

and paid off the loan, the TILA rescission provision no longer applied and only damages provision

remained as a cause of action”); see also id. at 903 (stating “[t]he regulation is clear: the right to rescind

ends with the sale”). 

Numerous courts have held that an involuntary foreclosure sale, like any other sale, terminates

TILA’s right of rescission. See, e.g., Hallas v. Ameriquest Mortg. Co., 406 F. Supp. 2d 1176, 1183 (D.

Or. 2005); Worthy v. World Wide Fin. Servs., Inc., 347 F. Supp. 2d 502, 506 (E.D. Mich. 2004) (“A sale

or transfer of the property need not be voluntary to terminate the right to rescind. For example, a

foreclosure sale would terminate an unexpired right to rescind.”) (quoting 12 C.F.R. § 226.23(a)(3));

Ford v. Wells Fargo Home Mortg., No. 08-4276 SC, 2008 WL 5070687, at *3 (N.D. Cal. Dec. 1, 2008)

(dismissing claim and noting, inter alia, that “the Official Staff Commentary to Regulation Z, which was

promulgated by the Board of Governors of the Federal Reserve System to implement TILA, also states

that a ‘sale or transfer of the property need not be voluntary to terminate the right to rescind the

transaction’ Official Staff Commentary to Reg. Z, 12 C.F.R. § 226.23(a)(3)”); Metcalf v. Drexel

Lending Group, No. 08-CV-0731, 2008 WL 2682851, at *2 (S.D. Cal. July 3, 2008).

Accordingly, the Court DISMISSES the TILA rescission claim without leave to amend. Plaintiff

has now had several opportunities to amend the TILA claim, and the Court concludes that any further

leave to amend is futile. With the dismissal of the TILA claim, there is no longer any basis for federal

jurisdiction. The Court declines to exercise supplemental jurisdiction over the remaining state law

claims, and REMANDS these claims to state court. See 28 U.S.C. § 1367(c)(3). 

CONCLUSION

For the foregoing reasons, the Court DISMISSES the TILA claim without leave to amend and

REMANDS the state law claims to Superior Court for the County of Napa. All pending motions are

DENIED as moot. 

IT IS SO ORDERED.

Dated: March 17, 2010 

SUSAN ILLSTON

United States District Judge

Case 3:09-cv-04511-SI Document 23 Filed 03/17/10 Page 3 of 3