Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_09-cv-02422/USCOURTS-caed-2_09-cv-02422-1/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 15:1640 Truth in Lending

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 Because oral argument will not be of material assistance, 1

the Court orders this matter submitted on the briefs. E.D. Cal.

Local Rule 230(g). 

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

KATHRYN McOMIE-GRAY, No. 2:09-cv-02422-MCE-EFB

Plaintiff,

v. MEMORANDUM AND ORDER

BANK OF AMERICA HOME LOANS

f/k/a COUNTRYWIDE HOME LOANS,

INC., 

Defendants.

----oo0oo----

Presently before the Court is a Motion by Defendant Bank of

America Home Loans f/k/a Countrywide Home Loans, Inc.

(“Defendant”) to Dismiss portions of the Complaint of Plaintiff

Kathryn McOmie-Gray (“Plaintiff”) for failure to state a claim

upon which relief may be granted pursuant to Federal Rule of

Civil Procedure 12(b)(6). For the reasons set forth below, 1

Defendant’s Motion to Dismiss is granted.

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 The factual assertions in this section are based on the 2

allegations in Plaintiff’s Complaint unless otherwise specified.

2

BACKGROUND2

Plaintiff seeks rescission of her mortgage loan pursuant to

the federal Truth in Lending Act (“TILA”), 15 U.S.C. 1601 et seq.

On April 14, 2006 Plaintiff obtained a mortgage loan from

Paramount Equity Mortgage. At the closing, Plaintiff was

presented several loan documents to sign including two Notice of

the Right to Cancel forms indicating April 14, 2006 as the date

of the transaction. However, Plaintiff alleges that neither of

these forms indicated when the borrower’s right to cancel would

expire.

Subsequently, Paramount’s interest in the loan was assigned

to Defendant. On January 18, 2006 Plaintiff sent a notice to

Defendant indicating her intent to rescind the loan. Defendant

contests the validity of the rescission under TILA provisions. 

On August 27, 2009 Plaintiff filed suit in this Court

seeking a declaratory judgment that Defendant’s actions are in

violation of TILA. 

STANDARD

A. Motion to Dismiss

On a motion to dismiss for failure to state a claim under

Rule 12(b)(6), all allegations of material fact must be accepted

as true and construed in the light most favorable to the

nonmoving party. 

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3

Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir.

1996). Rule 8(a)(2) requires only “a short and plain statement

of the claim showing that the pleader is entitled to relief” in

order to “give the defendant fair notice of what the...claim is

and the grounds upon which it rests.” Bell Atl. Corp. v.

Twombly, 127 S. Ct. 1955, 1964 (2007) (quoting Conley v. Gibson,

355 U.S. 41, 47 (1957)). 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. Id. at 1964-65 (internal citations

and quotations omitted). Factual allegations must be enough to

raise a right to relief above the speculative level. Id. at 1965

(citing 5 C. Wright & A. Miller, Federal Practice and Procedure

§ 1216, pp. 235-36 (3d ed. 2004) (“The pleading must contain

something more...than...a statement of facts that merely creates

a suspicion [of] a legally cognizable right of action”)). 

“Rule 8(a)(2)...requires a ‘showing,’ rather than a blanket

assertion of entitlement to relief. Without some factual

allegation in the complaint, it is hard to see how a claimant

could satisfy the requirements of providing not only ‘fair

notice’ of the nature of the claim, but also ‘grounds’ on which

the claim rests.” Twombly, 550 U.S. 556 n.3. A pleading must

contain “only enough facts to state a claim to relief that is

plausible on its face.” Id. at 570. If the “plaintiffs...have

not nudged their claims across the line from conceivable to

plausible, their complaint must be dismissed.” Id. 

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4

Nevertheless, “[a] well-pleaded complaint may proceed even if it

strikes a savvy judge that actual proof of those facts is

improbable, and ‘that a recovery is very remote and unlikely.’”

Id. at 556.

A court granting a motion to dismiss a complaint must then

decide whether to grant leave to amend. A court should “freely

give” leave to amend when there is no “undue delay, bad faith[,]

dilatory motive on the part of the movant,...undue prejudice to

the opposing party by virtue of...the amendment, [or] futility of

the amendment....” Fed. R. Civ. P. 15(a); Foman v. Davis, 371

U.S. 178, 182 (1962). Generally, leave to amend is denied only

when it is clear the deficiencies of the complaint cannot be

cured by amendment. DeSoto v. Yellow Freight Sys., Inc., 957

F.2d 655, 658 (9th Cir. 1992).

ANALYSIS

The purpose of TILA is “to assure a meaningful disclosure of

credit terms so that the consumer will be able to compare more

readily the various credit terms available to him and avoid the

uninformed use of credit, and to protect the consumer against

inaccurate and unfair credit billing and credit card practices.”

15 U.S.C. § 1601(a). It requires the lender to provide several

disclosures to the consumer regarding their debt, including

providing notice of the right to rescind. 15 U.S.C. § 1635(a)

TILA grants consumers a three-day right to cancel residential

loan mortgages. Id. 

///

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5

Pursuant to 15 U.S.C. § 1635(a) the cancellation period begins

upon the consummation of the transaction or upon the delivery of

required disclosures and rescission forms, whichever is later. 

If the required disclosures are not provided, then the right to

cancel extends three years after the date of the loan. 15 U.S.C.

§ 1635(f).

Plaintiff alleges her lender failed to provide copies of the

notice of the right to cancel that clearly indicated the date the

rescission period would expire as required by TILA provisions. 

As such, Plaintiff asserts that the notices she received are

materially defective and accordingly she is electing her right to

rescind within the three-year statutory period allowed when

proper disclosures are not provided. However, Defendant contends

that Plaintiff’s claim must fail because Plaintiff has not

affirmatively alleged her ability or willingness to tender return

of the loan proceeds as required by TILA. Plaintiff responds

that she is not required to allege tender at this time. 

The Ninth Circuit has not provided a clear rule on the

tender requirement. The purpose of rescission under TILA is to

return both parties to the status quo ante. Yamamoto v. Bank of

New York, 329 F.3d 1167, 1172 (9th Cir. 2003). The exact wording

of the statute addresses the borrower’s “return of money or

property following rescission”, 15 U.S.C. § 1635(b) (emphasis

added), however the Ninth Circuit has held that the district

court has discretion to “modify the sequence of rescission

events” to require the borrower to allege tender prior to

rescission. Yamamoto, 329 F.3d at 1170 (relying on a 1980 TILA

amendment that allows courts to modify TILA procedures).

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Requiring the borrower to allege tender prior to rescission

“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.” Yamamoto,

329 F.3d at 1173 (citing S. Rep. No. 368, 96th Cong., 2d Sess.

29 (1980), reprinted in 1980 U.S.C.C.A.N. 236, 265). In

Yamamoto, the Ninth Circuit reasoned that it was ineffectual to

require parties to go through the rescission process if the

borrower would not be able to fulfill her requirements at the

end. Yamamoto, 329 F.3d at 1171-73. 

Thus, a Court may mandate that a plaintiff allege tender

prior to seeking rescission under TILA. Yamamoto, 329 F.3d at

1173; see also LaGrone v. Johnson, 534 F.2d 1360, 1362 (9th Cir.

1974) (holding that loan rescission should be conditioned on the

borrower’s tender of advanced funds). Following suit with the

Ninth Circuit’s reasoning, district courts have required tender

as a necessary element to proceeding with a TILA claim. See

Garza v. American Home Mortg., 2009 WL 188604, at *4 (E.D. Cal.

January 27, 2009) (dismissing plaintiff’s TILA claim for failure

to allege tender in the complaint); Guerrero v. City Residential,

2009 WL 926973, at *8 (E.D. Cal. April 3, 2009) (dismissing

plaintiff’s TILA claim where the complaint acknowledged

plaintiff’s inability to tender); Edelman v. Bank of America,

2009 WL 1285858, at *2 (C.D. Cal. April 17, 2009) (dismissing

plaintiff’s TILA claim on grounds that plaintiff’s offer to pay

back the loan in monthly installments on more favorable terms was

insufficient tender for purposes of rescission.)

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7

Here, Plaintiff has failed to allege any offer of tender. 

Although Plaintiff argues that requiring tender at this stage is

inappropriate, the Court finds that, as a matter of equity,

application of the tender requirement is warranted to prevent

“the empty (and expensive) exercise of a trial on the merits” if

Plaintiff is later found unable to restore what she has borrowed. 

See Yamamoto 329 F.3d at 1173. In light of Plaintiff’s failure

to allege ability or willingness to tender loan proceeds, she is

currently precluded from pursuing her claim. 

CONCLUSION

For the reasons set forth above, Defendant’s Motion to

Dismiss (Docket No. 8) is GRANTED. Defendant’s Request for

Judicial Notice (Docket No. 7) is DENIED as Moot. 

Plaintiff may file an amended complaint not later than

twenty (20) days after the date this Memorandum and Order is

filed electronically. If no amended complaint is filed within

said twenty (20)-day period, without further notice, Plaintiff’s

Complaint will be dismissed without leave to amend.

IT IS SO ORDERED.

Dated: March 10, 2010

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

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