Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-01993/USCOURTS-azd-2_11-cv-01993-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1601 Truth in Lending

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 The motion is filed by Bank of America, N.A., as successor by merger to BAC

Home Loans Servicing LP, Federal National Mortgage Association, and ReconTrust

Company, N.A.

2

 The Court takes notice of the Note and Deed of Trust because they have been

“properly submitted as part of the complaint.” Hal Roach Studios, Inc. v. Richard Feiner and

Co., Inc, 896 F.2d 1542, 1555 n.19 (9th Cir. 1990).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Jair Gongora and Linda Gongora, 

Plaintiffs, 

vs.

Compass Bank et al., 

Defendants. 

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No. CV-11-1993-PHX-GMS

ORDER

Pending before the Court are Defendant BAC Home Loans Servicing LP’s1

 Motion

to Dismiss in which Defendant Compass Bank joins (Doc. 12) and Defendant Compass

Bank’s Motion to Dismiss Party (Doc. 20). For the reasons discussed below, the first motion

to dismiss is granted and the second is dismissed as moot.

BACKGROUND

On January 26, 2009, Plaintiff Jair Gongora obtained a loan of $415,000 from

Compass Bank. (Doc. 1, Ex. 1).2

 On the Deed of Trust, the “Borrower” is listed as “Jair

Case 2:11-cv-01993-GMS Document 28 Filed 01/10/12 Page 1 of 6
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 The Court takes notice of the deeds documenting the transfers of title, submitted by

Defendants, because they are “matters of public record outside the pleadings.” Mack v. S.

Bay Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986), overruled on other grounds

by Astoria Fed. Sav. & Loan Ass’n. v. Solimino, 501 U.S. 104 (1991).

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Gongora, as his sole and separate property.” (Doc. 1, Ex. 2). The loan was secured by an

interest in Mr. Gongora’s house at 793 E. Maria Lane, Tempe, Arizona (“the property”).

(Id.). At the closing, Mr. Gongora was provided with one copy of a Truth In Lending

Disclosure Statement (“Disclosure Statement”) and two copies of a Notice of Right to Cancel

(“Notice”). (Doc. 1 at 5). Mr. Gongora had obtained the property in 1997, when he was

married to Noeline Martini Gongora, and had quit claimed it to himself in 2003 when he was

single.3

 (Doc. 12, Ex. C). On February 6, 2009, after taking out the loan, Mr. Gongora again

quit claimed the house, this time to himself and Linda Gongora as husband and wife. (Id.).

On August 26, 2011, Plaintiffs sent notices to Defendants that they intended to rescind the

loan. (Doc. 1 at 7). Defendants did not respond to the rescission notices. Mr. and Mrs.

Gongora now seek to rescind the loan and seek damages under the Truth in Lending Act

(“TILA”).

DISCUSSION

1. Legal Standard

To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil

Procedure 12(b)(6), a complaint must contain more than “labels and conclusions” or a

“formulaic recitation of the elements of a cause of action”; it must contain factual allegations

sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly,

550 U.S. 544, 555 (2007). While “a complaint need not contain detailed factual allegations

. . . it must plead ‘enough facts to state a claim to relief that is plausible on its face.’”

Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly,

550 U.S. at 570). “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, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550

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U.S. at 556). The plausibility standard “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 citations omitted) (quoting Twombly, 550 U.S. at 557).

When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll

allegations of material fact are taken as true and construed in the light most favorable to the

nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However, legal

conclusions couched as factual allegations are not given a presumption of truthfulness, and

“conclusory allegations of law and unwarranted inferences are not sufficient to defeat a

motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998).

2. Discussion

The Truth in Lending Act (TILA) provides borrowers with the opportunity to rescind

their loans within three days; if borrowers are not provided with proper notice of their

rescission rights, they may rescind the loan within three years. 15 U.S.C. § 1635(f). The only

person who has a right to rescind, however, is the “obligor,” and it is therefore to the obligor

that notice of the right to rescind must be provided. 15 U.S.C. § 1635(a). Here, Mr. Gongora

obtained the loan in his own name, and secured it with a house that he held “as his sole and

separate property.” (Doc. 1, Ex. 2). Plaintiffs argue that because they were married when Mr.

Gongora obtained the loan, Mrs. Gongora held an interest in the property and became an

obligor, thereby requiring Defendants to provide her with her own Disclosure Statement and

Notice. They argue that because Defendants did not provide Mrs. Gongora with her own

TILA documentation, TILA’s three-year deadline, rather than its three-day window, is

operative, and their attempt to rescind was timely. (Doc. 1 at 6).

Although Arizona is a community property state, “[a] spouse’s real and personal

property that is owned by that spouse before marriage . . . is the separate property of that

spouse.” Ariz. Rev. Stat. (“A.R.S.”) § 25-213(a) (2007). Mr. Gongora purchased the property

with his previous spouse and quit claimed it to himself as a single man before he was married

to Mrs. Gongora. (Doc. 12, Ex. C). Mrs. Gongora did not sign the note for the loan and is not

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listed on the Deed of Trust. Before Mr. Gongora quit claimed the property to the community

interest, she had no ownership interest in the property, and was not an “obligor” under TILA.

Failing to provide her with her own Disclosure Statement and Notice therefore did not toll

the three-day statute of limitations for rescission.

Plaintiffs argue convincingly that the house is Mrs. Gongora’s principal residence; this

fact alone does not, however, provide her with an ownership interest in the property. The

regulations define a “consumer” entitled to rescission as “a natural person in whose principal

dwelling a security interest is or will be retained or acquired, if that person’s ownership

interest in the dwelling is or will be subject to the security interest.” 12 C.F.R. § 226.2(a)(11)

(emphasis added). When Mr. Gongora obtained the loan, Mrs. Gongora had no ownership

interest in the house. The fact that she later acquired an ownership interest did not

retroactively invalidate Defendants’ proper TILA disclosures. The TILA regulations further

provide that “[i]f there is more than one consumer, the disclosures may be made to any

consumer who is primarily liable on the account.” 12 C.F.R. 226.5(d). This regulation

demonstrates that even if Mrs. Gongora had some ownership interest, making disclosures to

Mr. Gongora, who was the only person listed on the account, satisfied Defendants’

obligation.

Plaintiffs have cited a number of cases which have held that a spouse with an

ownership interest is allowed to rescind, or that spouses who take out a mortgage together

are both entitled to TILA disclosures. None of these cases suggest that a lender must provide

rescission disclosures to spouse without an ownership interest simply because the house is

a principal residence. When a husband induces his wife to sign mortgage paperwork but the

wife “contends that she did not know what the documents were and that her husband had

only told her that her signature was necessary as a formality,” she retains a rescission interest.

Eveland v. Star Bank, NA, 976 F. Supp. 721, 722 (S. D. Ohio, 1997). The bankruptcy courts

have found that when a couple mortgages a home together, both spouses are entitled to TILA

disclosure forms. See In re Jones, 298 B.R. 451, 455 (Bankr. Kan. 2003); In re Apgar, 291

B.R. 665, 670 (Bankr. E.D. Pa. 2003) (“Since Mrs. Apgar granted Homeside a mortgage on

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her home, she is a consumer having the right to rescind.”). No case cited by Plaintiffs,

however, holds that a spouse with no ownership interest in a property must be provided with

disclosure forms, or retains a rescission right, based solely on the fact that the property is a

principal dwelling.

Since Defendants properly provided TILA disclosures to Mr. Gongora, he had only

three days in which to rescind the loan. 15 U.S.C. § 1635(f). Plaintiffs’ rescission notice was

therefore untimely, and their TILA claim fails as a matter of law.

Additionally, Plaintiffs allege that Defendants violated Arizona’s consumer fraud

statutes. A.R.S. §§ 44-1521–1534 (2011). They make no new factual allegations, but instead

argue that Defendants’ failure to provide Mrs. Gongora TILA rescission disclosure and

failure to respond to Plaintiffs’ rescission notice triggered Arizona’s consumer protection

laws. (Doc. 1 at 13). Plaintiffs underlying substantive claims fail as a matter of law, and

therefore cannot support a fraud claim under Arizona law.

Finally, Plaintiffs seek declaratory relief that the security interest is void. (Doc. 1 at

15–16). When all other claims are dismissed, declaratory or injunctive relief that is “premised

upon those counts must likewise fail.” In re MERS Litigation, 744 F. Supp. 2d 1018, 1032

(D. Ariz. 2010). Plaintiffs are not entitled to declaratory or injunctive relief.

CONCLUSION

Plaintiffs argue that Defendants were obligated to provide both Mr. and Mrs. Gongora

with TILA rescission notices when Mr. Gongora took out a loan in his own name secured by

property that belonged solely to him under Arizona law. Defendants were under no such

obligation, and properly provided Mr. Gongora with rescission notice. Mr. Gongora therefore

had three days, not three years, to rescind his loan, and Plaintiffs’ claim is untimely. The

fraud claim under Arizona law is totally dependant on the TILA claim, and therefore fails.

The claim for declaratory relief is therefore dependent on the other claims and fails.

IT IS THEREFORE ORDERED:

1. Defendant BAC Home Loans Servicing’s Motion to Dismiss (Doc. 12) is

granted.

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2. Defendant Compass Bank’s Motion to Dismiss Party (Doc. 20) is dismissed

as moot.

3. The Clerk of Court is instructed to terminate this lawsuit.

DATED this 9th day of January, 2012.

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