Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_07-cv-00890/USCOURTS-caed-2_07-cv-00890-3/pdf.json

Parties Involved:
Chicago Title Company
Defendant
Coldwell Banker Elite
Defendant
James Friedman
Defendant
Susan Friedman
Defendant
Golden Horizon Mortgage
Defendant
Nbank Mortgage
Defendant
Stewart Title Company
Defendant
Daisy Turczynski
Plaintiff

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 The following defendants filed motions to dismiss: (1) James and Susan Friedman 1

(joined by Chicago Title Company and nBank Mortgage), (2) nBank Mortgage (joined by

Chicago Title Company and the Friedmans), and (3) Stewart Title Company (joined by the

Friedmans). In addition, nBank Mortgage and Stewart Title Company moved, alternatively, to 

strike plaintiff’s claim for punitive damages. 

1

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

DAISY TURCZYNSKI,

Plaintiff, No. CIV S-07-0890 RRB GGH PS

vs.

JAMES FRIEDMAN, individually, FINDINGS AND RECOMMENDATIONS

SUSAN FRIEDMAN, individually,

STEWART TITLE COMPANY,

CHICAGO TITLE COMPANY, 

GOLDEN HORIZON MORTGAGE,

nBank MORTGAGE, COLDWELL

BANKER ELITE, DOES 1 through 10, 

inclusive,

Defendants.

 /

Previously pending on this court’s law and motion calendar for September 13,

2007, were defendants’ motions to dismiss the amended complaint. Plaintiff Daisy Turczynski 1

appeared and represented herself in pro se. The following counsel appeared on behalf of

defendants: Richard Gray for the Friedmans, Christopher Blakes for Stewart Title Company, 

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Kathleen Moorhead for Chicago Title Company, and Stephen Davis for Nbank Mortgage. 

For the reasons that follow, this court recommends dismissal of this action for

lack of federal subject matter jurisdiction. 

BACKGROUND

By order filed May 31, 2007, this court granted plaintiff’s application to proceed

in forma pauperis, directed the clerk to reimburse plaintiff the filing fee, and directed the U.S.

Marshal to serve process on plaintiff’s amended complaint. The court denied without prejudice

plaintiff’s motion to quiet title. 

The many documents before this court indicate that Benjamin Friedman, an

apparently wealthy businessman with several real estate holdings, acquired title to the subject

single family residence, the “Mabrey property,” in October 2003. Plaintiff commenced

occupying the property in July 2004; Benjamin offered to sell the property to plaintiff for less

than market value and encouraged her to make minor changes to it in order to meet the

requirements for providing foster care. Lita Corbella, plaintiff’s daughter and a real estate agent,

sold several properties for Benjamin in California pursuant to a power of attorney and apparently

wrote the subject “Purchase Agreement” for the Mabrey property. 

The Amended Complaint provides that on November 4, 2004, plaintiff entered

into the Purchase Agreement with Benjamin Friedman to purchase the Mabry Property for

$340,000. On November 19, 2004, Benjamin executed a power of attorney giving his children,

James Friedman and Susan Friedman, power over his real property, including authority to “sign

the closing of the escrow on his behalf.” James Friedman wrote a letter to plaintiff indicating his

intent to follow through on the Purchase Agreement but “changed his mind and never come

down to close escrow.” In response, plaintiff “made [] an effort to cancel or rescind the

Mortgage Contract.” She asserts that defendant Stewart Title continues to hold plaintiff’s good

faith deposit, down payments and closing costs; that defendant Chicago Title Company, “where

the first escrow was opened,” did not inform plaintiff that it closed the escrow November 30,

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 Plaintiff represents she served the summons and complaint by mail upon Golden 2

Horizon Mortgage on May 18, 2007. See Return of Service filed May 31, 2007. However, the

address used by plaintiff is different than that provided by the corporation to the California

Secretary of State for purposes of service of process, and such mailing does not, in any case,

conform to the service requirements of Fed. R. Civ. P. 4.

3

2004, following the Friedmans’ repudiation; that defendant Golden Horizon Mortgage did not

inform plaintiff it reopened escrow December 2004 or of the withdrawal of plaintiff’s loan

agreement; that defendant nBank Mortgage Company, which approved the first and second loans,

did not inform plaintiff of the cancellation of the loan originated by Golden Horizon Mortgage;

and that defendant Coldwell Banker Elite put a “for sale” sign on the property despite knowing it

was in escrow. 

Benjamin Friedman died May 10, 2006. Plaintiff is 71 years of age.

The complaint rests federal subject matter jurisdiction on the “Truth in Lending

Act, 15 U.S.C. § 1635(a-b),” and plaintiff’s asserted right thereunder to rescind the mortgage

contract, and on “U.S. Code Collection Title 15>Chapter 2B> § 78u-2[]” (the Securities

Exchange Act). The complaint also asserts “pendant jurisdiction” over plaintiff’s claims for

relief, viz., a declaration that the Purchase Agreement and Mortgage Contract are valid and

enforceable; injunctive relief according plaintiff the right to possess and purchase the Mabrey

property; and punitive damages for plaintiff’s emotional and physical distress. Plaintiff also

asserts, in her oppositions to the pending motions, federal subject matter jurisdiction pursuant to

the Fifth and Fourteenth Amendments to the U.S. Constitution (asserting denial of equal

protection and due process), the Seventh Amendment (right to jury trial) and the Ninth

Amendment (nondisparagement of constitutionally unenumerated rights).

The only Answer was filed by Robert Do, sued as “Coldwell Banker Elite” but

self-described as “an individual formerly doing business as Coldwell Banker All State Homes

Elite.” Golden Horizon Mortgage has not appeared in the action. All other defendants filed, or 2

joined in, the pending motions to dismiss. 

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Several state court actions have been filed; some are decided, others are pending. 

Stewart Title concedes it holds plaintiff’s escrow deposit of $45,975.20, and has

filed a state action in interpleader. Sac. Sup Ct. No. 07AS03419, filed July 26, 2007 (naming

plaintiff herein, Lita Corbella, and James Friedman (as Trustee of the Friedman Continuation

Trust and Executor of the Benjamin Friedman Estate).

On January 19, 2005, the Friedmans filed suit to cancel the “Mabrey Purchase

Agreement.” Sac. Sup. Ct. No. 05AS00227. Judgment was rendered May 1, 2007, declaring

void all of the following: an October 2003 “Commission Agreement” and “Residential Tenancy

Agreement Option to Purchase” the Mabrey property; a June 2004 “Assignment of Contract for

Option to Purchase” the property; and a November 2004 “Residential Purchase Agreement and

Joint Escrow Instructions.” The court found that Ms. Turcynski and Ms. Corbella “have no

rights to purchase, sell, lease, transfer, convey, hypothecate, or encumber any right, title, or

interest” in the Mabrey property, and awarded costs of the suit to the Friedmans ($57,421 against

Ms. Turczynski). Plaintiff’s cross-complaint for return of her escrow deposit is scheduled for

trial on December 10, 2007. Sac. Sup. Ct. No. 05AS00227; see also Sac. Sup. Ct. No.

06AS02533 (cancellation of Mabrey Purchase Agreement). 

On July 23, 2007, the superior court ruled in favor of the Friedmans in their

unlawful detainer action against Ms. Turczynski. The court granted restitution and possession of

the Mabrey Property to the Friedmans, and damages at the rate of $1600 per month for an

approximate total of $45,000. Sac. Sup. Ct. No. 07AS02094. Plaintiff was evicted from the

premises August 1, 2007. 

LEGAL STANDARDS 

Defendants move to dismiss plaintiff’s amended complaint for lack of federal

subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). A federal court is a court of limited

jurisdiction and may adjudicate only those cases authorized by the Constitution and by Congress. 

See Kokkonen v. Guardian Life Ins. Co, 511 U.S. 375, 377, 114 S. Ct. 1673, 1675 (1994);

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 A federal court’s authority to hear cases in diversity is established by 28 U.S.C. § 1332. 3

“The diversity jurisdiction statute, as construed for nearly 200 years, requires that to bring a

diversity case in federal court against multiple defendants, each plaintiff must be diverse from

each defendant. That compliance with the diversity statute, including its complete diversity

requirement, is the sine qua non of diversity jurisdiction was made clear in Newman-Green, Inc.

v. Alfonzo-Larrain, 490 U.S. 826 (1989). In a case involving claims against multiple defendants,

“the plaintiff must meet the requirements of the diversity statute for each defendant. Id. at 829.” 

Lee v. American National Insurance Company, 260 F.3d 997, 1004-1005 (9th Cir. 2001) (fn. and

citations omitted).

5

Ankenbrandt v. Richards, 504 U.S. 689, 697-99, 112 S. Ct. 2206, 2212 (1992); U.S. Const. Art.

III, §§ 1, 2. Lack of subject matter jurisdiction may be raised at any time by either party or by the

court. See Attorneys Trust v. Videotape Computer Products, Inc., 93 F.3d 593, 594-95 (9th Cir.

1996).

On a Rule12(b)(1) motion to dismiss, plaintiff bears the burden of proving

jurisdiction. See, e.g., Sopcak v. Northern Mountain Helicopter Serv., 52 F.3d 817, 818 (9th

Cir.1995); Thornhill Pub. Co. v. General Tel. & Electronics Corp., 594 F.2d 730, 733 (9th

Cir.1979). When the motion attacks the complaint on its face, as here, the court considers the

complaint’s allegations to be true in order to ascertain whether jurisdiction may be premised on

diversity of citizenship or a federal question. For diversity jurisdiction pursuant to 28 U.S.C. §

1332, each plaintiff must be diverse from each defendant. For federal question jurisdiction 3

pursuant to 28 U.S.C. § 1331, the complaint must either (1) arise under a federal law or the

United States Constitution, (2) allege a “case or controversy” within the meaning of Article III,

section 2, or (3) be authorized by a jurisdiction statute. Baker v. Carr, 369 U.S. 186, 198, 82 S.

Ct. 691, 699-700, 7 L. Ed. 2d 663 (1962). 

DISCUSSION

No party contends, and the court does not find, diversity jurisdiction over this

action. Such jurisdiction would require that each defendant be a citizen of a state other than

California, plaintiff’s state of citizenship. However, several defendants are citizens of

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 E.g., Stewart Title Co., Golden Horizon Mortgage, Inc., and Coldwell Banker Elite

4

(now pro se defendant and California citizen Robert Do).

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California, thus precluding this court’s exercise of diversity jurisdiction. This court’s authority, 4

if any, must rest on federal subject matter jurisdiction. 

A. Federal Truth in Lending Act 

Plaintiff premises federal subject matter jurisdiction on the Truth in Lending Act

(“TILA”), specifically, 15 U.S.C. § 1635 (a) (requiring creditor’s disclosure of obligor’s right to

rescind) and (b) (return of money or property upon rescission). Although the complaint seeks

enforcement of the Purchase Agreement and Mortgage Contract, plaintiff premises her

jurisdictional argument under TILA on the failure of defendants to return plaintiff’s escrow

deposit upon plaintiff’s “rescission” of the Mortgage Contract after James Friedman declined to

close escrow. 

Section 1635(a) accords borrowers a three-day “cooling off” period during which

they may cancel a consumer credit transaction. The lender is required timely to disclose to the

creditor his or her right to rescission and to provide appropriate forms for the exercise of that

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 15 U.S.C. § 1635 (a) (“Disclosure of obligor’s right to rescind”) provides in pertinent 5

part:

Except as otherwise provided in this section, in the case of any consumer credit

transaction . . . in which a security interest, including any such interest arising by

operation of law, 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, the obligor

shall have the right to rescind the transaction until midnight of the third business

day following the consummation of the transaction or the delivery of the

information and rescission forms required under this section together with a

statement containing the material disclosures required under this subchapter,

whichever is later, by notifying the creditor, in accordance with regulations of the

Board, of his intention to do so. The creditor shall clearly and conspicuously

disclose, in accordance with regulations of the Board, to any obligor in a

transaction subject to this section the rights of the obligor under this section. The

creditor shall also provide, in accordance with regulations of the Board,

appropriate forms for the obligor to exercise his right to rescind any transaction

subject to this section.

 15 U.S.C. § 1635(b) provides in pertinent part:

6

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. . . . 

7

 right. Section 1635(b) provides for the return of money or property upon rescission. Section 5 6

1635(f) accords a three-year period for rescission “after the date of consummation of the

transaction or upon the sale of the property” if the obligor has failed timely to make material

disclosures. 

Defendants respond that plaintiff has failed to state a claim under TILA because

the challenged transaction was a “residential mortgage transaction,” as defined by § 1602(w),

which is expressly exempt from the right to rescission pursuant to § 1635(e)(1). Defendants are

correct. The transaction for which plaintiff seeks rescission was a “residential mortgage

transaction,” within the meaning of § 1602(w) (security interest sought against plaintiff’s

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 15 U.S.C. § 1602(w) provides: “The term ‘residential mortgage transaction’ means a 7

transaction in which a mortgage, deed of trust, purchase money security interest arising under an

installment sales contract, or equivalent consensual security interest is created or retained against

the consumer’s dwelling to finance the acquisition or initial construction of such dwelling.”

Accord, 12 C.F.R. § 226.2(a)(24).

 Defendants also assert there is no right of rescission for “unconsummated transactions,” 8

as they characterize the parties’ disputed agreements. Plaintiff retorts that the parties’ Mortgage

Transaction was “consummated” because plaintiff met all conditions precedent and defendants

continue to retain plaintiff’s deposit in a non-interest-bearing account. The court need not reach

this issue. It is clear the mortgage at issue is a “residential mortgage” within the meaning of

section 1602(w) and therefore exempt from TILA’s disclosure and rescission rights pursuant to

section 1635(e)(1). 

8

 dwelling for the purpose of acquiring it), and was therefore expressly exempt from TILA’s 7

disclosure and rescission rights pursuant to § 1635(e)(1) (“[t]his section does not apply to. . . a

residential mortgage transaction as defined in section 1602(w) of this title”). See also, 12 C.F.R.

§ 226.23 (f) (exempting residential mortgage transactions from rescission rights).8

Case law supports the express language of sections 1602(w) and 1635(e)(1)

exempting residential mortgage transactions, specifically, purchase-money first mortgages (as

here), from the right of rescission. See, e.g., Williams v. Homestake Mortgage Company, 986 F.

2d 1137, 1139, n. 5 (11th Cir. 1992) (“Rescission under § 1635(a) applies to those transactions in

which the creditor retains a security interest, other than a first mortgage, on the consumer’s

principal residence”); N.C. Freed Co., Inc. v. Board of Governors of the Federal Reserve System,

473 F.2d 1210, 1214-15 (2d Cir. 1973) (“Any credit transaction which involves a security

interest in property must be clearly explained to the consumer as involving a mortgage or lien;

any such transaction involving the consume’s residence – other than in a purchase-money first

mortgage for the acquisition of the home – carries a 3-day cancellation right”); In re Jones, 298

B.R. 451, 457, n. 29 and related text (D. Kan. 2003) (exempt from rescission are purchase-money

loans to finance the acquisition or construction of the consumer-borrower’s home); Perkins v.

Central Mortgage Co., 422 F. Supp. 2d 487 (E.D. Pa. 2006); Briggs v. Provident Bank, 349 F.

Supp. 2d 1124 (N.D.Ill. 2004); Scott v. Wells Fargo Home Mortgage Co., 326 F. Supp. 2d 709

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(E.D.Va. 2003); In re Figueroa, __ B.R. __ (S.D. Fla. 2006), 2006 WL 4549615, at *4; Parker v.

Long Beach Mortgage Co., __B.R.__ (E.D. Pa. 2006) 2006 WL 2868983, *2; Heuer v. Forest

Hill State Bank, 728 F. Supp. 1199, 1200-01 (D.Md. 1989) (“[T]he Congressional purpose in

creating the statutory rescission right in the first place [was] to protect home owners from certain

sharp practices of home improvement contractors (and those financing such contractors), by

creating a rescission right for home improvement loans that were secured by residential

mortgages on existing dwellings. . . .“Given this Congressional purpose, it is clear that the

Congress did not intend the rescission obligation (or disclosure of it) to extend to a loan whose

predominant purpose is to enable the borrower to acquire or erect, on her property, a new

residential structure.”). 

Accordingly, the court finds that plaintiff has failed to state a claim under the

Truth in Lending Act and cannot rely thereon to establish federal subject matter jurisdiction.

B. The Securities Exchange Act

Plaintiff also asserts, generally, this court has subject matter jurisdiction pursuant

to the Securities Exchange Act (“SEC”), 15 U.S.C. § 78a, et seq. However, the private mortgage

transaction at issue here is not a “security” regulated by the SEC. See, e.g., Home Guaranty

Insurance Corp. v. Third Financial Services, Inc., 667 F. Supp. 577 (M.D. Tenn.1987) (mortgage

loans are not “securities” under SEC’s antifraud provisions, applying Ninth Circuit’s “risk

capital” analysis set forth in United California Bank v. THC Financial Corp., 557 F.2d 1351 (9th

Cir.1977) and Great Western Bank & Trust v. Kotz, 532 F.2d 1252 (9th Cir.1976); see

Developers Mortgage Company v. Transohio Savings Bank, 706 F. Supp. 570 (S.D. Ohio 1989)).

C. Federal Constitutional Claims

Plaintiff fails to state a federal constitutional claim. She does not allege the

requisite state action to support her due process or equal protection claims under the Fifth and

Fourteenth Amendments. See, e.g., Single Moms, Inc. v. Montana Power Co., 331 F.3d 743, 746

-747 (9th Cir. 2003), citing Brentwood Academy v. Tenn. Secondary Sch. Athletic Ass'n., 531

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 The Ninth Amendment protects unarticulated rights. “The absence of a Bill of Rights 9

in the Constitution proposed by the Federal Constitutional Convention of 1787 was a major

objection to the Convention's proposal. See, e.g., 12 The Papers of Thomas Jefferson 438 (Boyd

ed. 1955). In defense of the Convention's plan Alexander Hamilton argued that the enumeration

of certain rights was not only unnecessary, given that such rights had not been surrendered by the

people in their grant of limited powers to the Federal Government, but “would even be

dangerous” on the ground that enumerating certain rights could provide a “plausible pretense” for

the Government to claim powers not granted in derogation of the people's rights. The Federalist

No. 84, pp. 573, 574 (Ford ed. 1898) (A. Hamilton). The latter argument troubled the First

Congress during deliberations on the Bill of Rights, and its solution became the Ninth

Amendment. See 1 Annals of Congress 439 (1789) (remarks of Rep. Madison).” Massachusetts

v. Upton, supra, 466 U.S. at 737.

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U.S. 288, 295, 121 S. Ct. 924 (2001) (“[t]he United States Constitution protects individual rights

only from government action, not from private action”). Nor has plaintiff stated a cause of action

under the general provisions of the Ninth Amendment. See, e.g., Massachusetts v. Upton, 466

U.S. 727, 737, 104 S. Ct. 2085, 2090 (1984) (Stevens, J., conc.) (“the Ninth Amendment, it has

been said, states but a truism”). Finally, plaintiff does not have the right to a civil jury trial 9

under the Seventh Amendment in the absence of a federal claim. 

D. Pendant State Claims

In cases conferring federal subject matter jurisdiction, the court may exercise 

pendant jurisdiction over related state claims. 28 U.S.C. § 1367; United Mine Workers of

America v. Gibbs, 383 U.S. 715, 86 S. Ct. 1130 (1966). However, plaintiff’s alleged state claims

are in reality mischaracterization of her claims for relief (declaratory and injunctive relief and

damages), and would not, therefore, require an exercise of pendant jurisdiction had plaintiff pled

a federal cause of action.

CONCLUSION

This court does not have federal subject matter jurisdiction over plaintiff’s claims

and must, therefore, recommend dismissal of this action. Plaintiff may appeal the decisions of

the state superior court to the state appellate court. This court notes, nonetheless, that while it

does not have jurisdiction to review the “correctness” of the state court proceedings, the

imbalance of legal and financial resources between plaintiff and defendants herein is striking. 

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The state court proceedings have resulted in plaintiff’s eviction and the imposition of damages

that are more than double the amount plaintiff, who proceeds in pro se, can recover from the

return of her escrow deposit. Plaintiff nonetheless pursues her claims and sense of justice

sincerely and articulately. The superior court would do well to bring the various state actions to a

consolidated close in as fair and equitable a manner as possible. 

Accordingly, IT IS HEREBY RECOMMENDED that the following motions to

dismiss be granted: (1) filed July 16, 2007, by James and Susan Friedman (2) filed June 14, 2007,

by nBank Mortgage, and (3) filed July 26, 2007, by Stewart Title Company. Plaintiff’s Notice of

Lis Pendens, filed May 22, 2007 should be discharged, as there is no probable cause to sustain it

in this court.

These findings and recommendations are submitted to the Honorable Ralph R.

Beistline, the United States District Judge assigned to this case, pursuant to the provisions of 28

U.S.C. § 636(b)(l). Within ten days after being served with these findings and recommendations,

plaintiff may file written objections with the court. The document should be captioned

“Objections to Magistrate Judge’s Findings and Recommendations.” Plaintiff is advised that

failure to file objections within the specified time may waive the right to appeal the District

Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

DATED: 10/23/07

/s/ Gregory G. Hollows

___________________________

GREGORY G. HOLLOWS

 U. S. MAGISTRATE JUDGE

GGH5:turc0890.f&r

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