Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_09-cv-01982/USCOURTS-caed-1_09-cv-01982-4/pdf.json

Parties Involved:
American Home Mortgage Servicing, Inc.
Defendant
Deborah Curtis
Plaintiff
Option One Mortgage Corp.
Defendant

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IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

DEBORAH CURTIS, an individual, )

)

Plaintiff, )

)

v. )

)

OPTION ONE MORTGAGE CORP., a )

suspended California corporation, and )

DOES 1 though 50 inclusive, )

)

Defendant. )

____________________________________)

1:09-CV-1982 AWI SMS

ORDER GRANTING

DEFENDANT’S MOTION TO

DISMISS

(Documents #26 & #27)

BACKGROUND

On July 22, 2009, Plaintiff filed a complaint in the Superior Court of the State of

California, County of Stanislaus. On November 10, 2009, Defendant removed the complaint to

the Eastern District of California, Fresno Division, because this court has federal question

jurisdiction over the complaint pursuant to 28 U.S.C. § 1331. On April 28, 2010, the court

dismissed the complaint with leave to amend the complaint’s TILA rescission claim. The court

found that to state a TILA rescission claim, Plaintiff needed to allege in the complaint that she is

financially capable of tendering the loan proceeds. 

On May 10, 2010, Plaintiff filed a first amended complaint (“complaint”). The

complaint alleges a violation of TILA and seeks rescission. The complaint alleges that:

“Plaintiff is fully able and willing to tender performance of her obligations by tendering the

subject properties as required under 15 U.S.C. § 1635(b).”

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On May 20, 2010, American Home Mortgage Servicing, Inc. filed a motion to dismiss. 

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On May 21, 2010, Option One Mortgage Corporation f/k/a/ Option One Mortgage Corporation

filed a motion to dismiss. Defendants contend that the complaint still does not allege Plaintiff’s

ability to tender because the complaint does not allege that Plaintiff is capable of tendering loan’s

proceeds.

On June 3, 2010 and June 9, 2010, Plaintiff filed oppositions to the motions to dismiss. 

Plaintiff contends that because the complaint states she is capable and willing to tender the

“properties”, nothing more is required under TILA. 

Defendants filed reply briefs. Defendants contend that Plaintiff must allege her financial

ability to return the net loan proceeds received, and not the properties securing the loans.

On June 25, 2010, the court reviewed the pending motions to dismiss. The court found

that a definition of the term “property”, as used in the complaint, is necessary for the court to

resolve the pending motions to dismiss. The court noted that it was unclear if by “property”

Plaintiff is referring to the real properties that secure the loan or referring to the loan proceeds

Plaintiff received from Defendants. The court ordered Plaintiff to file an amendment to the

complaint that includes her definition of the term “properties” as used in the complaint.

On July 2, 2010, Plaintiff filed a brief defining the meaning of “properties” as used in the

complaint. Plaintiff states that the word “properties” as used in the complaint and opposition

briefs refers to the real properties that secure the loans, which are the real properties located at

2585 Carriage Court, Turlock, County of Stanislaus, California and 1634 Arlington Court,

Turlock, County of Stanislaus, California.

LEGAL STANDARD

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure a claim may be dismissed

because of the plaintiff’s “failure to state a claim upon which relief can be granted.” Fed. R. Civ.

 While not originally named as a Defendant in this action , on July 2, 2010 Plaintiff filed 1

an amendment to the complaint that names American Home Mortgage Servicing, Inc. in place of

Doe 1.

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P. 12(b)(6). A dismissal under Rule 12(b)(6) may be based on the lack of a cognizable legal

theory or on the absence of sufficient facts alleged under a cognizable legal theory. Johnson v.

Riverside Healthcare Sys., 534 F.3d 1116, 1121 (9 Cir. 2008); Navarro v. Block, 250 F.3d 729, th

732 (9 Cir. 2001). In reviewing a complaint under Rule 12(b)(6), all of the complaint’s material th

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

non-moving party. Marceau v. Balckfeet Hous. Auth., 540 F.3d 916, 919 (9 Cir. 2008); Vignolo th

v. Miller, 120 F.3d 1075, 1077 (9 Cir. 1999). The court must also assume that general th

allegations embrace the necessary, specific facts to support the claim. Smith v. Pacific Prop. and

Dev. Corp., 358 F.3d 1097, 1106 (9 Cir. 2004). However, the court is not required “to accept as

th

true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable

inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1056-57 (9 Cir. 2008); Sprewell v. th

Golden State Warriors, 266 F.3d 979, 988 (9 Cir. 2001). Although legal conclusions may th

provide the framework of a complaint, they are not accepted as true and “[t]hreadbare recitals of

elements of a cause of action, supported by mere conclusory statements, do not suffice.” Ashcroft

v. Iqbal, 129 S.Ct. 1937, 1949-50 (2009); see also Warren v. Fox Family Worldwide, Inc., 328

F.3d 1136, 1139 (9th Cir. 2003). As the Supreme Court has explained: 

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. Factual allegations must

be enough to raise a right to relief above the speculative level, on the assumption

that all the allegations in the complaint are true (even if doubtful in fact).

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus, “a complaint must contain

sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” 

Iqbal, 129 S.Ct. at 1949. “A claim has facial plausibility when the plaintiff pleads factual content

that allows the court draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Iqbal, 129 S.Ct. at 1949. 

The plausibility standard is not akin to a ‘probability requirement,’ but it asks more

than a sheer possibility that a defendant has acted unlawfully. Where a complaint

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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.’

. . . 

Determining whether a complaint states a plausible claim for relief will . . . be a

context specific task that requires the reviewing court to draw on its judicial

experience and common sense. But where the well-pleaded facts do not permit the

court to infer more than the mere possibility of misconduct, the complaint has

alleged – but it has not shown – that the pleader is entitled to relief.

Iqbal, 129 S.Ct. at 1949-50. “In sum, for a complaint to survive a motion to dismiss, the nonconclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly

suggestive of a claim entitling the plaintiff to relief.” Moss v. United States Secret Service, 572

F.3d 962, 969 (9 Cir. 2009). th

ALLEGED FACTS

This action concerns properties located at 2585 Carriage Court, Turlock, and 1634

Arlington Court, Turlock, both of which are located in the County of Stanislaus, State of

California. 

The complaint alleges that on or about November 2006, Plaintiff approached Defendant in

regards to refinancing the property at 1634 Arlington Court, Turlock. Defendant represented it

could provide a fixed rate loan with low monthly payments based upon Plaintiff’s income. 

Plaintiff agreed to refinance 1634 Arlington Court, Turlock.

The complaint alleges that during the loan process, Defendant deceptively and fraudulently

understated the Annual Percentage Rate (APR) by 2.358%, the finance charge and total payments

by $315,633.03 and the payments schedule listed three payment changes instead of six payment

changes. The complaint alleges that Plaintiff’s income was falsified and the property value

grossly overstated. The complaint alleges that “on or about December 20, 2009 [sic.], unaware of

Defendant’s deceptive and fraudulent actions, Plaintiff executed the refinance.”

The complaint alleges that, less than a month later, Defendant approached Plaintiff about

refinancing a second property, 2585 Carriage Court, Turlock, to be used as Plaintiff’s primary

residence. The complaint alleges that since Plaintiff was unaware of Defendant’s deception and

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fraudulent actions regarding the first refinance, Plaintiff agreed to refinance 2585 Carriage Court,

Turlock.

The complaint alleges that Defendant deceptively and fraudulently understated the Annual

Percentage Rate by .252%, the finance charge and total payments by $147,309.67, and the

payments schedule misstated Plaintiff’s payment amounts. In addition, the complaint alleges

Plaintiff’s income was falsified, and the property value grossly overstated.

The complaint alleges on or about February 1, 2007, unaware of Defendant’s deceptive

and fraudulent actions, Plaintiff executed the refinance.

The complaint alleges that on or about October 2008, in attempting to modify the

refinance loans, Plaintiff discovered that Defendant had under disclosed Plaintiff’s APR and

financed an amount in a blatant violation of the Federal Truth in Lending Act (TILA).

The complaint alleges that Plaintiff brought this discrepancy to Defendant’s attention in an

attempt to modify the loans instead of having to institute her right to rescission. The complaint

alleges Defendant refused to modify the loans with more favorable terms.

The complaint alleges that “Plaintiff is fully able and willing to tender performance of her

obligations by tendering the subject properties as required under 15 U.S.C. § 1635.” Plaintiff

states that by “property” she is referring to the real properties that secure the loans. 

DISCUSSION

Plaintiff contends that Defendants violated TILA by understating Plaintiff’s APR and by

understating Plaintiff’s finance charges on the loan. Plaintiff contends that she now exercises her

right to rescission pursuant to 15 U.S.C.§ 1635(b) due to Defendants’ breach. The complaint

alleges that:“Plaintiff is fully able and willing to tender performance of her obligations by

tendering the subject peroperties as required under 15 U.S.C. § 1635(b).

TILA “requires creditors to provide borrowers with clear and accurate disclosures of terms

dealing with things like finance charges, annual percentage rates of interest, and the borrower’s

rights.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998). TILA also requires creditors to

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“clearly and conspicuously disclose” borrowers’ rights to rescind a home mortgage loan in

accordance with regulations of the Federal Reserve Board. Jones v. E*Trade Mortg. Corp., 397

F.3d 810, 812 (9 Cir. 2005). The purpose of rescission under TILA is to return both parties to th

the status quo. Yamamoto v. Bank of New York, 329 F.3d 1167, 1172 (9 Cir. 2003). Title 15 th

U.S.C. § 1635(b) provides that:

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. If the creditor has delivered any property to the obligor, the obligor

may retain possession of it. Upon the performance of the creditor's obligations

under this section, the obligor shall tender the property to the creditor, except

that if return of the property in kind would be impracticable or inequitable, the

obligor shall tender its reasonable value. Tender shall be made at the location of

the property or at the residence of the obligor, at the option of the obligor. If the

creditor does not take possession of the property within 20 days after tender by the

obligor, ownership of the property vests in the obligor without obligation on his

part to pay for it. The procedures prescribed by this subsection shall apply except

when otherwise ordered by a court.

15 U.S.C. § 1635(b) (emphasis added). 

The Ninth Circuit has held that “in applying TILA, ‘a trial judge ha[s] the discretion to

condition rescission on tender by the borrower of the property he had received from the lender.’” 

Yamamoto, 329 F.3d at 1171. This court has found that Plaintiff cannot state a claim for

rescission under TILA unless she alleges that she is financially capable of tendering the loans

proceeds. See, e.g,, Gonzalez v. First Franklin Loan Services, 2010 WL 144862, *5 (E.D.Cal.

2010); Avina v. BNC Mortg., 2009 WL 5215751, *2 (N.D.Cal. 2009); Farmer v. Countrywide

Financial Corp., 2009 WL 1530973, at *5 (C.D. Cal. 2009); Pagtalunan v. Reunion Mortgage Inc.,

2009 WL 961995, at *3 (N.D. Cal. 2009); Garza v. American Home Mortg., 2009 WL 188604, at

*5 (E.D. Cal. 2009). 

Defendants contend that the complaint is subject to dismissal because Plaintiff has still not

alleged she is financially capable of tendering the loans proceeds. In response, Plaintiff contends

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that she has stated a claim under Section 1625(b) because she is able and willing to tender the

properties. Plaintiff admits that by “properties” she is referring to the real property that secures

the loans. Thus, the issue is whether tendering the real property that secure loans satisfies Section

1625(b).

Cases discussing what must be tendered pursuant to Section 1625(b) have specifically

referred to a plaintiff’s need to allege an ability to tender loan proceeds. See Almunir v. Aurora

Loan Service, LLC, 2010 WL 2106278, at *4 (E.D.Cal. 2010). “Property” as used in Section

1625(b) refers to whatever was received from the defendants. See Yamamoto, 329 F.3d at 1171

(stating borrower must tender property he received from lender). For example, in Semar v. Platte

Valley Federal Sav. & Loan Ass'n, 791 F.2d 699 (9 Cir. 1986), the plaintiff received a monetary

th

loan from the defendants. When discussing rescission under Section 1625(b), the Ninth Circuit

stated that upon “rescission, the security interest is dissolved and the borrower returns ‘the

property’ -in this case the loan proceeds- to the lender.” Semar, 791 F.2d at 705. Thus, in

Semar, the Ninth Circuit defined “property” as used in Section 1625(b) to be the loan proceeds

and not the real property that may secure a loan. 

In addition, the language of Section 1635(b) implies that the term “property” is whatever

the obligor received from the creditor. Section 1635(b) requires the obligor to tender the

property and requires the creditor to take any action necessary to reflect the termination of any

security interest created under the transaction. Because the real property secures the loan but is

not the property actually received from Defendants, Plaintiff must tender what she actually

received – the loan proceeds – and Defendants must take any actions necessary to reflect the

termination of the security interest. The security interest are the deeds of trust on the real

properties. 

Plaintiff must return to Defendants the property she received. In this action, the property

Plaintiff received is the loan proceeds and not the real property, or anything else, that secures the

loans. Plaintiff has alleged her willingness to provide Defendants with only the real property

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securing her loan. However, this is not what Section 1635(b) requires. Section 1635(b) requires

Plaintiff to return the loans’ proceeds. Plaintiff’s repeated failure to allege an ability to return the

loans’ proceeds requires the court to find Plaintiff is unable or unwilling to return the loan

proceeds. As such, Plaintiff has not alleged she is financially capable of tendering the property. 

Thus, Plaintiff’s TILA recession claim, brought under Section 1625(b), must be dismissed.2

ORDER

Accordingly, Defendants’ motions to dismiss the complaint are GRANTED, the complaint

is DISMISSED without prejudice, and the Clerk of the Court is DIRECTED to close this action.

IT IS SO ORDERED. 

Dated: July 21, 2010 

0m8i78 CHIEF UNITED STATES DISTRICT JUDGE 

 The court recognizes that leave to amend should ordinarily be granted when the court 2

finds that a complaint fails to state a claim. Chang v. Chen, 80 F.3d 1293, 1296 (9 Cir. 1996). th

However, leave to amend is not required if the court determines that the pleading could not

possibly be cured by the allegation of other facts. Bly-Magee v. California, 236 F.3d 1014, 1019

(9 Cir.2001). Here, Plaintiff has already filed an amended complaint and has still not provided th

the necessary allegations. Thus, no further leave to amend will be given.

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