Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_15-cv-02623/USCOURTS-caed-2_15-cv-02623-1/pdf.json

Parties Involved:
Deutsche Bank Trust Company Americas
Defendant
Gary Lohse
Plaintiff
Hanneke Lohse
Plaintiff
Nationstar Mortgage, LLC
Defendant

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UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF CALIFORNIA 

----oo0oo---- 

GARY LOHSE and HANNEKE LOHSE, 

Plaintiffs, 

v. 

DEUTSCHE BANK TRUST COMPANY 

AMERICAS AS TRUSTEE FOR 

RESIDENTIAL ACCREDIT LOANS, 

INC. PASS THROUGH 

CERTIFICATES 2006-Q03; 

NATIONSTAR MORTGAGE, LLC; and 

DOES 1 through 10, inclusive,

Defendants. 

CIV. NO. 2:15-2623 WBS KJN 

MEMORANDUM AND ORDER RE: MOTION 

TO DISMISS 

----oo0oo---- 

 Plaintiffs Gary Lohse and Hanneke Lohse brought this 

action against defendants Deutsche Bank Trust Company Americas as 

Trustee for Residential Accredit Loans, Inc. (“Deutsche Bank”) 

and Nationstar Mortgage, LLC (“Nationstar”), arising out of 

defendants’ allegedly wrongful conduct related to a mortgage 

loan. The matter is now before the court on defendants’ motion 

to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) 

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for lack of subject matter jurisdiction and 12(b)(6) for failure 

to state a claim upon which relief can be granted. (Mot. (Docket 

No. 6).) 

 Prior to filing this action, plaintiffs had brought 

three separate lawsuits based upon the mortgage at issue here.1 

First, in 2011, plaintiffs sued their mortgage loan servicer at 

the time, Aurora Bank FSB and its subsidiary, Aurora Loan 

Services, LLC (collectively, “Aurora”). See Newhouse v. Aurora 

Bank FSB, 915 F. Supp. 2d 1159, 1161 (E.D. Cal. 2013) (Mueller, 

J.). The complaint in that case was filed in Sacramento County 

Superior Court and the action was subsequently removed to this 

district on the basis of diversity jurisdiction. Id. at 1161-62. 

Plaintiffs in that case alleged that during the origination of 

the 2006 Mortgage, they were deceived into believing they were 

entering a traditional, arms-length, lender-borrower 

relationship, when in fact their loan was immediately bundled, 

packaged, and sold to investors. Id. at 1162. 

 Plaintiffs brought claims against Aurora for 

(1) rescission of the Mortgage based on plaintiffs’ mistaken 

belief they were entering into a traditional mortgage agreement, 

(2) negligence in loan origination, and (3) misrepresentation 

related to their request for a modification of the Mortgage in 

2009. See id. at 1165-68. The court dismissed plaintiffs’ first 

 1

 The court takes judicial notice of the filings in those 

actions. See United States ex rel. Robinson Rancheria Citizens 

Council v. Borneo, Inc., 971 F.2d 244, 248 (9th Cir. 1992) 

(stating that a federal court may take judicial notice of records 

and “proceedings in other courts, both within and without the 

federal judicial system, if those proceedings have a direct 

relation to matters at issue”). 

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two claims with prejudice because they were preempted by the Home 

Owners Loan Act of 1933, and it granted plaintiffs leave to amend 

their misrepresentation claim to satisfy the heightened pleading 

standard under Rule 9(b). See id. Plaintiffs subsequently 

dismissed their action against Aurora with prejudice. Newhouse 

v. Aurora Bank FSB, Civ. No. 2:12-223 KJM KJN, 2013 WL 2449536 

(E.D. Cal. June 5, 2013) (ECF Nos. 93, 96). 

 Second, in February 2014, plaintiffs filed an action in 

the Northern District of California against Nationstar, one of 

the defendants here, and Aztec Foreclosure Corporation (“Aztec”). 

See Lohse v. Nationstar Mortgage, Civ. No. 3:14-514 JCS, 2014 WL 

5358966, at *1 (N.D. Cal. Oct. 20, 2014). Plaintiffs alleged 

that Nationstar took over the servicing of their Mortgage on 

behalf of Deutsche Bank in 2012 after plaintiffs had defaulted on 

the payments. Id. at *1-2. Nationstar allegedly retained Aztec 

to foreclose on the real property that secured the Mortgage. Id. 

 Plaintiffs brought claims against Nationstar under the 

federal Fair Debt Collection Practices Act and Rosenthal Fair 

Debt Collection Practices Act, alleging Nationstar failed to 

notify consumer reporting agencies that plaintiffs disputed their 

debt under the Mortgage. Id. at *2, *8. Plaintiffs ultimately 

settled those claims and dismissed their action against 

Nationstar and Aztec with prejudice. See id. at *1 n.1; Lohse, 

2014 WL 5358966 (N.D. Cal. Feb. 13, 2015) (ECF No. 69) (Order 

Granting Stipulation of Dismissal with Prejudice). 

 Third, plaintiffs filed a separate lawsuit in February 

2014 in the Solano County Superior Court against Nationstar, 

Deutsche Bank, Aztec, and MERS, arising out of the real property 

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that secured the Mortgage. See Lohse v. Nationstar Mortgage, 

LLC, Civ. No. FCS043010 (Cal. Sup. Ct. filed Feb. 6, 2014).2 The 

Superior Court granted the defendants’ demurrer and entered 

judgment dismissing plaintiffs’ action with prejudice. See id. 

(June 16, 2014 Judgment of Dismissal). Plaintiffs appealed the 

judgment and that appeal is presently pending before the Court of 

Appeal of California, First Appellate District. See Lohse v. 

Nationstar Mortgage, LLC, Civ. No. A142814 (Cal. Ct. App. filed 

Aug. 19, 2014). 

 Finally, in December 2015, plaintiffs brought the 

present action against Nationstar and Deutsche Bank. (Compl. 

(Docket No. 1).) Plaintiffs allege that during the origination 

of their Mortgage, they were not provided proper notices of their 

right to rescind within three business days as required by the 

Truth in Lending Act (“TILA”), 15 U.S.C. § 1635(a). (Id. ¶ 4.) 

According to plaintiffs, after discovering alleged fraud in 

connection with the origination of their Mortgage, plaintiffs 

sent written notice to Nationstar on August 21, 2015 rescinding 

the Mortgage transaction. (Id. ¶¶ 4-6, Ex. A, Ex. B at 2.) 

Plaintiffs’ letter to Nationstar asserted that the 2006 

promissory note and Deed of Trust were void because plaintiffs’ 

signatures were fraudulently obtained and because plaintiffs did 

 2

 The court takes judicial notice of the docket entries 

in case number FCS043010 on the Solano County Superior Court’s 

website because they are matters of public record whose accuracy 

cannot reasonably be questioned. E.g., Borneo, 971 F.2d at 248 

(taking judicial notice of a final judgment entered in California 

court); see also Fed. R. Evid. 401(c)(2) (judicial notice 

required “if a party requests it and the court is supplied with 

the necessary information”); (Mot. at 1 n.1). 

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not receive proper disclosures under TILA at the time of 

origination. (See id.) 

 Plaintiffs allege in this action that defendants 

violated TILA section 1635(b) by failing to cancel the Mortgage 

and return the real property and all money paid by plaintiffs 

within twenty days after receiving plaintiffs’ notice to rescind. 

(Id. ¶¶ 7, 11-12.) On that basis, plaintiffs seek a declaratory 

judgment that (1) the 2006 Mortgage transaction is void as a 

matter of law; (2) all documents recorded against the real 

property that secured the Mortgage are void; and (3) plaintiffs 

hold title to the subject property as sole owners unencumbered by 

any claim by defendants. (Id. ¶ 12.) 

DISCUSSION 

 TILA aims to “avoid the uninformed use of credit.” 15 

U.S.C. § 1601(a). The Act “has the broad purpose of promoting 

the informed use of credit by assuring meaningful disclosure of 

credit terms to consumers.” Ford Motor Credit Co. v. Milhollin, 

444 U.S. 555, 559 (1980) (internal quotation marks omitted). 

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). 

 “Failure to satisfy the Act subjects a lender to 

criminal penalties for noncompliance, as well as to statutory and 

actual damages traceable to a lender’s failure to make the 

requisite disclosures.” Id. (citations omitted). “To effectuate 

TILA’s purpose, a court must construe the Act’s provisions 

liberally in favor of the consumer and require absolute 

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compliance by creditors.” Hauk v. JP Morgan Chase Bank USA, 552 

F.3d 1114, 1118 (9th Cir. 2009) (internal quotation marks 

omitted); see Jackson v. Grant, 890 F.2d 118, 120 (9th Cir. 1989) 

(“Even technical or minor violations of the TILA impose liability 

on the creditor.”). 

 1. Timeliness of TILA Rescission 

 For the following reasons, plaintiffs’ claim for 

rescission of their Mortgage under TILA is time-barred. (See 

Mot. at 1-2.) Plaintiffs allege that their August 21, 2015 

notice of rescission that was sent to Nationstar properly 

rescinded their 2006 Mortgage pursuant to TILA section 1635. 

(Compl. ¶¶ 10-12.) Section 1635 provides borrowers an 

unconditional right to rescind certain loans “until midnight of 

the third business day following the consummation of the 

transaction or the delivery of the [requisite disclosures under 

TILA], whichever is later, by notifying the creditor” of their 

intention to rescind. 15 U.S.C. § 1635(a). Creditors are 

required to notify borrowers of this right to rescind and to 

supply them with the forms necessary to exercise that right. 

Id.; 12 C.F.R. § 226.23(b)(1) (listing the form and content of 

the disclosures required to satisfy notice of the right to 

rescind). 

 Under section 1635, “if a lender never makes the 

required disclosures, the ‘right of rescission shall expire three 

years after the date of consummation of the transaction or upon 

the sale of the property, whichever comes first.’” Jesinoski v. 

Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015) (quoting 

15 U.S.C. § 1635(f)); see also 12 C.F.R. § 226.23(a)(3) (“If the 

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required notice or material disclosures are not delivered, the 

right to rescind shall expire 3 years after consummation.”). 

Section “1635(f) completely extinguishes the right of rescission 

at the end of the 3-year period.” Beach, 523 U.S. at 412 ; see 

Miguel v. Country Funding Corp., 309 F.3d 1161, 1164 (9th Cir. 

2002) (“[S]ection 1635(f) represents an ‘absolute limitation on 

rescission actions’ which bars any claims filed more than three 

years after the consummation of the transaction.” (citation 

omitted)). 

 In order to have effectively rescinded their Mortgage 

under TILA section 1635, therefore, plaintiffs were required to 

invoke their right to rescind within the statutory three-year 

period after consummation of the Mortgage. “Consummation means 

the time that a consumer becomes contractually obligated on a 

credit transaction.” 12 C.F.R. § 226.2(a)(13). Plaintiffs do 

not dispute that they consummated the Mortgage before February 8, 

2006, the date they executed the Deed of Trust. (DOT at 15; see 

Compl. ¶ 1.) Consequently, even assuming that defendants did not 

provide the requisite disclosures, plaintiffs’ right to rescind 

the Mortgage expired, at the latest, on February 8, 2009. 

 Plaintiffs here sent their rescission letter to 

Nationstar on August 21, 2015, well outside the three-year 

limitations period. (Compl. ¶ 4, Ex. A.) As a result, their 

notice to rescind was untimely by more than six years, and their 

rescission claim under TILA is therefore time-barred. Jesinoski, 

135 S. Ct. at 792 (“[There is] no federal right to rescind, 

defensively or otherwise, after the 3–year period of § 1635(f) 

has run.” (citation omitted)); Miguel, 309 F.3d at 1164-65 

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(“Because [plaintiff] did not attempt to rescind against the 

proper entity within the three-year limitation period, her right 

to rescind expired.”). 

 Plaintiffs also point to no authority for their 

contention that defendants’ failure to respond to their August 

21, 2015 rescission letter within twenty days resulted in a 

waiver of their right to contest plaintiffs’ rescission under 

TILA. (See Compl. ¶ 7; Opp’n at 4 (Docket No. 10).) Contrary to 

plaintiffs’ assertions, TILA does not impose an obligation on the 

lender to bring a lawsuit against the borrower within twenty days 

where the borrower provides the notice of rescission outside the 

three-year statutory period. Miguel, 309 F.3d at 1165; see also 

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

(holding that neither TILA nor its implementing regulations 

establish “that a borrower’s mere assertion of the right of 

rescission has the automatic effect of voiding the contract”). 

 The Ninth Circuit has further ruled that TILA 

“§ 1635(f) is a three-year statute of repose, requiring dismissal 

of a claim for rescission brought more than three years after the 

consummation of the loan secured by the first trust deed, 

regardless of when the borrower sends notice of rescission.” 

McOmie-Gray v. Bank of Am. Home Loans, 667 F.3d 1325, 1329 (9th 

Cir. 2012). Section 1635(f)’s three-year period is thus not 

subject to equitable tolling. Id. at 1329-30; Miguel, 309 F.3d 

at 1164-65; see Balam-Chuc v. Mukasey, 547 F.3d 1044, 1048-50 

(9th Cir. 2008) (explaining that unlike a statute of limitations, 

a statute of repose is not subject to equitable tolling). 

 2. Declaratory Relief 

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 Because plaintiffs’ complaint does not state a 

cognizable claim under TILA, it likewise fails to state a claim 

for declarative relief pursuant to the Declaratory Judgment Act 

(“DJA”), 28 U.S.C. § 2201 et seq. (Compl. ¶ 8.) It is well 

recognized that “where a plaintiff has alleged a substantive 

cause of action, a declaratory relief claim should not be used as 

a superfluous ‘second cause of action for the determination of 

identical issues’ subsumed within the first.” Jensen v. Quality 

Loan Serv. Corp., 702 F. Supp. 2d 1183, 1189 (E.D. Cal. 2010) 

(Wanger, J.) (citation omitted); see also United States v. 

Washington, 759 F.2d 1353, 1356–1357 (9th Cir. 1985) 

(“Declaratory relief should be denied when it will neither serve 

a useful purpose in clarifying and settling the legal relations 

in issue nor terminate the proceedings and afford relief from the 

uncertainty and controversy faced by the parties.”). Plaintiffs’ 

Complaint does not suggest that their declaratory judgment claim 

would entitle them to any relief beyond what they request 

pursuant to their substantive TILA rescission claim. 

 3. State Law Claims 

 Plaintiffs seek to bring state law claims for quiet 

title, cancellation of instrument, and fraud. (See Compl. ¶¶ 4-

6, 12.) Plaintiffs do not assert that jurisdiction is proper 

under diversity of citizenship, and the Complaint does not 

contain facts sufficient to establish that diversity jurisdiction 

exists here. Accordingly, because the court dismisses the only 

claim over which it may have had original jurisdiction, pursuant 

to 28 U.S.C. § 1367(c)(3), the court declines to exercise 

supplemental jurisdiction over those state law claims. 

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 4. Leave to Amend 

 The decision to grant leave to amend the pleadings is 

within the sound discretion of the district court. See DCD 

Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987). 

When granting a defendant’s motion to dismiss, the court need not 

give the plaintiff leave to amend the complaint if it “determines 

that the pleading could not possibly be cured by the allegation 

of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 

2000) (en banc) (citation omitted). In other words, leave to 

amend need not be granted when amendment would be futile. 

Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002). Here, 

the court cannot perceive how plaintiffs could amend their 

complaint to state a timely claim under TILA. 

 IT IS THEREFORE ORDERED that defendants Deutsche Bank 

Trust Company Americas as Trustee for Residential Accredit Loans, 

Inc. and Nationstar Mortgage, LLC’s motion to dismiss (Docket No. 

6) be, and the same hereby is, GRANTED, without leave to amend. 

Dated: April 4, 2016 

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