Court Opinion

ID: 4348022
Source: CourtListenerOpinion
Date Created: 2018-12-06 18:00:46.891004+00
Date Added: 2024-06-11T14:48:51.785085
License: Public Domain

FOR PUBLICATION

    UNITED STATES COURT OF APPEALS
         FOR THE NINTH CIRCUIT

 JERRY HOANG; LE UYEN THI                          No. 17-35993
 HOANG,
           Plaintiffs-Appellants,                   D.C. No.
                                               2:17-cv-00874-JLR
                    v.

 BANK OF AMERICA, N.A.;                              OPINION
 FEDERAL NATIONAL MORTGAGE
 ASSOCIATION, INC.,
          Defendants-Appellees.

        Appeal from the United States District Court
          for the Western District of Washington
      James L. Robart, Senior District Judge, Presiding

           Argued and Submitted October 12, 2018
                    Seattle, Washington

                     Filed December 6, 2018

   Before: N. Randy Smith and Morgan Christen, Circuit
       Judges, and Robert E. Payne,* District Judge.

                  Opinion by Judge N.R. Smith

     *
       The Honorable Robert E. Payne, Senior United States District Judge
for the Eastern District of Virginia, sitting by designation.
2                 HOANG V. BANK OF AMERICA

                            SUMMARY**

                       Truth in Lending Act

     The panel reversed the district court’s dismissal of an
action brought by a borrower against Bank of America, N.A.,
alleging claims under the Truth in Lending Act (“TILA”)
after the bank declared the borrower in default on a loan and
initiated non-judicial foreclosure proceedings.

    If a creditor fails to make required disclosures under
TILA, borrowers are allowed three years from the loan’s
consummation date to rescind certain loans. 15 U.S.C.
§ 1635(f). The borrower sent the bank notice of intent to
rescind the loan within three years of the consummation date.

    The panel held that under Jesinoski v. Countrywide Home
Loans, 135 S. Ct. 790, 792 (2015), borrowers may affect
rescission of such a loan simply by notifying the creditor of
their intent to rescind within the three-year period from the
loan’s consummation date. The panel further held that
because TILA did not include a statute of limitations
outlining when an action to enforce such a rescission must be
brought, courts must borrow the most analogous state law
statute of limitations and apply that limitation period to TILA
rescission enforcement claims. The panel held that in
Washington, the state’s six-year contract statute of limitations
was the most analogous statute. The panel rejected the
district court’s application of TILA’s one-year statute of
limitations for legal damages claims. The panel also rejected

    **
       This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                HOANG V. BANK OF AMERICA                       3

the bank’s argument that Washington’s two-year catch-all
statute of limitations should apply. Because the borrower
brought this action within six years, the district court erred in
dismissing the TILA claim as time barred.

    The panel held that the district court improperly denied
the borrower leave to amend the complaint. The district court
made its determination based on its determination that
amendment would be futile because the claims were time-
barred. The panel held that because the borrower’s TILA
rescission enforcement claim was not time-barred, an
amendment by the borrower would not be futile.

                         COUNSEL

Jill J. Smith (argued), Natural Resource Law Group PLLC,
Seattle, Washington, for Plaintiffs-Appellants.

Elizabeth Holt Andrews (argued), Jon D. Ives, and Jan T.
Chilton, Severson & Werson, San Francisco, California; for
Defendants-Appellees.
4                 HOANG V. BANK OF AMERICA

                              OPINION

N.R. SMITH, Circuit Judge:

    If a creditor fails to make required disclosures under the
Truth in Lending Act (TILA), borrowers are allowed three
years from the loan’s consummation date to rescind certain
loans.1 15 U.S.C. § 1635(f). Borrowers may effect that
rescission simply by notifying the creditor of their intent to
rescind within the three-year period. Jesinoski v. Countrywide
Home Loans, 135 S. Ct. 790, 792 (2015). TILA does not
include a statute of limitations outlining when an action to
enforce such a rescission must be brought. Without a statute
of limitations in TILA, courts must first borrow the most
analogous state law statute of limitations and apply that
limitation period to TILA rescission enforcement claims. Cty.
of Oneida v. Oneida Indian Nation of N.Y. State, 470 U.S.
226, 240 (1985). In Washington, the state’s six-year contract
statute of limitations is the most analogous statute. We have
jurisdiction under 28 U.S.C. § 1291, and we reverse and
remand for further proceedings.

    1
       Section 1635 applies to consumer credit transactions, as defined in
15 U.S.C. § 1602, which include refinanced home loans such as the loan
at issue here.
                   HOANG V. BANK OF AMERICA                               5

                                    I.2

    In December 2004, Plaintiffs, Jerry Hoang and Le Uyen
Thi Hoang (Hoang), borrowed money from Wells Fargo
Bank, N.A. to purchase a home in Tukwila, Washington. On
April 30, 2010, Hoang refinanced the Wells Fargo home loan
with Bank of America, N.A. and the Federal National
Mortgage Association (collectively, the Bank). At the time of
the refinancing, the Bank failed to give Hoang notice of the
right to rescind the loan, thereby violating TILA’s disclosure
requirement. See 15 U.S.C. § 1635(a). As a result, Hoang had
three years from the loan’s consummation date of April 30,
2010, to rescind the loan. See 15 U.S.C. § 1635(f). On April
15, 2013 (within the three-year period), Hoang sent the Bank
notice of intent to rescind the loan under TILA. The record
reflects that the Bank took no action in response to receiving
the notice.

    In February 2017, the Bank declared Hoang in default on
the loan and initiated non-judicial foreclosure proceedings.
To stop the non-judicial foreclosure proceedings, Hoang filed
suit on May 9, 2017. Hoang requested enforcement of the
loan rescission under TILA, 15 U.S.C. § 1635(f), through
declaratory and injunctive relief. In addition, Hoang’s prayer
for relief requested monetary damages under the Washington
Consumer Protection Act (WCPA), although reference to that
statute appeared nowhere else in the complaint. The Bank
moved to dismiss the case, arguing that Hoang’s claims were

    2
      Because this case arises from the district court’s grant of the Bank’s
motion to dismiss, “we accept the factual allegations in the complaint as
true and construe the pleading in the light most favorable to [Hoang].”
Northstar Fin. Advisors Inc. v. Schwab Invest., 779 F.3d 1036, 1042 (9th
Cir. 2015) (alteration and citation omitted).
6                  HOANG V. BANK OF AMERICA

time barred, because Hoang failed to bring a suit for
rescission within three years of the loan’s consummation.

    The district court held that Hoang timely rescinded the
loan by sending notice of rescission to the Bank within three
years of the loan’s consummation.3 Nevertheless, the district
court granted the Bank’s motion to dismiss, because Hoang’s
claims were time barred. To find the claims time barred, the
district court adopted the one-year statute of limitations
applicable to TILA claims for monetary damages, 15 U.S.C.
§ 1640(e). However, it adopted that statute, because it
misread Hoang’s request for damages under the WCPA (in
Hoang’s prayer for relief) as a claim for monetary relief
under TILA. The district court dismissed Hoang’s claim as
untimely for failure to bring suit within one year. Neither
party disputes that the district court erred in interpreting
Hoang’s complaint as requesting TILA damages.

    As to Hoang’s requests for declaratory and injunctive
relief, the district court acknowledged that the limitations
period applicable to TILA rescission enforcement claims is an
“unsettled issue of law” post-Jesinoski. See Jesinoski v.
Countrywide Home Loans, 135 S. Ct. 790 (2015). The district
court determined that some statute of limitations must apply
and borrowed the limitations period for monetary damages
under TILA, 15 U.S.C. § 1640(e) (based, in part, on its
misconception that Hoang asserted a claim under that
section). Under the one-year statute of limitations, the district
court found that Hoang’s claim for injunctive and declaratory
relief was also time barred. Because it found that all of
Hoang’s claims were time barred, the district court

     3
       This determination by the district court resolved this issue, and it has
not been raised on appeal.
                HOANG V. BANK OF AMERICA                       7

determined that any amendment would be futile.
Accordingly, the district court granted the Bank’s motion and
dismissed the case without leave to amend.

                               II.

    We review the district court’s choice of the applicable
statute of limitations de novo. Hooper v. Lockheed Martin
Corp., 688 F.3d 1037, 1045 (9th Cir. 2012). We also review
dismissal on statute of limitations grounds de novo, because
we have accepted all factual allegations in the complaint as
true and draw all reasonable inferences in favor of the
nonmoving party. Gregg v. Hawaii, Dep’t of Public Safety,
870 F.3d 883, 886–87 (9th Cir. 2017).

    TILA gives borrowers the right to rescind certain loans
within three business days after consummation of the loan.
15 U.S.C. § 1635(a). However, if the creditor fails to make
required TILA disclosures to the borrower, the window for
rescission is expanded to three years from consummation of
the loan. 15 U.S.C. § 1635(f). Once a borrower rescinds a
loan under TILA, the borrower “is not liable for any finance
or other charge, and any security interest given by the
[borrower] . . . becomes void upon such a rescission.”
15 U.S.C. § 1635(b); see 12 C.F.R. § 226.23(a)(3). Within
20 days after the creditor receives a notice of rescission, the
creditor must take steps to wind up the loan. 15 U.S.C.
§ 1635(b). “Upon the performance of the creditor’s
obligations under this section, the [borrower] shall tender the
property to the creditor . . . [or] tender its reasonable value.”
Id. Once both creditor and borrower have so acted, the loan
has been wound up.
8               HOANG V. BANK OF AMERICA

    Previously, we required that borrowers effectuate TILA
loan rescissions by giving lenders their notice of rescission
and also bringing suit to enforce that rescission, both to be
accomplished within the three-year window set forth in
15 U.S.C. § 1635(f). See, e.g., McOmie-Gray v. Bank of Am.
Home Loans, 667 F.3d 1325, 1328 (9th Cir. 2012)
(“[R]escission suits must be brought within three years from
the consummation of the loan.”); 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.”) (quoting King v.
California, 784 F.2d 910, 913 (9th Cir. 1986)). However, the
Supreme Court altered that usual procedure in Jesinoski. It
eliminated the need for a borrower to bring suit within the
three-year window to exercise TILA rescission. Instead,
“rescission is effected when the borrower notifies the creditor
of his intention to rescind.” Jesinoski, 135 S. Ct. at 792. “[S]o
long as the borrower notifies within three years after the
transaction is consummated, his rescission is timely. The
statute does not also require him to sue within three years.”
Id. Thus, although emphasizing that the borrower need only
give the notice of rescission within the three years, the Court
did not clarify when a suit to enforce the rescission must be
brought after a lender’s failure to act on that notice of
rescission. We are now presented with that question: when a
borrower effectively rescinds a loan under TILA, but no steps
are taken to wind up the loan, when must suit be brought to
enforce that rescission?

    Hoang argues that no statute of limitations applies to such
an action in the absence of an express statute of limitations
set forth in TILA and in light of Jesinoski. Alternatively, the
Bank agrees with the district court that a limitation period
                HOANG V. BANK OF AMERICA                       9

must apply but argues that the district court should have
applied Washington’s two-year catchall statute of limitations.
Neither party on appeal argues that we should adopt the
district court’s view and borrow the TILA damage limitation
period in 15 U.S.C. § 1640(e). After review, we agree with
the district court that there is a statute of limitations
applicable to TILA rescission enforcement actions, but we
reject the district court’s decision and the parties’ arguments
as to what that limitation period should be.

    When there is no statute of limitations expressly
applicable to a federal statute, “we do not ordinarily assume
that Congress intended that there be no time limit on actions
at all.” DelCostello v. Int’l Bhd. of Teamsters, 462 U.S. 151,
158 (1983). Rather, “the general rule is that a state limitations
period for an analogous cause of action is borrowed and
applied to the federal claim.” Cty. of Oneida, 470 U.S. at 240.
As a “narrow exception to the general rule,” courts may
“decline to borrow a state statute of limitations only when a
rule from elsewhere in federal law clearly provides a closer
analogy than available state statutes, and when the federal
policies at stake and the practicalities of litigation make that
rule a significantly more appropriate vehicle for interstitial
lawmaking.” Reed v. United Transp. Union, 488 U.S. 319,
324 (1989) (internal quotation marks omitted). However,
“application of a federal statute will be unusual, and resort to
state law remains the norm for borrowing of limitations
periods.” Id. (internal quotation marks omitted).

    As above explained, TILA does not provide a statute of
limitations for rescission enforcement claims. Accordingly,
our precedent requires that we borrow from analogous
Washington state law. See Sharkey v. O’Neal, 778 F.3d 767,
770–71 (9th Cir. 2015). Under Washington’s general contract
10                HOANG V. BANK OF AMERICA

law, the statute of limitations sets forth a six-year limitation
period for an “action upon a contract in writing, or liability
express or implied arising out of a written agreement.” Wash.
Rev. Code § 4.16.040. The loan agreement between Hoang
and the Bank is a contract in writing. An action to rescind that
loan (under TILA or otherwise) arises out of that written
agreement. Because TILA rescissions necessarily require a
contract to be rescinded, contract law provides the best
analogy and we adopt the general contract law statute of
limitations. The district court agreed, acknowledging that the
Washington contract statute of limitations provided the
closest state law analogy to TILA rescission enforcement
(although it declined to borrow it).4 There is no federal law
that provides a closer analogy, nor do TILA policies at stake
and the practicalities of TILA rescission litigation make
federal law a more appropriate vehicle for interstitial
lawmaking.

    We reject the district court’s application of TILA’s one-
year statute of limitations for legal damages claims. 15 U.S.C.
§ 1640(e). First, the district court’s choice to apply the TILA
one-year legal damages statute of limitations was based
primarily on a misreading of Hoang’s complaint as requesting
TILA relief rather than relief under the WCPA. More
importantly, TILA provides for both legal damages and
equitable relief but only includes a statute of limitations for
legal damages relief. The statute does not suggest that the
statute of limitations for legal damages relief is also
applicable to claims for equitable remedies. If Congress
intended that statute to apply, Congress surely knew how to

     4
       The district court declined to borrow Washington’s contract
limitations period, because it reasoned that 15 U.S.C. § 1640(e), TILA’s
damages statute, provided a closer analogy.
               HOANG V. BANK OF AMERICA                    11

draft the statute accordingly. Thus, the district court erred
when it declined to follow the “norm for borrowing [state
law] limitations periods.” See Reed, 488 U.S. at 324. Only
when a state statute of limitations would “frustrate or
significantly interfere with federal policies” do we turn
instead to federal law to supply the limitation period. Id. at
327. Application of Washington’s longer six-year contract
statute of limitations would actually further TILA’s purpose,
which is to protect consumers from predatory lending
practices and promote the informed use of credit. 15 U.S.C.
§ 1601(a).

    We also reject the Bank’s argument that Washington’s
two-year catchall statute of limitations should apply. The
catchall provision applies to “[a]n action for relief not
hereinbefore provided for[.]” Wash. Rev. Code § 4.16.130. In
similar contexts, the Supreme Court previously determined
that catchall statutes were not substantively analogous and
declined to borrow them. See Agency Holding Corp. v.
Malley-Duffy & Assoc., Inc., 483 U.S. 143, 152–53 (1987);
see also DirecTV, Inc. v. Webb, 545 F.3d 837, 849 (9th Cir.
2008). We decline to find that Washington’s catchall is
analogous to TILA and do not borrow it here. Additionally,
because we find that Washington’s contract statute of
limitations is closely analogous, we need not resort to
Washington’s catchall limitation period.

    Last, because “we do not ordinarily assume that Congress
intended that there be no time limit on actions at all,”
DelCostello, 462 U.S. at 158, we reject Hoang’s argument
that no statute of limitations applies to TILA rescission
enforcement claims.
12                HOANG V. BANK OF AMERICA

    Applying Washington’s six-year contract statute of
limitations, Hoang’s TILA claim is timely. Hoang’s cause of
action arose in May 2013 when the Bank failed to take any
action to wind up the loan within 20 days of receiving
Hoang’s notice of rescission.5 See 15 U.S.C. § 1635(b).
Because Hoang brought this suit within six years, the district
court erred in dismissing the claim as time barred.

                                  III.

   The district court improperly denied Hoang leave to
amend the complaint. We review denial of leave to amend for
abuse of discretion. AE ex rel. Hernandez v. Cty. of Tulare,
666 F.3d 631, 636 (9th Cir. 2012).

    A party may amend its pleading with the court’s leave,
which “[t]he court should freely give . . . when justice so
requires.” Fed. R. Civ. P. 15(a)(2). “This policy is to be
applied with extreme liberality.” Eminence Capital, LLC v.
Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (internal
quotation marks omitted). “Dismissal with prejudice and
without leave to amend is not appropriate unless it is clear on
de novo review that the complaint could not be saved by
amendment.” Id. at 1052. Leave to amend can and should
generally be given, even in the absence of such a request by
the party. See Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th
Cir. 2016) (“[A] district court should grant leave to amend
even if no request to amend the pleading was made, unless it
determines that the pleading could not possibly be cured by
the allegation of other facts.”). However, leave to amend need

     5
       Although the complaint alleges that Hoang sent the notice of
rescission to the Bank on April 15, 2013, it is not clear when the notice
was actually received or when the 20-day period would have run.
               HOANG V. BANK OF AMERICA                    13

not be granted when “any amendment would be an exercise
in futility,” Steckman v. Hart Brewing, Co., 143 F.3d 1293,
1298 (9th Cir. 1998), such as when the claims are barred by
the applicable statute of limitations. See Platt Elec. Supply,
Inc. v. EOFF Elec., Inc., 522 F.3d 1049, 1060 (9th Cir. 2008).

    The district court here dismissed Hoang’s claims without
leave to amend. However, the district court made that
determination based on its finding that an amendment would
be futile because the claims were time barred by the one-year
statute of limitations applicable to TILA damage claims.
15 U.S.C. § 1640(e). With the six-year contract statute of
limitations, Hoang’s TILA rescission enforcement claim is
not time barred. Therefore, an amendment by Hoang may not
be futile.

   REVERSE AND REMAND.