Dunn et al v. US Bank National Association
JUDGMENT: Consistent with the 28 order entered on this day, this case is dismissed with prejudice. Signed by Chief Judge Brian S. Miller on 10/04/2016. (rhm)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF ARKANSAS
JOHN DUNN and WENDY DUNN
CASE NO. 4:16-CV-00085 BSM
U.S. BANK NATIONAL ASSOCIATION,
as Trustee for CMSI REMIC Series 200802, REMIC Pass-Through Certificates
Defendant’s motion to dismiss [Doc. No. 12] is granted and plaintiffs’ complaint
[Doc. No. 1] is dismissed with prejudice. Plaintiffs’ motion to strike [Doc. No. 16] is denied
This is the third lawsuit filed by plaintiffs John and Wendy Dunn to void their
February 21, 2008, mortgage and loan, and to enjoin foreclosure. See Dunn v. Am. Mortgage
Associates, Inc., 2015 Ark. App. 358, 1–4 (Ark. Ct. App. 2015) (summarizing prior lawsuits).
In the first case, plaintiffs sued American Mortgage Association, Inc. (the original
lender), Citimortgage, Inc. (who was assigned the loan), and Wilson and Associates, PLLC
(the law firm that initiated foreclosure proceedings), claiming that American Mortgage
Associates failed to provide disclosures as required by the Truth in Lending Act (“TILA”),
15 U.S.C. § 1635. See John F. Dunn and Wendy Dunn v. American Mortgage Associates, et
al., Case No. CV-2010-310 (Pulaski Cnty. Cir. Ct., Ark.). Plaintiffs sought to enjoin
foreclosure and a declaration that the mortgage and loan were void. The state court granted
summary judgment to the defendants and found that plaintiffs were provided the disclosures.
While the first case was underway, plaintiffs filed a second case alleging that
American Mortgage Association failed to provide terms of financing disclosures as TILA
required. See John Dunn and Wendy Dunn v. Mortgage Electronic Registration Systems, Inc.
et al., Case No. 60CV-13-102 (Pulaski Cnty. Cir. Ct., Ark.). As in the first case, plaintiffs
sought to enjoin foreclosure and a declaration that the mortgage and loan were void. The
state court dismissed the claims, holding that res judicata and collateral estoppel barred relitigating substantially similar claims involving the same obligations.
Plaintiffs bring this third case concerning the same obligations seeking an order
requiring defendant to: (1) return the cancelled original note; (2) file the documents required
to release any encumbrance or lien on the property; and (3) repay the money received from
plaintiffs. Complaint 7, Doc. No. 1. Plaintiffs argue that this relief is appropriate because
defendant failed to respond to their TILA-compliant notice of recission on April 21, 2009.
Id. ¶¶ 23–24. Essentially, plaintiffs claim that TILA required defendant to respond, and since
the defendant failed to do so, plaintiffs can bring this lawsuit. Id. ¶ 23. Defendant moves
to dismiss. See Doc. No. 12.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 12(b)(6) permits dismissal when the plaintiff fails to
state a claim upon which relief may be granted. To meet the 12(b)(6) standard, a complaint
must allege sufficient facts to entitle the plaintiff to the relief sought. See Ashcroft v. Iqbal,
556 U.S. 662, 663 (2009). Although detailed factual allegations are not required, threadbare
recitals of the elements of a cause of action, supported by mere conclusory statements, are
insufficient. Id. In ruling on a 12(b)(6) motion to dismiss, materials embraced by the
pleadings, as well as exhibits attached to the pleadings and matters of public record, may all
be considered. Mills v. City of Grand Forks, 614 F.3d 495, 498 (8th Cir. 2010).
Defendant’s motion to dismiss is granted because TILA provides no relief for
plaintiffs simply because defendant failed to respond to the notice of rescission. Indeed,
plaintiffs had no right to rescind at the time they delivered the April 2009 rescission notice
and therefore nothing in the statute required defendant to respond.
As an initial matter, plaintiffs had no right to rescind at the time they delivered the
rescission notice. The right to rescind arises under 15 U.S.C. § 1635. An obligor has an
unconditional right to rescind within three days after a loan is consummated. 15 U.S.C. §
1635(a). If the required forms and disclosures are not provided during the transaction, this
three day period is extended to three years. Id. § 1635(f). This three-year extension is not
applicable, however, because the binding state court judgments established that plaintiffs
received the required disclosures. Therefore, when plaintiffs delivered their notice of
rescission in April 2009, more than one year after loan consummation, the three-day window
to exercise the right to rescind had long since closed.
Despite having no right to rescind, plaintiffs interpret 15 U.S.C. § 1635(b) and the
Supreme Court’s ruling in Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015),
as requiring a response to an invalid rescission notice. These interpretations are rejected.
Nothing in subsection 1635(b) required defendant to respond to plaintiffs’ April 2009
rescission notice. The statute merely provides:
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.
15 U.S.C. § 1635(b). Plaintiffs ignore the opening sentence of the provision, which makes
the subsection applicable “[w]hen an obligator exercises his right to rescind.” Id. Since
plaintiffs had no right to rescind, section 1635(b) does not apply. Moreover, nothing
suggests that defendant was required to file a complaint or other legal action to counter
plaintiffs’ notice of rescission.
Even when Jesinoski is read broadly, the opinion does not provide a cause of action
simply because the defendant failed to respond to a notice of rescission. In Jesinoski, the
Supreme Court held that a borrower is not required to file a lawsuit to exercise his right to
rescind, but the borrower “need only provide written notice to a lender in order to exercise
his right to rescind.” Jesinoski, 135 S.Ct. at 793. Jesinoski does not apply here because
neither party is contesting plaintiffs’ method of rescission. The issue is whether plaintiffs
had the right to rescind and if they did not, whether they could manufacture that right by
merely sending a rescission notice. It cannot be reasonably disputed that plaintiffs delivered
their rescission notice outside of the three-day window, and plaintiffs have provided no law
suggesting how TILA permits them to circumvent the statute and force a rescission when
they had no right to do so in the first place.
For the reasons set forth above, defendants’s motion to dismiss [Doc. No. 12] is
granted and plaintiffs’ complaint [Doc. No. 1] is dismissed with prejudice. Plaintiffs’ motion
to strike defendants’ affirmative defenses [Doc. No. 16] is denied as moot.
IT IS SO ORDERED this 4th day of October 2016.
UNITED STATES DISTRICT JUDGE
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