Luna v. Bank of America N.A. et al

Filing 23

ORDER AND FINDINGS AND RECOMMENDATIONS signed by Magistrate Judge Allison Claire on 7/9/13 ORDERING that the 7/17/13 hearing on Defendants' MOTION to DISMISS is VACATED from calendar; and IT IS RECOMMENDED that Defendants' MOTION to DISMISS 13 be granted in part; Plaintiff's Counter-Motion 20 be denied as moot; Plaintiff's TILA rescission claim be dismissed with prejudice; Plaintiff's remaining state law claims be dismissed without prejudice to renewal in state court. These FINDINGS and RECOMMENDATIONS are submitted to U.S. District Judge Garland E. Burrell, Jr. Objections to these F&R due within fourteen days.(Mena-Sanchez, L)

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UNITED STATES DISTRICT COURT

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FOR THE EASTERN DISTRICT OF CALIFORNIA

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BENJAMIN LUNA,

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Plaintiff,

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No. 2:13-cv-0732 GEB AC PS

v.

ORDER AND

BANK OF AMERICA, N.A. et al,

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FINDINGS & RECOMMENDATIONS

Defendants.

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Plaintiff Benjamin Luna is proceeding in this action pro per. Pending before the court is a

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motion to dismiss filed by defendants Bank of America, N.A., ReconTrust Company, N.A.

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(“ReconTrust”), Mortgage Electronic Registration Systems, Inc. (“MERS”), and Federal National

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Mortgage Association. Plaintiff has filed an opposition and a “counter-motion.” The court has

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determined that the matter shall be submitted upon the record and briefs on file and accordingly,

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the date for hearing of this matter shall be vacated. Local Rule 230. On review of the motion, the

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documents filed in support and opposition, and good cause appearing therefor, THE COURT

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FINDS AS FOLLOWS:
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND

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A.

Facts Underlying Litigation
On May 5, 2006, a Deed of Trust (“DOT”) was recorded in the Yolo County Recorder’s

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Office reflecting that plaintiff entered into a mortgage loan agreement with Central Pacific

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Mortgage Company, identified as the “Lender,” for the amount of $365,000 secured by real
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property located at 319 I Street, Davis, CA 95816 (“the Subject Property”). Compl. Ex. 1.

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MERS is identified as the beneficiary. Id. On August 7, 2006, the DOT was re-recorded to

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reflect a corrected document. See id.

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On July 7, 2010, a Notice of Default was filed in the Yolo County Recorder’s Office.
Compl. Ex. 2. On October 12, 2010, a Notice of Trustee’s Sale was filed. Id. Ex. 12.

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On February 9, 2011, the Subject Property was sold at a Trustee’s Sale, but this sale was
later rescinded. See Compl. Exs. 4, 15-16.

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On August 11, 2011, a second Notice of Trustee’s Sale was recorded. Compl. Ex. 17.
The Subject Property was sold on April 20, 2012. Id. Ex. 22.
B.

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The State Action
On April 25, 2012, plaintiff initiated a lawsuit in the Yolo County Superior Court, Luna v.

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Bank of America, N.A., et al., Case No. CV12-824 (“the State Action”). Defs.’ Req. for Judicial

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Notice (“RJN”) Ex. 1.1 The complaint related to the Subject Property’s April 2012 foreclosure

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sale and asserted five causes of action against defendants for (1) cancellation of instruments, (2)

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quiet title, (3) fraud per se, (4) breach of fiduciary duty, and (5) preliminary injunction.

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Defendants filed a demurrer to the complaint.

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On July 16, 2012, rather than filing an opposition to the demurrer, plaintiff filed a first

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amended complaint asserting ten causes of action, including four separate claims (1-4) for

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cancellation of recorded documents, (5) breach of the deed of trust, (6) failure to record new

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notice of default, (7) quiet title, (8) fraud per se, (9) breach of fiduciary duty, and (10) preliminary

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injunction. RJN Ex. 2. Defendant filed a demurrer to the first amended complaint.

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On November 7, 2012, and again after failing to file an opposition, plaintiff filed a second

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amended complaint. RJN Ex. 4. This pleading asserted sixteen causes of action, including nine

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of the first amended complaint’s causes of action and seven additional causes of action. See id.

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Defendants filed a demurrer to the second amended complaint. RJN Ex. 1.

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The court takes notice of facts that are capable of accurate and ready determination by resort to
sources whose accuracy cannot reasonably be questioned. Fed. R. Evid. 201(b); United States v.
Bernal-Obeso, 989 F.2d 331, 333 (9th Cir. 1993).
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On April 8, 2013, the superior court sustained defendants’ demurrer in its entirety and

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dismissed the action with prejudice. RJN Ex. 5.

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C.

The Federal Action

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On April 15, 2013, plaintiff filed the instant action asserting the following claims: (1) void

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notice of default and void sale, (2) failure to mail plaintiff notices, (3) bank documents, including

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notice of default, were executed by “robo-signers,” (4) quiet title, (5) unlawful, unfair or

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fraudulent business practices, (6) negligent misrepresentation, (7) demand for rescission under the

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Truth in Lending Act (“TILA”), 15 U.S.C. § 1635(a), and (8) preliminary injunction.

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On May 23, 2013, defendants filed the instant motion to dismiss. On June 18, 2013,
plaintiff filed an opposition and a “counter-motion.” ECF No. 20.
LEGAL STANDARDS

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The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal

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sufficiency of the complaint. N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir.

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1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of

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sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901

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F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege “enough facts to state a claim to

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relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Thus,

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a defendant’s Rule 12(b)(6) motion challenges the court’s ability to grant any relief on the

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plaintiff’s claims, even if the plaintiff’s allegations are true.

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In determining whether a complaint states a claim on which relief may be granted, the

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court accepts as true the allegations in the complaint and construes the allegations in the light

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most favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984); Love v.

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United States, 915 F.2d 1242, 1245 (9th Cir. 1989).

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The court is permitted to consider material properly submitted as part of the complaint,

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documents not physically attached to the complaint if their authenticity is not contested and the

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complaint necessarily relies on them, and matters of public record. Lee v. City of Los Angeles,

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250 F.3d 668, 688-89 (9th Cir. 2001). Matters of public record include pleadings and other

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papers filed with a court. Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir.
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1986). The court need not accept as true conclusory allegations, unreasonable inferences, or

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unwarranted deductions of fact. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir.

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1981).

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DISCUSSION
A.

Federal Claim
Because jurisdiction over this action is dependent upon an actionable federal claim, the

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court will first consider defendants’ argument that plaintiff’s sole federal claim for rescission

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under TILA is time-barred and subject to dismissal for failure to allege tender.

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Plaintiff moves for rescission under TILA on the grounds that the defendant failed to

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adequately disclose the annual percentage rate for the mortgage loan and that the language of the

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mortgage note is confusing.

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A borrower’s right to rescind a loan transaction under TILA “expire[s] three years after

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the date of the consummation of the transaction[.]” 15 U.S.C. § 1635(f). “Unlike TILA’s one

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year period for civil damages claims, the three year period for TILA rescission claims is an

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‘absolute’ statute of repose that cannot be tolled.” Falcocchia v. Saxon Mortg., Inc., 709 F. Supp.

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2d 860, 867 (E.D. Cal. 2010); see also McOmie-Gray v. Bank of Am. Home Loans, 667 F.3d

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1325, 1329 (9th Cir. 2012) (“Because § 1635(f) is a statute of repose, it extinguished [the

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plaintiff’s] right to rescission . . . three years after the consummation of the loan.”). The

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documents submitted by plaintiff demonstrate that the loan at issue was consummated on or

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around May 5, 2006. Since plaintiff did not commence the State Action until April 25, 2012 and

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did not initiate the instant action until April 15, 2013, plaintiff’s right to rescission under TILA is

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extinguished and his TILA rescission claim should be dismissed with prejudice.

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Timeliness

In his opposition, plaintiff seeks tolling of the statute of limitations on the ground that the

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actual lender of the mortgage loan was never disclosed to him. Plaintiff relies on Jackson v.

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Grant, 890 F.2d 118, 120 (9th Cir. 1989), to argue that Central Pacific Mortgage Company, the

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lender identified in the DOT, could not have been the ultimate lender of his loan since this entity

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was a mortgage company, therefore rendering the ultimate source of funding unknown. For this
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reason, plaintiff argues that the underlying mortgage loan cannot be deemed consummated on or

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around May 5, 2006 since, without knowing with whom he was contracting, there would have

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been no “meeting of the minds” under California law.

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In Jackson, the Ninth Circuit held that a contract conditioned on lender identification was

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invalid where no lender was identified; it did not hold that all loans remain unconsummated as

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long as the ultimate source of the lender’s funding remains unknown. 890 F.2d at 121. Here, a

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lender was plainly identified, see Compl. Ex. 1, and the loan was consummated regardless of how

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or by whom the lender was ultimately funded. See, e.g., Buie v. Palm Springs Motors, Inc., 2001

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WL 34570064, at *3 (C.D. Cal. May 14, 2001) (distinguishing Jackson on these grounds). See

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also Mbaku v. Bank of America, N.A., 2013 WL 425981, at *4 (D. Colo. Feb. 1, 2013);

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Pennington v. Equifirst Corp., 2011 WL 1541283, at *2 (D. Kan. Apr. 21, 2011). Accordingly,

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plaintiff’s TILA claim is time-barred. 2

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2.

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Defendants also seeks dismissal of plaintiff’s TILA claim due to plaintiff failure to allege

Alleging Tender

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ability to tender. The Ninth Circuit has held that rescission under TILA “should be conditioned

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on repayment of the amounts advanced by the lender.” Yamamoto v. Bank of N.Y., 329 F.3d

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1167, 1170 (9th Cir. 2003) (emphasis in original). District courts in this circuit have dismissed

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rescission claims under TILA at the pleading stage based upon the plaintiff’s failure to allege an

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ability to tender loan proceeds. See, e.g., Garza v. Am. Home Mortgage, 2009 WL 188604, at *5

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(E.D. Cal. 2009) (stating that “rescission is an empty remedy without [the borrower’s] ability to

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pay back what she has received”); Ibarra v. Plaza Home Mortgage, 2009 WL 2901637, at *8

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(S.D. Cal. 2009); Ing Bank v. Korn, 2009 WL 1455488 at *1 (W.D. Wash. 2009). In this case,

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plaintiff has unequivocally stated an ability to tender. See Compl. 22-23. Accordingly, dismissal

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is not warranted on this ground.

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B.

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State Law Claims

Plaintiff’s “counter-motion” is a request pursuant to Federal Rule of Civil Procedure 60 for
relief from the judgment in the State Action. This counter-motion will be denied as moot in light
of the undersigned’s finding that plaintiff fails to state an actionable federal claim, which deprives
this court of subject matter jurisdiction.
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Plaintiff’s federal claim provides the sole basis for federal subject matter jurisdiction here.

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While federal courts may exercise supplemental jurisdiction over state law claims “that are so

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related to claims in the action within [the court’s] original jurisdiction that they form part of the

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same case or controversy under Article III of the United States Constitution,” 28 U.S.C.

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§ 1367(a), a court may decline to exercise supplemental jurisdiction where it “has dismissed all

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claims over which it has original jurisdiction,” id. § 1367(c)(3). Indeed, unless “considerations of

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judicial economy, convenience[,] and fairness to litigants” weigh in favor of the exercise of

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supplemental jurisdiction, “a federal court should hesitate to exercise jurisdiction over state

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claims.” United Mine Workers v. Gibbs, 383 U.S. 715, 726 (1966).

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In light of the recommendation that plaintiff’s federal claim be dismissed with prejudice,

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the undersigned also recommends that the court decline to exercise supplemental jurisdiction over

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the remaining state law claims. Accordingly, the court need not address defendants’ arguments

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regarding res judicata or the viability of plaintiff’s state law claims.

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Accordingly, IT IS HEREBY ORDERED that the July 17, 2013 hearing on defendants’

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motion to dismiss is vacated from calendar; and

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IT IS HEREBY RECOMMENDED that:

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1. Defendants’ motion to dismiss be granted in part;

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2. Plaintiff’s “counter-motion” be denied as moot;

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3. Plaintiff’s TILA rescission claim be dismissed with prejudice;

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4. Plaintiff’s remaining state law claims be dismissed without prejudice to renewal in

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state court.

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These findings and recommendations are submitted to the United States District Judge

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assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within fourteen days

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after being served with these findings and recommendations, any party may file written

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objections with the court and serve a copy on all parties. Such a document should be captioned

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“Objections to Magistrate Judge’s Findings and Recommendations.” Any reply to the objections

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shall be served and filed within fourteen days after service of the objections. The parties are

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advised that failure to file objections within the specified time may waive the right to appeal the
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District Court’s order. Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).

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DATED: July 9, 2013

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___________________________________
ALLISON CLAIRE
UNITED STATES MAGISTRATE JUDGE

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