Abubo et al v. Bank of New York Mellon, The et al
Filing
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ORDER Granting In Part And Denying In Part Defendants' Motion To Dismiss Third Amended Complaint re 31 . Signed by JUDGE J. MICHAEL SEABRIGHT on 6/4/12. (gls, )CERTIFICATE OF SERVICEParticipants registered to r eceive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
EDWARD YUZON ABUBO, and
SARANNE KAGEL ABUBO,
)
)
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Plaintiffs,
)
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vs.
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THE BANK OF NEW YORK
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MELLON; COUNTRYWIDE HOME )
LOANS, INC.; MORTGAGE
)
ELECTRONIC REGISTRATION
)
SYSTEMS, INC.; BANK OF
)
AMERICA, N.A.; and DOES 1-50.
)
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Defendants.
)
________________________________ )
CIVIL NO. 11-00312 JMS-BMK
ORDER GRANTING IN PART AND
DENYING IN PART
DEFENDANTS’ MOTION TO
DISMISS THIRD AMENDED
COMPLAINT
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’
MOTION TO DISMISS THIRD AMENDED COMPLAINT
I. INTRODUCTION
This action arises from a January 22, 2007 mortgage refinancing
transaction in which Plaintiffs Edward Yuzon Abubo and Saranne Kagel Abubo
(collectively, “Plaintiffs” or the “Abubos”) borrowed $1,375,000 from Defendant
Countrywide Home Loans, Inc. (“Countrywide”), secured by a promissory note
and mortgage on real property located at 7297 Alealea Road, Hanalei, Hawaii
96714 (the “subject property”). On October 12, 2009, the note and mortgage were
assigned to Defendant Bank of New York Mellon (“BONYM”), which instituted
non-judicial foreclosure proceedings and subsequently foreclosed on the subject
property. Plaintiffs filed this action on December 17, 2010 in the First Circuit
Court for the State of Hawaii against Countrywide, BONYM, Mortgage Electronic
Registration Systems, Inc. (“MERS”), and Bank of America, N.A., seeking
declaratory and injunctive relief, damages, and rescission of the mortgage
transaction. The action was then removed to this court on May 12, 2011.
After various motions practice, Plaintiffs filed their Third Amended
Complaint (“TAC”) asserting a single claim against BONYM, Countrywide, and
MERS (collectively, “Defendants”) seeking damages for violation of the Truth in
Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., based on Defendants’ alleged
failure to rescind the mortgage loan upon Plaintiffs’ request. Currently before the
court is Defendants’ Motion to Dismiss the TAC. Based on the following, the
court GRANTS in part and DENIES in part Defendants’ Motion to Dismiss.
II. BACKGROUND
A.
Factual Background
The TAC alleges the following relevant facts, which the court
assumes are true for purposes of this Motion. See, e.g., Savage v. Glendale Union
High Sch., 343 F.3d 1036, 1039 n.1 (9th Cir. 2003).
In January 2007, a Countrywide loan officer solicited Plaintiffs to
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refinance their loan on the subject property. Doc. No. 29, TAC ¶ 8. On January
22, 2007, Countrywide loaned Plaintiffs $1,375,000 for that purpose. The loan
was a “subprime,” interest-only, adjustable rate loan with an initial annual interest
rate of 6.25%, requiring initial monthly payments of $7,161.46. Id. ¶¶ 10-11. The
mortgage provides that MERS “is acting solely as nominee for Lender and
Lender’s successors and assigns. MERS is the mortgagee under this Security
Instrument.” Id. Ex. 2.
Plaintiffs allege that they were not provided with two completed and
signed copies of the Notice of Right to Cancel form as required under TILA. Id.
¶ 13. Instead, they were given a blank copy of the form. Id. Ex. 3. Plaintiffs were
also given a TILA disclosure form that stated the wrong amount financed
($1,370,207.55, rather than $1,375,000). Id. ¶ 14.
The mortgage was assigned on October 12, 2009 by MERS, as
nominee for Countrywide, to BONYM, “acting as Trustee of the Alternative Loan
Trust 2007-HY3 Mortgage Pass-Through Certificates, Series 2007-HY3” (“2007
Loan Trust”), which is a “mortgage securitization trust and Pooling and Servicing
Agreement.” Id. ¶ 15.
After being assigned the Mortgage, BONYM initiated non-judicial
foreclosure proceedings on the subject property. Specifically, on October 28,
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2009, BONYM issued and recorded with the Hawaii Bureau of Conveyances a
“Notice of Mortgagee’s Intention to Foreclose Under Power of Sale,” setting an
auction date of December 18, 2009. Id. ¶ 16. On December 17, 2009, Plaintiffs
attempted to cancel the January 22, 2007 loan transaction by sending a cancellation
letter from their counsel, Gary Dubin, by certified mail to “all current and former
parties to the mortgage loan contract.” Id. ¶ 18 & Ex. 7. Although many of the
Defendants received the letter after the auction was held, see id. Ex. 8, the letter
indicates that a copy was hand delivered to the office of David Rosen, counsel for
BONYM, on December 17, 2009. Id. Ex. 7.
Nevertheless, the foreclosure auction proceeded on December 18,
2009. Id. ¶ 19. At the auction, BONYM purchased the subject property for
$1,021,500.00, id. Ex. 9 at 2, with “a credit bid.” Id. ¶ 19. On March 10, 2010,
BONYM recorded a quitclaim deed to obtain title to the subject property. Id. ¶ 20
& Ex. 10. BONYM subsequently filed an ejectment action in state court. The
TAC alleges that the Abubos “have since prevailed in that ejectment action, which
was dismissed” for lack of subject matter jurisdiction. Id. ¶ 21.
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B.
Procedural Background
Plaintiffs initiated this action on December 17, 2010, in the Circuit
Court of the First Circuit, State of Hawaii (“State Court”). Doc. No. 15, State Ct.
Docket, at 3. On April 11, 2011, Plaintiffs filed a First Amended Complaint
(“FAC”) in State Court, and Defendants removed the action to this court on May
12, 2011. Doc. No. 1, Notice of Removal. On May 12, 2011, Defendants filed a
Motion to Dismiss the FAC, which became moot after the parties stipulated to
allow Plaintiffs to file the SAC. See Doc. No. 20 (Entering Order deeming Motion
to Dismiss FAC moot).
Plaintiffs filed their SAC on August 12, 2011, and the court granted a
subsequent Motion to Dismiss on November 30, 2011. The November 30, 2011
Order granted Plaintiffs leave to file their TAC to assert a single claim for TILA
damages based on an alleged wrongful refusal to recognize the December 17, 2009
cancellation notice. Plaintiffs filed their TAC on December 15, 2011.
On January 3, 2012, Defendants filed their Motion to Dismiss the
TAC. Plaintiffs failed to file an Opposition (or a Statement of No Opposition).1 A
hearing was held on June 4, 2012.
1
Counsel for Plaintiffs are reminded that the filing of an Opposition (or Statement of No
Opposition) is not optional. Failure to comply with court-mandated deadlines in the future may
result in the imposition of sanctions.
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III. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]”
“To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its
face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)); see also Weber v. Dep’t of Veterans Affairs,
521 F.3d 1061, 1065 (9th Cir. 2008). This tenet -- that the court must accept as
true all of the allegations contained in the complaint -- “is inapplicable to legal
conclusions.” Iqbal, 556 U.S. at 678. Accordingly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 555); see also Starr v. Baca, 652 F.3d
1202, 1216 (9th Cir. 2011) (“[A]llegations in a complaint or counterclaim may not
simply recite the elements of a cause of action, but must contain sufficient
allegations of underlying facts to give fair notice and to enable the opposing party
to defend itself effectively.”).
Rather, “[a] claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing
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Twombly, 550 U.S. at 556). In other words, “the factual allegations that are taken
as true must plausibly suggest an entitlement to relief, such that it is not unfair to
require the opposing party to be subjected to the expense of discovery and
continued litigation.” Starr, 652 F.3d at 1216. Factual allegations that only permit
the court to infer “the mere possibility of misconduct” do not show that the pleader
is entitled to relief as required by Rule 8. Iqbal, 556 U.S. at 679.
IV. DISCUSSION
The TAC asserts that Defendants are liable for TILA damages for
failure to properly respond to Plaintiffs’ rescission of the mortgage loan. The TAC
alleges:
Because [] Plaintiffs were not provided with the
mandatory TILA notice of right to cancel upon closing
the loan transaction as required under 15 U.S.C. § 1635,
because Plaintiffs timely provided written notice of
rescission to Defendants BONY, Countrywide, and
MERS, within three years of origination of the loan, and
because Defendants ignored said notice, failed to rescind
the subject mortgage loan, and instead moved forward
with an alleged nonjudicial foreclosure to Plaintiffs’
detriment, Plaintiffs are entitled under TILA, including
Sections 1640 and 1641 thereof, to recover damages from
Defendants based upon their wrongful failure to rescind
the subject mortgage loan. . . .
Doc. No. 29, TAC ¶ 24.
Defendants argue that Plaintiff’s TILA damages claim should be
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dismissed because it is time-barred and is insufficiently pled as to each Defendant.2
Based on the following, the court agrees with Defendants in part.
A.
Statute of Limitations
As alleged in the TAC, Plaintiffs purported to rescind the mortgage
loan on December 17, 2009, and then filed this action exactly one year later on
December 17, 2010. Defendants argue that because a TILA claim for damages
must be brought “within one year from the date of the occurrence of the violation,”
15 U.S.C. § 1640(e) (emphasis added), Plaintiffs failed to timely file this action by
one day. In other words, Defendants argue that to bring this action within one year
of the violation, Plaintiffs needed to file this action by December 16, 2010, and not
by December 17, 2010. The court disagrees.
A claim for damages under TILA must be brought “within one year
from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e). Where the
alleged TILA violation is a creditor’s failure to honor a borrower’s rescission of
the mortgage loan, a creditor has twenty days to respond to the rescission. See 15
U.S.C. § 1635(b) (“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
2
Although Defendants raised an additional argument for dismissal during the June 4,
2012 hearing, the court will not address arguments untimely raised.
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reflect the termination of any security interest created under the transaction.”).
Thus, the date of occurrence of a TILA violation for failure to honor a borrower’s
rescission “is the earlier of when the creditor refuses to effectuate rescission, or
twenty days after it receives the notice of rescission.” Kruse v. U.S. Bank, N.A.,
2010 WL 331354, at *3 (D. Colo. Jan. 20, 2010) (collecting and citing cases);
Belini v. Washington Mut. Bank, FA, 412 F.3d 17, 26 (1st Cir. 2005) (providing
that where lender does not respond to rescission notice, the date of violation
occurred for purposes of one-year limitations period was, at the latest, the twentieth
day after lender received notice); Cook v. Wells Fargo Bank, 2010 WL 1289892, at
*3 (S.D. Cal. Mar. 26, 2010) (calculating the statute of limitations as running from
“the twentieth day after Plaintiffs sent their Notice of Rescission”); Buick v. World
Savings Bank, 637 F. Supp. 2d 765, 771-72 (E.D. Cal. 2008) (noting that a lender’s
failure to honor Plaintiffs’ request to rescind is a “distinct and actionable violation”
of TILA, and that the one-year limitations period for a damage claim based on such
violation begins to run at the time the lender failed to honor the rescission request);
see also Miguel v. Country Funding Corp., 309 F.3d 1161, 1165 (9th Cir. 2002)
(stating in dicta that “15 U.S.C. § 1640(e) provides the borrower one year from the
refusal of cancellation to file suit” if the borrower provided the lender an effective
rescission notice).
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Plaintiffs mailed their notice of rescission on December 17, 2009, and
at some point after that date, Defendants failed to honor that request (the court
need not determine whether the date of violation was the December 18, 2009
auction or when the twenty-day period expired).3 Thus, Plaintiffs timely filed their
action for TILA damages on December 17, 2010.
B.
Sufficiency of the TAC as to Each Defendant
Defendants further argue that Plaintiffs’ TILA damages claim is
insufficiently pled because it fails to explain each Defendant’s role in the failure to
rescind. The court agrees with Defendants in part.
As to MERS, it is neither a creditor nor assignee as defined by TILA
and therefore cannot be held civilly liable for alleged TILA violations.
Specifically, TILA provides remedies for violations of TILA as against creditors,
see 15 U.S .C. § 1640(a), and assignees of creditors, see 15 U.S.C. § 1641(a).
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The court further notes that even if the “occurrence of the violation” was Plaintiffs’
rescission of the mortgage loan on December 17, 2009 (which it is not), the statute of limitations
would nonetheless not begin to run until December 18, 2009. Statutes of limitations are
generally computed using Federal Rule of Civil Procedure 6(a), which “exclude[s] the day of the
event that triggers the period.” See Hernandez v. Caldwell, 225 F.3d 435, 439 (4th Cir. 2000)
(using Rule 6(a) to calculate statute of limitations); Clark v. Bonded Adjustment Co., 176 F.
Supp. 2d 1062, 1065 (E.D. Wash. 2001) (“The ‘majority view’ is that generally Rule 6(a) should
be applied to federal statutes of limitations.” (citing 4A Charles Allen Wright & Arthur R.
Miller, Fed. Practice & Pro.: Civil 2d, § 1163 at 465 (2d ed.1987)); see, e.g., Rush v. Am. Home
Mortg., Inc., 2009 WL 4728971, at*5 (D. Md. Dec. 3, 2009) (finding TILA damages claim based
on loan origination was timely where the loan closed on April 3, 2006 and plaintiff brought her
action on April 3, 2007).
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TILA further defines a creditor as:
[A] person who both (1) regularly extends, whether in
connection with loans, sales of property or services, or
otherwise, consumer credit which is payable by
agreement in more than four installments of for which the
payment of a finance charge is or may be required, and
(2) is the person who the debt arising from the consumer
credit transaction is initially payable on the face of the
evidence of indebtedness or, if there is no such
indebtedness, by agreement.
15 U.S.C. § 1602(f). As alleged in the TAC and as displayed in its exhibits, MERS
merely acted as “nominee” for Countrywide; the TAC includes no allegations
suggesting that MERS is a “creditor” as defined by TILA. See, e.g., Cannon v.
U.S. Bank, NA, 2011 WL 2117015, at *5 (D. Haw. May 24, 2011) (dismissing
TILA claim against MERS with prejudice); Gorospe v. Sec. Nat’l Mortg., 2011
WL 578844, at *6 (D. Haw. Feb. 8, 2011) (same); see also Reyes v. WMC Mortg.
Corp., 2012 WL 1067560, at *2 (N.D. Cal. Mar. 28, 2012) (dismissing TILA claim
against MERS because it is not a “creditor”); Stovall v. Nat’l Default Servicing
Corp., 2011 WL 1103582, at *2 (D. Nev. Mar. 23, 2011) (“[P]laintiffs may not
maintain their TILA claims against MERS because Plaintiffs have not alleged that
MERS was either the creditor or an assignee of the creditor.”). The court therefore
GRANTS Defendants’ Motion to Dismiss as to MERS.
As to Countrywide, the TAC asserts that Countrywide was the
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original lender and subsequently assigned the mortgage loan to BONYM. See
Doc. No. 29, TAC ¶¶ 12, 15. Thus, according to the TAC, Countrywide was no
longer Plaintiffs’ creditor at the time Plaintiffs sought rescission. Given that
Countrywide was no longer Plaintiffs’ creditor at the time of rescission, the TAC
fails to plausibly explain how Countrywide could be liable for failing to honor a
rescission that it could not honor in the first place. See King v. Long Beach Mortg.
Co., 672 F. Supp. 2d 238, 246-47 (D. Mass. 2009) (“Rescission in the TILA
context, as envisaged by Congress, is a private and mutual process involving both
the consumer and the creditor ‘working out the logistics’ of returning any property,
monies and financial charges. . . . Rescission, therefore, only makes sense if
exercised by the consumer . . . against the current creditor . . . .”) (internal citations
omitted). The court therefore GRANTS Defendants’ Motion to Dismiss as to
Countrywide.
Finally, as to BONYM, the court finds that the TAC alleges sufficient
facts to state a plausible TILA damages claim against BONYM for failure to honor
Plaintiffs’ rescission of the mortgage loan. The TAC asserts that various TILA
violations occurred during the consummation of the loan, extending Plaintiffs’
ability to rescind the loan to three years from the date of the loan consummation.
See Doc. No. 29, TAC ¶¶ 13-14. The TAC further asserts that Countrywide
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assigned the mortgage loan to BONYM, and that Plaintiffs timely exercised their
right to rescind by notifying BONYM via letter. Id. ¶¶ 15, 18. Finally, the TAC
asserts that rather than honor Plaintiffs’ rescission, BONYM proceeded with the
foreclosure. Id. ¶ 18. In sum, these allegations assert a TILA damages claim
against BONY on the basis that (1) TILA violations occurred in the consummation
of the loan transaction; (2) BONYM was the current assignee of the mortgage loan
at the time Plaintiffs sought rescission; and (3) BONYM failed to honor the
rescission. The court therefore DENIES Defendants’ Motion to Dismiss as to
BONYM.
V. CONCLUSION
Based on the above, the court GRANTS in part and DENIES in part
Defendants’ Motion to Dismiss the TAC. Remaining in this action is Plaintiffs’
TILA damages claim against BONYM.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, June 4, 2012.
/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge
Abubo v. Bank of New York Mellon et al., Civ. No. 11-00312 JMS-BMK, Order Granting in Part
and Denying in Part Defendants’ Motion to Dismiss Third Amended Complaint
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