Burke et al v. Countrywide Mortgage Ventures, LLC et al

Filing 17

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS WITH LEAVE TO AMEND re 8 - Signed by JUDGE DERRICK K. WATSON on 8/7/2017. "For the foregoing reasons, Defendant's Motion to Dismiss is GRANTED. Plaintiffs are granted li mited leave to file an amended complaint in accordance with the terms of this order by no later than September 8, 2017. The Court CAUTIONS the Burkes that failure to file an amended complaint by September 8, 2017 will result in the automatic dismissal of this action without prejudice." (emt, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Thomas Michael Burke and Elizabeth Braxton Burke served by first class mail to the address of record on August 7, 2017.

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAI‘I

CIVIL NO. 17-00220 DKW-RLP

THOMAS MICHAEL BURKE;
ELIZABETH BRAXTON BURKE,
Plaintiffs,

ORDER GRANTING
DEFENDANT’S MOTION TO
DISMISS WITH LEAVE TO
AMEND

vs.
COUNTRYWIDE MORTGAGE
VENTURES, LLC dba WESTERN
PARADISE FINANCIAL et al.,
Defendants.

INTRODUCTION
In an effort to rescind a mortgage that is currently the subject of a pending
state court foreclosure action, Plaintiffs Thomas Michael Burke and Elizabeth
Braxton Burke, proceeding pro se, bring claims in federal court against Countrywide
Mortgage Ventures, LLC dba Western Paradise Financial (“Countrywide”) under
the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”). Countrywide seeks
dismissal of the Burkes’ federal claims under abstention principles or, alternatively,
for failure to state a claim. Because the claims for violation of 15 U.S.C.
§§ 1635(b) and 1641(g) are time-barred and otherwise fail to state a claim, the Court

1

GRANTS Countrywide’s Motion to Dismiss. The Court grants the Burkes limited
leave to amend as detailed below.
BACKGROUND
I.

State Court Foreclosure Action
The Burkes’ federal claims against Countrywide relate to the same Mortgage

on their real property, located at 2073 Kahaapo Loop, Kihei, Hawaii 96753
(“Property”), that is at issue in a pending state foreclosure proceeding filed on
October 20, 2014 in the Circuit Court of the Second Circuit, State of Hawaii. Def.’s
Ex. 2 (Certified Copy of Compl.); Dkt. No 10–2.1 In Christiana Trust, a Division of
Wilmington Savings Fund Society, FSB, not in Its Individual Capacity but as Trustee
of ARLP Trust 3 v. T. Michael Burke, et al., Civil No. 14-1-0603(1) (“state
foreclosure action”), the foreclosing mortgagee seeks to enforce its interest in the
$800,000 Mortgage on the Property, and Promissory Note secured by the Mortgage,
both executed on December 11, 2007. See Def.’s Ex. 2 ¶¶ 10–13; see also Verified

1

The Court grants Defendant’s request for judicial notice to consider documents whose contents
are incorporated by reference or attached to Plaintiffs’ Verified Complaint, including the
Mortgage, Note, and Notice of Rescission recorded at the State of Hawaii Bureau of Conveyances.
Davis v. HSBC Bank Nevada, N.A., 691 F.3d 1152, 1160 (9th Cir. 2012). The Court also
considers matters that are the proper subject of judicial notice pursuant to Federal Rule of
Evidence 201, including publicly available and recorded documents. Lee v. City of Los Angeles,
250 F.3d 668, 688-89 (9th Cir. 2001); Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308,
322 (2007); Barber v. Ohana Military Communities, LLC, 2014 WL 3529766, *4 (D. Haw. July
15, 2014).

2

Complaint, Ex. B (12/11/07 Mortgage), Dkt. No 1–2; Ex. C (12/11/07 Note), Dkt.
No. 1–3.
The foreclosing mortgagee, Christiana Trust, asserts that it is the holder of the
Note and assignee of the Mortgage by way of assignments from Countrywide to
non-party Bank of America, N.A. on February 10, 2012, and then from Bank of
America to Christiana Trust on February 7, 2014. See Def.’s Ex. 2 ¶¶ 6–9.
Christiana Trust alleges that the Burkes received a notice of default and intent to
accelerate and foreclose the Mortgage in 2012, but despite the notice, the Burkes
neglected to cure the default. See Def.’s Ex. 2 ¶ 11. The Burkes challenge
Christiana Trust’s standing to foreclose on the Property, based in part on their Notice
of Rescission/Right to Cancel, recorded at the State of Hawaii Bureau of
Conveyances on March 18, 2016. Verified Complaint, Ex. A (Notice of
Rescission), Dkt. No. 1–1.
II.

Plaintiffs’ Federal Court Action
On May 17, 2017, the Burkes initiated this federal civil action against

Countrywide and any “Un-Noticed New Creditor” defendants purporting to be
“successors and/or assigns.” The Verified Complaint alleges that defendants failed
to comply with 15 U.S.C. §§ 1635(b) and 1641(g) and seeks “statutory damages,
civil liability, attorneys’ fees and actual damages [and] a judicial declaration that
Plaintiffs are not liable for any finance or other charge relating to the cancelled

3

transaction identified herein,” and also requests an “Order Setting Aside any and
every Mortgage or any and every other instrument that is or may be purported to
secure the said cancelled transaction, under [Section] 1635(b), requiring Defendant
to return to Plaintiff[s] the[ir] original Note.” Verified Complaint at 3.
According to the Burkes, their Notice of Rescission, mailed on November 13,
2015, delivered on November 16, 2015, and publicly recorded in March 2016,
“canceled the Transaction identified as ‘Loan No 182078358 . . . under authority of
[Section] 1635(b).” Verified Complaint at 5. Plaintiffs assert that the “only
conclusive evidence of the Defendant’s compliance with 15 U.S.C. § 1635(b)’s
mandate would be Defendant[’]s return (to Plaintiff[s]) of Plaintiff(s)’ original
Note.” Id. The Defendant has failed to return (to Plaintiff[s]) . . . Plaintiff(s)’
original Note.” Id.
The Burkes allege four causes of action, each directed at rescinding, voiding,
or canceling their loan on the Property: (1) failure to comply with the requirements
of 15 U.S.C. § 1635(b) by returning Plaintiffs’ original Note (Count I); (2) violation
of 15 U.S.C. § 1641(g) that seeks to remove any cloud on the Property’s title (Count
II); (3) request to void or cancel the mortgage under 15 U.S.C. § 1635(b) (Count III);
and (4) an action to quiet title pursuant to 15 U.S.C. §§ 1635(b) and 1641(g) (Count
IV). Among other relief, the Verified Complaint asks that the Court “set[] aside
any and every Mortgage or . . . instrument that is or may be purported to ‘secure’ the

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said cancelled transaction,” and that, any “Un-Noticed,” “New Creditor” be
enjoined from taking any action “based upon any security interest that Defendant
failed to ‘take any action necessary or appropriate to reflect the termination of . . .’,
as mandated by law in [Section] 1635(b).” Verified Complaint at 11.
Countrywide moves for dismissal of the Verified Complaint because it fails to
state a claim for relief or, alternatively, under the Colorado River abstention doctrine
due to the parallel foreclosure proceeding.
STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) authorizes the Court to dismiss a
complaint that fails “to state a claim upon which relief can be granted.” Rule
12(b)(6) is read in conjunction with Rule 8(a), which requires “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). The Court may dismiss a complaint either because it lacks a cognizable
legal theory or because it lacks sufficient factual allegations to support a cognizable
legal theory. Balistreri v. Pacifica Police Dep’t., 901 F.2d 696, 699 (9th Cir. 1988).
Pursuant to Ashcroft v. Iqbal, “[t]o 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.’” 555 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.
Twombly, 550 U.S. 554, 570 (2007)). “[T]he tenet that a court must accept as true
all of the allegations contained in a complaint is inapplicable to legal conclusions.”

5

Id. 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). 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.” Id. (citing Twombly, 550 U.S. at
556). Factual allegations that only permit the court to infer “the mere possibility of
misconduct” do not constitute a short and plain statement of the claim showing that
the pleader is entitled to relief as required by Rule 8(a)(2). Id. at 679.
Because Plaintiffs are proceeding pro se, the Court liberally construes their
filings. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Eldridge v. Block, 832
F.2d 1132, 1137 (9th Cir. 1987) (“The Supreme Court has instructed the federal
courts to liberally construe the ‘inartful pleading’ of pro se litigants.”) (citing Boag
v. MacDougall, 454 U.S. 364, 365 (1982) (per curiam)). The Court recognizes that
“[u]nless it is absolutely clear that no amendment can cure the defect . . . a pro se
litigant is entitled to notice of the complaint’s deficiencies and an opportunity to
amend prior to dismissal of the action.” Lucas v. Dep’t of Corr., 66 F.3d 245, 248
(9th Cir. 1995); see also Crowley v. Bannister, 734 F.3d 967, 977-78 (9th Cir. 2013).
DISCUSSION
Countrywide asks the Court to either abstain from exercising jurisdiction over
the Burkes’ claims or to dismiss all Counts for failure to state a claim upon which

6

relief may be granted under TILA. The Court, exercising its discretion, declines
Countrywide’s request to dismiss or stay this matter under Colorado River Water
Conservation Dist. v. United States, 424 U.S. 800, 818 (1976), based on the pending
state foreclosure action. However, because the Verified Complaint fails to timely
allege any claim upon which relief can be granted, all time-barred claims are
DISMISSED with prejudice. The Burkes are granted limited leave to amend, with
instructions below.
I.

Colorado River Abstention Is Not Warranted Under The Circumstances
“In Colorado River, the Supreme Court was concerned with the problem

posed by the contemporaneous exercise of concurrent jurisdiction by state and
federal courts.” Smith v. Central Ariz. Water Conservation Dist., 418 F.3d 1028,
1032–33 (9th Cir. 2005) (citation omitted). “In such cases, the Court recognized
there may be circumstances in which traditional abstention principles do not apply,
yet considerations of wise judicial administration, giving regard to conservation of
judicial resources and comprehensive disposition of litigation, nonetheless justify a
decision to stay or dismiss federal proceedings pending resolution of concurrent
state court proceedings.” Smith, 418 F.3d at 1033 (internal quotation marks and
citations omitted). “Such circumstances are, however, exceedingly rare. As [the
Ninth Circuit] previously observed, the Colorado River doctrine is a narrow

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exception to the virtually unflagging obligation of the federal courts to exercise the
jurisdiction given them.” Id.
The threshold question is whether there are parallel federal and state suits. In
the Ninth Circuit, “exact parallelism [between the two suits] . . . is not required. It
is enough if the two proceedings are ‘substantially similar.’” Nakash v. Marciano,
882 F.2d 1411, 1416 (9th Cir. 1989). Colorado River and its progeny provide a
multi-factor test for determining whether substantial similarity exists, warranting
federal abstention from concurrent federal and state proceedings. Courts consider:
(1) which court first assumed jurisdiction over any property at
stake; (2) the inconvenience of the federal forum; (3) the desire
to avoid piecemeal litigation; (4) the order in which the forums
obtained jurisdiction; (5) whether federal law or state law
provides the rule of decision on the merits; (6) whether the state
court proceedings can adequately protect the rights of the federal
litigants; (7) the desire to avoid forum shopping; and (8) whether
the state court proceedings will resolve all issues before the
federal court.
Seneca Ins. Co., Inc. v. Strange Land, Inc., --- F.3d ---, 2017 WL 2855082, at *3 (9th
Cir. July 5, 2017) (citation omitted). These factors are not a “mechanical
checklist”—indeed, some may not have any applicability to a case—instead, the
Court examines them in “a pragmatic, flexible manner with a view to the realities of
the case at hand.” Id. at *3 (quoting Moses H. Cone Mem’l Hosp. v. Mercury
Constr. Corp., 460 U.S. 1, 21 (1983)).
Moreover, we must carefully balance the important factors,
“with the balance heavily weighted in favor of the exercise of
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jurisdiction.” [Moses H. Cone Mem’l Hosp. v. Mercury Constr.
Corp., 460 U.S. 1, 16 (1983)]. The underlying principle
guiding this review is a strong presumption against federal
abstention: “[O]ur task in cases such as this is not to find some
substantial reason for the exercise of federal jurisdiction by the
district court; rather, the task is to ascertain whether there exist
‘exceptional’ circumstances, the ‘clearest of justifications,’ that
can suffice under Colorado River to justify the surrender of that
jurisdiction.” Id. at 25–26, 103 S.Ct. 927. “Any doubt as to
whether a factor exists should be resolved against a stay, not in
favor of one.” Travelers Indem. Co. v. Madonna, 914 F.2d
1364, 1369 (9th Cir. 1990).
2017 WL 2855082, at *3. With this framework in mind, the Court considers the
balance of factors as each applies to the present matter. In light of the information
currently available to the Court, the balance ultimately weighs in favor of retaining
jurisdiction.
When analyzing the first factor, a federal court examines whether there is an
in rem or quasi in rem action involving a res already subject to a state court’s
jurisdiction. Princess Lida of Thurn & Taxis v. Thompson, 305 U.S. 456, 466
(1939) (noting that when two suits are in rem, or quasi in rem, the first court to
obtain jurisdiction retains jurisdiction); see also United States v. Fairway Capital
Corp., 483 F.3d 34, 40 n. 2 (1st Cir. 2007) (treating the Princess Lida doctrine as
part of the first factor of a Colorado River abstention analysis). Here, the state
court has assumed quasi in rem jurisdiction over the Property subject to the
Mortgage securing Plaintiffs’ obligations. The civil action in this Court, however,
is not entirely in rem or quasi in rem; it also proceeds in personam. Cf. Rowland v.
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Novus Fin. Corp., 949 F. Supp. 1447, 1457 (D. Haw. 1996) (“[T]his [abstention]
doctrine does not apply in the instant case because the federal TILA action here is
not an in rem proceeding.”); Schmidt v. Fid. Nat. Title Ins. Co., 2008 WL 5082860,
at *10 (D. Haw. Nov. 26, 2008) (“A suit for damages is not an action in rem or quasi
in rem.”). Although Plaintiffs seek rescission of the loan, or cancellation of the
Note and Mortgage, their statutory claims for money damages and civil penalties
under TILA do not implicate the Property in the foreclosure action. See Rowland,
949 F. Supp. at 1457 (finding that the first Colorado River factor weighed against
abstention because state foreclosure action was in rem while federal plaintiff’s TILA
claims were in personam, even though federal plaintiff sought rescission); but see
Blake v. Wells Fargo Bank, 917 F. Supp. 2d 732, 737 (S.D. Ohio 2013) (reaching the
opposite conclusion and abstaining from proceeding with a plaintiff’s TILA claims
after an Ohio court obtained jurisdiction over the plaintiff’s resident property in a
state foreclosure action).2 The first factor, therefore, does not weigh heavily in
favor of abstention.

2

See also Britton v. Britton, 223 F.Supp.2d 276, 284 (D.Me.2002) (finding first factor would not
weigh in favor of abstention because, in part, state-court divorce and dissolution proceeding was in
rem and plaintiff’s federal statutory action for money damages was not); cf. Carson v. Wells Fargo
Bank, 2011 WL 2470099, at *6 (M.D. Fla. June 20, 2011) (finding first factor weighed in favor of
abstention because even though state foreclosure case was in rem and federal plaintiff’s TILA
claims were in personam, federal defendant intended to add counterclaims to federal case that
would make the federal case in rem).

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Nor do the remaining factors, taken in their totality, weigh heavily in favor of
abstention. This Court may be less convenient geographically for the Burkes than
the Second Circuit court, but it is not necessarily less convenient for Countrywide,
which is not a party to the state foreclosure action, such that this factor weighs
neither for nor against abstention. See Cerit v. Cerit, 188 F. Supp. 2d 1239, 1249
(D. Haw. 2002) (noting that “the question is whether the inconvenience of the
federal forum is so great that this factor points toward abstention”). On the other
hand, there is some risk that proceeding here could result in piecemeal litigation and
inconsistent rulings. Unlike the statute at issue in Colorado River, however,
Countrywide points to no “clear federal policy” against piecemeal litigation of TILA
claims that mandates giving this factor greater consideration given the procedural
posture of these two cases. See Colorado River, 424 U.S. at 819; see also
ScripsAmerica, Inc. v. Ironridge Glob. LLC, 56 F. Supp. 3d 1121, 1149 (C.D. Cal.
2014) (“The mere possibility of piecemeal litigation does not constitute an
exceptional circumstance.”) (citation omitted). As to the fourth factor, although the
state court foreclosure action was filed first, the Court cannot determine how far it
has progressed. See Moses H. Cone, 460 U.S. at 21 (stating that the jurisdictional
order analysis “should not be measured exclusively by which complaint was filed
first, but rather in terms of how much progress has been made in the two actions”).

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The fifth factor—the rule of decision—requires the Court to examine whether
state or federal law controls. The presence of federal questions weighs heavily
against abstention. See Moses H. Cone., 460 U.S. at 26 (“[T]he presence of federal
law issues must always be a major consideration weighing against surrender.”).
The sixth factor involves whether the state court can adequately protect federal
rights. See Travelers, 914 F.2d at 1369. As there is no concern that the parties’
federal rights will be inadequately protected in state court, this factor does not weigh
in favor of either party. The final factor—forum shopping—does weigh in favor of
abstention when a litigant seeks a federal forum to avoid adverse rulings made by the
state court or to gain a tactical advantage from the application of federal court rules.
There is no evidence in the current record, however, of adverse rulings in the state
foreclosure action against the Burkes, or that Plaintiffs, unhappy with the
proceedings in state court, are attempting to obtain a different result from the federal
court.
In sum, because these cases do not present the requisite “exceptional
circumstances” to merit a Colorado River stay or dismissal, abstention is not
warranted at this time. Based on the information currently available, the record
contains insufficient facts to overcome “the balance weighted heavily in favor of the
exercise of jurisdiction,” Moses H. Cone, 460 U.S. at 16, and the Court declines

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Countrywide’s request to stay or dismiss this matter on abstention grounds. The
Court next turns to the merits of Plaintiffs’ claims.
II.

The Verified Complaint Fails To State A Claim
As discussed more fully below, even liberally construed, the allegations in the

Verified Complaint are deficient for several reasons. First, Plaintiffs’ TILA claims
are time-barred as a matter of law. Second, even if timely, the Verified Complaint
fails to plausibly allege claims for violation of the cited provisions. Defendants’
Motion is therefore granted and the time-barred claims are dismissed with prejudice.
The Burkes are granted limited leave to amend consistent with the instructions
below.
A.

Count I: Rescission Under TILA Section 1635(b)

When a lender fails to make the required disclosures, TILA grants borrowers
the right to rescind the loan agreement by providing the creditor with written notice
of an intent to rescind. 15 U.S.C. § 1635(a). And “[w]ithin 20 days after receipt of
a notice of rescission, the creditor shall return to the obligor any money . . . given . . .
[and] the obligor shall tender the property to the creditor[.]” Id. § 1635(b). “If the
creditor does not take possession of the property within 20 days after tender by the
obligor, ownership of the property vests in the obligor without obligation on his part
to pay for it.” Id.

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The Burkes’ Section 1635(b) rescission claim fails for several reasons. First,
the right of rescission relied upon by the Burkes under TILA Section 1635 “does not
apply to . . . a residential mortgage transaction as defined in section 1602(w).”3 15
U.S.C. § 1635(e)(1). Section 1602 defines “residential mortgage transaction” as “a
transaction in which a mortgage, deed of trust, purchase money security interest
arising under an installment sales contract, or equivalent consensual security interest
is created or retained against the consumer’s dwelling to finance the acquisition or
initial construction of such dwelling.” The Burkes’ Mortgage states that “Borrower
shall occupy, establish, and use the Property as Borrower’s principal residence,”
Verified Complaint, Ex. B at 6. As such, the Burkes do not establish that Section
1635(b) applies to this transaction in the first instance, or how the transaction they
complain of is anything other than a “residential mortgage transaction” that is
ineligible for rescission. See also Zakarian v. Option One Mortg. Corp., 642
F. Supp. 2d 1206, 1214 (D. Haw. 2009) (“[T]he rescission provision of TILA
contains a specific exemption for a “residential mortgage transaction,” which is
defined in the statute as: “a transaction in which a mortgage, deed of trust, purchase
money security interest arising under an installment sales contract, or equivalent
consensual security interest is created or retained against the consumer’s dwelling to

3

Redesignated as section 1602(x) of this title.

14

finance the acquisition or initial construction of such dwelling.” (citing 15 U.S.C.
§ 1602(w)).
Second, even assuming a statutory right to rescind exists, the Burkes’ claim is
time-barred based on the allegations on the face of the Verified Complaint. Section
1635(a) provides a right to rescind a loan transaction “until midnight of the third
business day following the consummation of the transaction or the delivery of the
information and rescission forms required under this section together with a
statement containing [the required material disclosures.]” If the required
disclosures are not provided, the right to rescind is extended and expires “three years
after the date of consummation of the transaction or upon the sale of the property,
whichever occurs first[.]” 15 U.S.C. § 1635(f).4
The Ninth Circuit has made clear that an obligor who wishes to cancel a loan
must provide actual notice within the three-year statutory period.5 Section 1635(f)
is an absolute statute of repose barring “any [TILA rescission] claims filed more
than three years after the consummation of the transaction.” Miguel v. Country
Funding Corp., 309 F.3d 1161, 1164 (9th Cir. 2002) (citing King v. Cal., 784 F.2d
910, 913 (9th Cir. 1986)). The three-year period is not subject to equitable tolling.

4

A transaction is “consummated” when a consumer becomes contractually obligated. Jackson v.
Grant, 890 F.2d 118, 120 (9th Cir. 1989) (citing 12 C.F.R. § 226.2(a)(13)).
5
Plaintiffs’ rescission rights in foreclosure under Section 1635(i) remain “subject to the time
period provided in subsection [1635](f).”

15

See Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998) (stating that Ҥ 1635(f)
completely extinguishes the right of rescission at the end of the 3-year period,” even
if a lender failed to make the required disclosures); see also Mohanna v. Bank of
Am., N.A., 2016 WL 1729996, at *4 (N.D. Cal. May 2, 2016) (“A borrower’s right to
seek rescission under TILA is subject to a three-year statute of repose. Any attempt
to rescind more than three years after the date of the ‘consummation of the
transaction’ is absolutely time-barred.”) (quoting Jesinoski v. Countrywide Home
Loans, Inc., 135 S. Ct. 790, 792 (2015)). Plaintiffs failed to meet the deadline.
The Burkes allege that they executed their right to rescind the loan under
TILA when they mailed the Notice of Rescission on November 13, 2015 and
recorded it with the Bureau of Conveyances on March 10, 2016. See Verified
Complaint, Ex. A. None of these occurrences, however, is within three years of the
consummation of the December 11, 2007 Mortgage that they seek to rescind. The
Burkes do not contest that their Notice of Rescission was untimely. See Mem. In
Opp’n at 6 (“Plaintiffs allege that defendants ignored Plaintiffs rescission in its
Circuit Court case State of Hawaii even when confronted with a lawful judicial
notice. . . . All that is required of the Borrower(s) is a Notice.”). In fact, the
Burkes contend that because Defendant failed to return their original cancelled Note
within twenty days after receiving their Notice of Rescission, the loan is rescinded,

16

and Plaintiffs are entitled to retain the Property without further financial obligation.
Plaintiffs are mistaken.
To the extent the Burkes baldly assert that Defendant’s failure to respond to
their Notice of Rescission within 20 days entitles them to rescission even though the
notice is time-barred, they are wrong for two reasons. First, the lender was not
required to respond to the late-filed Notice of Rescission. See Lohse v. Deutsche
Bank Trust Co. Americas as Trustee for Residential Accredit Loans, Inc. Pass
Through Certificates 2006-Q03, et al., 2016 WL 1322891, at *4 (E.D. Cal. Apr. 4,
2016) (rejecting plaintiff’s “contention that defendants’ failure to respond to their
. . . rescission letter within twenty days resulted in a waiver of their right to contest
plaintiff’s rescission under TILA,” and noting that “TILA does not impose an
obligation on the lender to [take action] within twenty days where the borrower
provides the notice of rescission outside the three-year statutory period.”). Second,
the statute is not self-effectuating and imposes no automatic obligation on Defendant
to rescind the mortgage loan. See McOmie-Gray v. Bank of Am. Home Loans, 667
F.3d 1325, 1327 (9th Cir. 2012); see also Yamamoto v. Bank of N.Y., 329 F.3d 1167,
1172 (9th Cir. 2003) (rejecting argument that rescission is “accomplished
automatically upon . . . communicat[ion of] a notice of rescission, without regard to
whether the law permits [rescission] on the grounds asserted”). Construing the
statute otherwise “would give TILA claimants the right to simply walk away with a

17

windfall . . . without any further obligation, a result certainly not intended by
Congress.” Bradford v. HSBC Mortg. Corp., 838 F. Supp. 2d 424, 429 (E.D. Va.
2012) (internal citation and quotation omitted).
In any event, there is no dispute that Plaintiffs sent their Notice of Rescission
more than seven years after executing their loan, well after the expiration of any
statutory right to rescind. Thus, their Notice of Rescission is a nullity and does not
entitle the Burkes to an order declaring the Mortgage rescinded.
Because the Section 1635(b) rescission claim is time-barred based on the
unambiguous allegations on the face of the Verified Complaint and Exhibits thereto,
no amendment could save this claim. See Sluka v. Rushmore Loan Mgmt. Servs.,
LLC, 2016 WL 6275387, at *3 (D. Haw. Oct. 26, 2016) (dismissing time-barred
TILA Section 1635(b) claim with prejudice, finding that amendment would be
futile). Accordingly, Defendant’s Motion is granted as to this claim, and Count I is
dismissed without leave to amend.
B.

Count II: Violation Of TILA Section 1641(g)

Count II alleges that Countrywide and unidentified “successors and/or
assigns” are liable for monetary damages and removal of any cloud of title on the
Property for failing to provide the Burkes with notice of assignment of the Mortgage
within thirty days of the transaction, in violation of TILA Section 1641(g).
Verified Complaint at 6–9. Prior to the filing of this civil action, the most recent

18

assignment was on February 7, 2014. This assignment and all previous publicly
recorded assignments of the Mortgage are attached as exhibits to the state
foreclosure complaint filed on October 20, 2014. See Def.’s Ex. 2 (Foreclosure
Complaint). Plaintiffs deny receiving written notice of any assignment as required
by Section 1641(g).
Claims 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). Equitable tolling
can apply under limited circumstances. See King v. Cal., 784 F.2d 910, 915 (9th
Cir. 1986) (“[T]he doctrine of equitable tolling may, in the appropriate
circumstances, suspend the limitations period until the borrower discovers or had
reasonable opportunity to discover the . . . nondisclosures that form the basis of the
TILA action.”).
Even assuming the truth of the Burkes’ allegations, the purported
nondisclosures themselves cannot serve as a basis to justifying tolling. That is,
without more, nondisclosure is insufficient to support tolling of the limitations
period. See Teaupa v. U.S. Nat’l Bank, 836 F. Supp. 2d 1083, 1094 (D. Haw.
2011); accord Garcia v. Wachovia Mort. Corp., 676 F. Supp. 2d 895, 896 (C. D.
Cal. 2009) (“the mere existence of TILA violations and lack of disclosure does not
itself equitably toll the statute of limitations”). Because the Burkes allege nothing
more than nondisclosure, there is no basis to equitably toll the statute of

19

limitations—especially in light of the fact that the publicly filed notice of
assignment is also an exhibit to the state foreclosure complaint filed against the
Burkes on October 20, 2014. See Def.’s Ex. 2
The record establishes that the most recent assignment of the Mortgage was
executed on February 7, 2014. The Burkes filed the present civil action on May 17,
2017—over three years later. Because the Burkes did not bring their claim within
one year from the date of the occurrence of the violation, and there is no basis to find
equitable tolling, their TILA Section 1641 claim for damages is time-barred.
Defendant’s Motion is granted as to this claim, and Count II is dismissed without
leave to amend.
C.

Count III: Avoidance Or Cancellation Of The Loan

Count III seeks to void or cancel the Note and Mortgage pursuant to TILA
Section 1635(b) and is premised on Count I’s claim for violation of that same
statute. See Verified Complaint at 9–10. The Burkes request a “judicial
declaration that any Mortgage arising from the transaction cancelled on authority of
Title 15 U.S.C § 1635(b) is null and void, and granting Plaintiff quiet title in the
Property. [The Burkes] are further entitled to a return of [their] original Note.”
Verified Complaint at 10. To the extent Count III is premised entirely on Count I,
the claim fails for same the reasons addressed above and is likewise dismissed

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without leave to amend. To the extent it additionally seeks to quiet title, that claim
is addressed below.
D.

Count IV: Quiet Title

Count IV seeks to quiet title based on violations of Sections 1635(b) and
1641(g): “Defendant’s failure to comply with [Section] 1635(b) . . . relieved
Plaintiff[s] of any obligation to ‘tender’ in-kind, and Plaintiff[s] seek[] [a] judicial
declaration that title to the Subject Property is vested in Plaintiff[s] alone[,]” and any
one “purporting to be a ‘new creditor’ as contemplated in [Section] 1641(g) be
declared to have no estate, right, title or interest in Subject Property.” Verified
Complaint at 10–11. To the extent Count IV’s quiet title claim is premised on
time-barred Counts I and II, it necessarily fails for the same reasons and is
correspondingly dismissed.
Even if liberally construed as a quiet title claim under state law, the Burkes
have not alleged the most basic facts regarding the interests of various parties to
make out a cognizable “quiet title” claim.6 Moreover, plaintiffs bringing a quiet
title claim against a mortgagee or purported servicer for the mortgagee are required
to allege that they are able to tender the amount of indebtedness. See Nat’l Mortg.
Ass’n v. Kamakau, 2012 WL 622169, at *9 (D. Haw. Feb. 23, 2012) (“A basic

6

Hawaii law provides that a quiet title “[a]ction may be brought by any person against another
person who claims, or who may claim adversely to the plaintiff, an estate or interest in real
property, for the purpose of determining the adverse claim.” HRS § 669-1(a).

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requirement of an action to quiet title is an allegation that plaintiffs are the rightful
owners of the property, i.e., that they have satisfied their obligations under the [note
and mortgage].”) (internal quotation marks and citation omitted); Benoist v. U.S.
Bank Nat’l Ass’n, 2012 WL 3202180, at *10 (D. Haw. Aug. 3, 2012) (“[T]ender is
required, regardless of whether the claim is based on common law or statute.”);
Caraang v. PNC Mortg., 795 F. Supp. 2d 1098, 1126 (D. Haw. 2011) (“In order for
mortgagors to quiet title against the mortgagee, the mortgagors must establish that
they are the rightful owners of the property and they have paid, or are able to pay, the
amount of their indebtedness.”). Cases from this district and elsewhere rely on this
rule requiring plaintiffs “to establish [their] superior title by showing the strength of
[their] title as opposed to merely attacking the title of the defendant.” Amina v.
Bank of N.Y. Mellon, 2012 WL 3283513, at *3 (D. Haw. Aug. 9, 2012). The Burkes
do not allege that they have paid the outstanding loan balance or that they are able to
do so.
For these reasons, the Burkes fail to state a claim for quiet title, and Count IV
is dismissed. Because amendment may be possible with respect to their non-TILA
claims, however, Plaintiffs are granted leave to attempt to cure the deficiencies in
this claim.

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III.

Plaintiffs Are Granted Limited Leave To Amend
Plaintiffs seek leave to amend to allege fraud claims. See Mem. In Opp’n at

8. They do not specify against whom they would assert fraud claims or upon what
specific facts. Nevertheless, the Court cannot say at this time that such amendment
would be futile. Accordingly, Plaintiffs’ request for leave to amend is GRANTED.
Plaintiffs may file an amended complaint on or before September 8, 2017, and must
comply with the Federal Rules of Civil Procedure and the Local Rules for the
District of Hawaii.
If Plaintiffs choose to file an amended complaint, they are CAUTIONED that
they must write short, plain statements telling the Court: (1) the specific basis of this
Court’s jurisdiction; (2) the constitutional or statutory right Plaintiffs believe was
violated; (3) the name of the defendant who violated that right; (4) exactly what that
defendant did or failed to do; (5) how the action or inaction of that defendant is
connected to the violation of Plaintiffs’ rights; and (6) what specific injury Plaintiff
suffered because of that defendant’s conduct. Plaintiffs must repeat this process for
each person or entity named as a defendant. If Plaintiffs fail to affirmatively link
the conduct of each named defendant with the specific injury suffered, the allegation
against that defendant will be dismissed for failure to state a claim.
An amended complaint generally supersedes a prior complaint, and must be
complete in itself without reference to the prior superseded pleading. Plaintiffs

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need not reallege their Section 1635(b) and Section 1641(g) claims. Because they
are dismissed with prejudice, these claims are preserved for any future appeal. See
Lacey v. Maricopa Cty., 693 F.3d 896, 928 (9th Cir. 2012) (“[C]laims dismissed
with prejudice [need not] . . . be repled in a[n] amended complaint to preserve them
for appeal.”).
The amended complaint must designate that it is the “First Amended
Complaint” and may not incorporate any part of the Verified Complaint. Rather,
any specific allegations must be retyped or rewritten in their entirety. Plaintiffs
may include only one claim per count. Failure to file an amended complaint that
attempts to cure the deficiencies noted in this Order by September 8, 2017 will
result in the automatic dismissal of this action without prejudice.
CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss is GRANTED.
Plaintiffs are granted limited leave to file an amended complaint in accordance with
the terms of this order by no later than September 8, 2017. The Court CAUTIONS

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the Burkes that failure to file an amended complaint by September 8, 2017 will
result in the automatic dismissal of this action without prejudice.
IT IS SO ORDERED.
DATED: August 7, 2017 at Honolulu, Hawai‘i.

Burke v. Countrywide Morgt. Ventures, LLC, CV NO. 17-00220 DKW-RLP; ORDER
GRANTING DEFENDANT’S MOTION TO DISMISS WITH LEAVE TO AMEND

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