Khalsa v. Bank of America National Association et al
Filing
24
MEMORANDUM OPINION AND ORDER by District Judge James A. Parker granting 18 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM , 13 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM . (bap)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW MEXICO
BIR SINGH KHALSA,
Plaintiff,
vs.
No. 16 CV 790 JAP/KBM
BANK OF AMERICA NATIONAL ASSOCIATION
and THE BANK OF NEW YORK MELLON
FKA THE BANK OF NEW YORK, AS TRUSTEE
FOR THE CERTIFICATE HOLDERS OF THE
CWALT INC, ALTERNATIVE LOAN TRUST
2006-2CB, MORTGAGE PASS-THROUGH
CERTIFICATES SERIES 2006-SCB,
Defendants,
MEMORANDUM OPINION AND ORDER
GRANTING MOTIONS TO DISMISS
In the MOTION TO DISMISS PLAINTIFF’S COMPLAINT (Doc. No. 13)
(Trust’s Motion) and DEFENDANT BANK OF AMERICA, N.A.’S MOTION TO
DISMISS PURSUANT TO FED. R. CIV. P. 12(B)(6) (Doc. No. 18) (BANA’s Motion)
(together, Motions), The Bank of New York Mellon f/k/a Bank of New York, as Trustee
for the Registered Holders of Alternative Loan Trust 2006-2CB, Mortgage Pass-Through
Certificates, Series 2006-2CB (the Trust) and Bank of America, National Association
(BANA) (together, Defendants) ask the Court to dismiss both of the claims in Plaintiff’s
COMPLAINT FOR JUDCIAL [sic] NOTICE AND STATUTORY RELIEF (Doc. No.
1) (Complaint). Plaintiff, pro se, opposes the Motions. See PLAINTIFF’S RESPONSE
TO DEFENDANT BANK OF AMERICA, N.A.’S MOTION TO DISMISS PURSUANT
TO FED. R. CIV. P. 12(B)(6) (Doc. No. 19) (Response to BANA’s Motion) and
1
PLAINTIFF’S RESPONSE TO DEFENDANT THE BANK OF NEW YORK
MELLON’S MOTION TO DISMISS (Doc. No. 20) (Response to the Trust’s Motion)
(together, Responses). Defendants submitted reply briefs. See REPLY TO RESPONSE
TO MOTION TO DISMISS PLAINTIFF’S COMPLAINT (Doc. No. 21) and
DEFENDANT BANK OF AMERICA, N.A’S REPLY IN SUPPORT OF MOTION TO
DISMISS (Doc. No. 22). Because Plaintiff failed to timely exercise his right to rescind
the loan transaction, the Court will grant the Motions and will dismiss both of Plaintiff’s
claims with prejudice.
I.
STANDARDS OF REVIEW
A.
Motion to Dismiss
Defendants move to dismiss under Rule 12(b)(6). “The court’s function on a Rule
12(b)(6) motion is . . . to assess whether the plaintiff’s complaint alone is legally
sufficient to state a claim for which relief may be granted.” Miller v. Glanz, 948 F.2d
1562, 1565 (10th Cir. 1991). In evaluating a Rule 12(b)(6) motion, the court must “accept
as true all well-pleaded facts [in the complaint], as distinguished from conclusory
allegations, and view the facts in the light most favorable to the nonmoving party[.]”
Archuleta v. Wagner, 523 F.3d 1278, 1283 (10th Cir. 2008) (quotation and alteration
omitted). ). To summarize, a complaint must contain sufficient factual allegations “to
raise a right to relief above the speculative level . . . on the assumption that all the
allegations in the complaint are true.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). Since Plaintiff is acting pro se, the Court will liberally construe Plaintiff’s
pleadings. Ogden v. San Juan County, 32 F.3d 452, 455 (10th Cir. 1994). However, in
construing Plaintiff’s pro se Complaint, the court need not accept bare conclusory
2
allegations or legal conclusions without factual support. Hall v. Belmon, 935 F.2d 1106,
1110 (10th Cir. 1991). See also Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009); Twombly,
550 U.S. at 557. In deciding a Rule 12(b)(6) motion, the Court typically considers only
the facts alleged in the complaint. County of Santa Fe v. Pub. Serv. Co. of N.M., 311 F.3d
1031, 1035 (10th Cir. 2002). Nevertheless, the court may review documents referred to in
a complaint, if the documents are central to the plaintiff’s claim and the parties do not
dispute their authenticity. Id. And, the court may also take judicial notice of documents
that are in the public record. S.E.C. v. Goldstone, 952 F. Supp. 2d 1060, 1190 (D.N.M.
2013).
B.
Truth in Lending Act
Under the Truth in Lending Act, 15 U.S.C. §§ 1601 et seq. (TILA), creditors must
make “clear and accurate disclosures of terms dealing with things like finance charges,
annual percentage rates of interest, and the borrower’s rights.” Beach v. Ocwen Fed.
Bank, 523 U.S. 410, 412 (1998). In Jesinoski v. Countrywide Home Loans, Inc., 135 S.Ct.
790, 791 (2015), Justice Antonin Scalia described TILA’s rescission provisions:
Congress passed the Truth in Lending Act . . . to help consumers “avoid
the uninformed use of credit, and to protect the consumer against
inaccurate and unfair credit billing.” 15 U.S.C. § 1601(a). To this end, the
Act grants borrowers the right to rescind a loan “until midnight of the third
business day following the consummation of the transaction or the
delivery of the [disclosures required by the Act], whichever is later, by
notifying the creditor, in accordance with regulations of the [Federal
Reserve] Board, of his intention to do so.” § 1635(a) (2006 ed.). This
regime grants borrowers an unconditional right to rescind for three days,
after which they may rescind only if the lender failed to satisfy the Act’s
disclosure requirements. But this conditional right to rescind does not last
forever. Even if a lender never makes the required disclosures, the “right
of rescission shall expire three years after the date of consummation
of the transaction or upon the sale of the property, whichever comes
first.” § 1635(f).
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Id. at 791–92 (footnote omitted and emphasis added). When a borrower timely exercises
his right to rescind, “any security interest given by the obligor . . . becomes void[.]” 15
U.S.C. § 1635(b). A creditor faced with a timely and valid notice of rescission must
respond:
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). Creditors who fail to comply with § 1635 may also be liable for
statutory damages:
Except as otherwise provided in this section, any creditor who fails to
comply with any requirement imposed under this part, including any
requirement under section 1635 of this title . . . is liable . . . in an amount
equal to the sum of—
(1) any actual damage sustained by such person as a result of the failure;
(2)(A) (i) in the case of an individual action twice the amount of any
finance charge in connection with the transaction, . . .
(3) in the case of any successful action to enforce the foregoing liability or
in any action in which a person is determined to have a right of rescission
under section 1635 . . ., the costs of the action, together with a reasonable
attorney’s fee as determined by the court[.]
15 U.S.C. § 1640. Under TILA, a borrower has a right of rescission and damages
against the original creditor and subsequent assignees. 15 U.S.C. § 1641(c). But
an assignee will not be liable unless the TILA disclosure violations are apparent
on the documents provided to the assignee by the original lender. 15 U.S.C. §
1641(a).
II.
BACKGROUND
On December 8, 2005, Plaintiff and his wife, Bir Kaur Khalsa, executed a Note
for the principal sum of $337,000 secured by a Mortgage in favor of Homeloan USA
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Corporation on a residential property located at 11 East Walnut Circle, Espanola, New
Mexico. (BANA Mot. Ex. A.)1 The Mortgage was signed and notarized on December 8,
2005 and was recorded on December 13, 2005 in the Santa Fe County records under the
records number 1411519. (Compl. ¶ 6.)2 The Complaint does not define each
Defendant’s relationship to the loan transaction but merely states that BANA and the
Trust “hold interest [sic] in various tangible mortgage loans as well as the tangible
mortgage loan which is the subject of the action.” (Compl. ¶¶ 2-3.) In its Motion, the
Trust identifies itself as an assignee of the original Note and Mortgage. In its Motion,
BANA identifies itself as the former servicer of the loan.
On June 6, 2016, Plaintiff sent Defendants a letter purporting to rescind the loan
transaction (the Notice) stating “[n]o loan between [Bank of America or the Trust]3 and
us or any other loan in connection to my property at 11 Walnut Circle, Espanola, NM
87532 has ever been consummated within the appropriate legal definition of
consummation.” (Compl. ¶ 13.) Plaintiff claims that through the Notice, he properly
exercised his right to rescind the loan under TILA § 1635(a). (Compl. ¶ 6.) In Count I of
the Complaint, Plaintiff asks the Court to take judicial notice that “the mortgage dated
December 8, 2005, recorded December 13, 2005, as instrument #1411519 in the office
1 Exhibit A to BANA’s Motion is a copy of the recorded Mortgage executed by Plaintiff and his wife.
Plaintiff has not disputed the authenticity of this exhibit. Although the Complaint does not aver that the
mortgaged property is Plaintiff’s residence, the Mortgage states that Plaintiff and his wife agreed to occupy
and insure the property as their principle residence. (BANA Mot. Ex. A at 6.)
2 In 2012, the Trust filed a complaint in the First Judicial District Court, Santa Fe County, New Mexico
seeking foreclosure of the Mortgage. See The Bank of New York Mellon v. Bir Kaur Khalsa, Case No. D101-CV 2012-02543 First Judicial District Court in Santa Fe County, NM. The foreclosure action was
dismissed on March 26, 2014 for lack of prosecution. (Trust Mot. Ex. A.) The Court may take judicial
notice of the Trust’s Exhibit A as a public docket sheet. See Goldstone, 952 F.Supp.2d at 1190.
3 Although the Complaint quotes only the notice referring to Bank of America, the Court assumes that the
notice sent to the Trust referred to it by name.
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[of] the Clerk of Santa Fe County, New Mexico is terminated, released, void and invalid
and likewise the obligation evidenced by the Note is terminated, released, void and
invalid.” (Compl. ¶ 20.) In Count II, Plaintiff alleges that he is entitled to statutory
damages under 15 U.S.C. § 1640. (Compl. ¶¶ 23–26.)4
II.
DISCUSSION
A.
COUNT I
1.
Plaintiff’s Notice was untimely.
Defendants contend that Count I should be dismissed because Plaintiff sent the
Notice more than three years after the loan transaction was consummated; thus, the
purported rescission of the Note and Mortgage was invalid under 15 U.S.C. § 1635(f). In
response, Plaintiff asserts that his Notice was not barred by the three-year statutory period
for rescission because, as stated in the Notice, the loan transaction was never
consummated. According to Plaintiff, since the loan transaction allegedly was never
consummated, the three-year deadline for notice of rescission never expired. (Resp. to
BANA’s Mot. at 3.) However, Plaintiff fails to meaningfully dispute the basic fact that
Plaintiff and his wife executed the loan documents on December 5, 2005, as evidenced by
the recorded Mortgage. Under TILA regulations, “consummation” is defined as “the time
that a consumer becomes contractually obligated on a credit transaction.” 12 C.F.R. §
226.2(a)(13). Therefore, as a matter of law, the loan transaction was consummated on
4
The Complaint alleges Plaintiff “has made certain payments of monies in regards to this loan prior to
rescission, and as Defendants are statutorily required to return those monies and has [sic] not, Plaintiff
seeks an immediate Court ordered return of those monies in full and under 15 U.S.C. § 1640 additionally
twice those amounts.” (Compl. ¶ 23.) “Plaintiff issued a Note, which, as personal property, had been
tendered in regards to the loan. Whereas Defendants are statutorily required to return personal property and
ha[ve] not, Plaintiff now seeks an immediate Court ordered return of all personal property and any other
property (real or personal) Plaintiff is entitled.” (Compl. ¶ 24.) “If the Note cannot be, or is not returned
unaltered, then Plaintiff seeks, from Defendants, the monetary value of that Note to [sic] determined by its
face as well as by all monies made or acquired in regards to that Note while that Note was held by others
and under 15 U.S.C. § 1640, additionally twice those amounts.” (Compl. ¶ 26.)
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December 5, 2005. See Wilder v. Ogden Ragland Mortgage, No. 3:15-CV-4013-N (BF),
2016 WL 4440487, *5 (N.D. Tex. July 29, 2016) (citing TILA regulation and finding
“consummation” when consumer signs loan documents). The Court joins other courts
that have rejected the same argument Plaintiff is making. See Fannon v. U.S. Bank, N.A.,
Civil No. 16–cv–141–JD, 2016 WL 5108036, *4 (D.N.H. Sept. 20, 2016) (stating that
loan was consummated when the plaintiffs signed the note and that the plaintiffs’ theory
that the loan was never consummated “has been overwhelmingly rejected by other
courts.”).
The Court agrees with United States District Judge William “Chip” Johnson’s
conclusion that a notice of rescission denying that a loan was consummated is wholly
conclusory and not legally or factually supported. See Khalsa v. U.S. Bank, N.A., et al.,
No. 15 CV 1010 WJ/KBM, MEMORANDUM OPINION AND ORDER GRANTING
DEFENDANTS’ MOTION TO DISMISS PLAINTIFF’S COMPLAINT (Doc. No. 45) at
p. 4–5 (D.N.M. July 13, 2016) (holding that rescission notice sent nearly 10 years after
loan closed was untimely despite notice’s statement that loan was never consummated).
See also Singh v. U.S. Bank N.A., No. 16 CV 579 WJ/WPL, MEMORANDUM
OPINION AND ORDER GRANTING PLAINTIFF’S MOTION TO FILE UNTIMELY
RESPONSE, GRANTING DEFENDANT’S MOTION TO DISMISS, AND DENYING
AS MOOT PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT (Doc. No. 26) at p.
5 (D.N.M. Oct. 26, 2016) (rejecting plaintiff’s claim that loan was never consummated
because plaintiff did not deny signing the loan documents). Like the plaintiffs in Judge
Johnson’s cases, Plaintiff has not alleged in the Complaint or in his Responses that he
failed to execute the Note or the Mortgage. Moreover, Plaintiff’s position is simply
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absurd because a loan that was never consummated cannot, and need not, be rescinded.
See Wilder, 2016 WL 4440487, at *5 (stating, “Plaintiff’s claim that the three years
period to rescind the loan remains open, because . . . the loan was never consummated is
nonsensical.”). Since Plaintiff’s right to rescind expired on December 5, 2008, three years
after the loan was consummated, his June 6, 2016 Notice was untimely and invalid.
2.
Rescission under TILA is not a non-judicial process.
Plaintiff cites Belini v. Washington Mut. Bank, 412 F.3d 17, 25 (1st Cir. 2005) and
argues that the Notice triggered a non-judicial rescission process. Plaintiff reasons that by
refusing to respond to the Notice, BANA and the Trust are now precluded from attacking
the rescission in this Court. However, in Belini, the borrowers had exercised their right to
rescind within three years of closing the loan transaction; therefore, the court did not
address the validity of the rescission. Id. at 21. Instead, the court ruled that in addition to
rescission, the borrowers could sue the bank for damages for failing to respond to their
notice. Id. at 25. Plaintiff points to a statement in which the court generally recognized
that “section 1635 is written with the goal of making the rescission process a private one,
worked out between creditor and debtor without the intervention of the courts.” Id. at 25.
This statement, however, does not support Plaintiff’s argument that the statutory process
can be triggered by an untimely Notice. Nor does Belini support Plaintiff’s assertion that
Defendants may not challenge the validity of Plaintiff’s purported rescission in court. In
addition to Belini, Plaintiff cites several cases all of which are inapposite. See, e.g., Mijo
v. Avco Fin. Serv. of Haw., No. 90-16688, 1991 WL 126660, at *1 (9th Cir. July 1, 1991)
(holding that by refinancing loan and paying the creditor, borrowers no longer had right
under TILA to rescind and sue creditor for damages for failure to respond to invalid
8
rescission notice); Smith v. Fid. Cons. Disc. Co., 898 F.2d 896, 903 (3d Cir. 1990)
(noting timely rescission notice, but finding that rescission was invalid because creditor’s
nondisclosure was not the type of TILA violation that supported right to rescind); Smith
v. Sm. Fin. Sys., Inc., 737 F.2d 1549, 1550 (11th Cir. 1984) (finding no right to damages
despite timely notice of rescission because creditor’s nondisclosure was not material);
Arnold v. W.D.L. Invs., Inc., 703 F.2d 848, 850 (5th Cir. 1983) (upholding timely notices
of rescission of second mortgage granted to secure down payment on purchase of home);
Gerasta v. Hibernia Nat. Bank, 575 F.2d 580, 584 (5th Cir. 1978) (upholding timely
rescission); and Rowland v. Novus Fin. Corp., 949 F. Supp. 1447, 1455 (D. Haw. 1996)
(finding that borrower had claim for damages because creditor failed to respond to timely
notice of rescission). At most, these cases stand for the proposition that the statutory
process of rescission under TILA is triggered when a borrower properly and timely
exercises the right to rescind. That is not the case here.
Plaintiff also cites Jesinoski to support his argument that merely sending a notice
of rescission, even if untimely, triggers the statutory rescission process. However,
Jesinoski did not involve an untimely notice of rescission. In that case, the borrowers sent
a letter to their mortgage bank requesting rescission exactly three years after executing a
note and mortgage. 135 S.Ct. at 791. Within 20 days after receiving the letter, the
mortgage bank responded by letter refusing to acknowledge the rescission. Id. One year
later, the borrowers sued to rescind the loan. Id. The district court and the Eighth Circuit
ruled that the notice of rescission was insufficient because TILA required the borrowers
to file suit to rescind within the three year time period. Id. Recognizing a circuit split on
the issue, the Supreme Court reversed and held that the borrowers’ timely notice was
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sufficient: “[S]o long as the borrower notifies within three years after the transaction is
consummated, his rescission is timely. The statute does not require him to sue within
three years.” Id. at 792. In short, Plaintiff cannot rely on either Belini or Jesinoski as
support for his assertion that Defendants were required to respond to his untimely Notice.
Plaintiff’s right to rescind this loan transaction under TILA expired on December 8,
2008; thus, Plaintiff’s June 6, 2016 Notice purporting to rescind the loan transaction had
no legal effect, and Defendants were not statutorily required to respond to the Notice. See
also Beach, 523 U.S. at 412 (“[Section] 1635(f) completely extinguishes the right of
rescission at the end of the 3-year period.”).
3.
Defendants are not estopped by their silence.
In a related argument, Plaintiff asserts that Defendants’ failure to respond to his
Notice precludes them from opposing rescission under the doctrine of estoppel by
silence. The concept of “estoppel by silence” prohibits a party from asserting a position
when that person had both the duty and the opportunity to speak up about their position
earlier. See, e.g., Wiser v. Lawler, 189 U.S. 260, 270 (1903) (describing theory);
Rockwell Acquisitions, Inc. v. Ross Dress for Less, Inc., 397 Fed. App’x 424, **5 (10th
Cir. Aug. 24, 2010) (unpublished) (holding that tenant had no duty to notify lessor of
lease violation and was not estopped for failing to oppose leasing of neighboring space to
more than one tenant). There is nothing in the TILA statutory language, the regulations,
or the common law that requires Defendants to respond to an untimely, legally ineffective
Notice or be barred from later disputing it in court. Khalsa, No. 15 CV 1010,
MEMORANDUM OPINION AND ORDER (Doc. No. 45) at 4–5 (discrediting “estoppel
by silence theory” and stating there is no statutory or common law duty requiring
10
Defendants to respond to a rescission demand that was “without basis”). Consequently,
Defendants’ alleged “silence” does not preclude them from opposing Plaintiff’s claim of
rescission.
4.
Plaintiff failed to plead ability to tender loan proceeds.
The Trust asserts that the Court should dismiss Count I because Plaintiff failed to
fulfill the TILA regulatory provision, 12 C.F.R. § 226.23(d)(3) and the statutory
provision, 15 U.S.C. 1635(b), which, according to the Trust, require a consumer to tender
the loan proceeds prior to exercising the right of rescission. The statutory language
provides,
Upon the performance of the creditor’s obligations under this section, the
obligor shall tender the property to the creditor, except that if return of the
property in kind would be impracticable or inequitable, the obligor shall
tender its reasonable value.
15 U.S.C. § 1635(b). The regulatory provisions state,
When the creditor has complied with [paragraph (d)(2)], the consumer
shall tender the money or property to the creditor or, where the latter
would be impracticable or inequitable, tender its reasonable value.
12 C.F.R. § 226.23(d)(3). Paragraph (d)(2) provides,
Within 20 calendar days after receipt of a notice of rescission, the creditor
shall return any money or property that has been given to anyone in
connection with the transaction and shall take any action necessary to
reflect the termination of the security interest.
12 C.F.R. § 226.23(d)(2). The regulations allow a court to modify the aforementioned
procedures. 12 C.F.R. § 226.23(d)(4).
Plaintiff asserts that under these provisions, he is not obligated to tender the loan
proceeds or to plead the ability to tender the proceeds until Defendants meet their
obligation to rescind the loan and return Plaintiff’s payments. Some courts, however,
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have required claimants to plead “the ability to tender payment” of loan proceeds or face
dismissal of their rescission claims. See, e.g., Gates v. Wachovia Mortgage, FSB, No. 09cv-02464-FCD/EFB, 2010 WL 902818, *5 n. 3 (E.D. Cal. Feb. 19, 2010) (stating that
plaintiff’s untimely rescission and failure to plead the ability to tender payment warranted
dismissal of her rescission claim); Ibarra v. Plaza Home Mortgage, No. 08-cv-01707-H,
2009 WL 2901637, *7 (S.D. Cal. Sept. 4, 2009) (dismissing rescission claim because
plaintiff had not alleged “the unconditional offer of payment and the present ability to
perform.”).5 And the Ninth Circuit Court of Appeals has held that courts have the power
to impose conditions on rescission that “assure the borrower meets her obligations once
the creditor has performed its obligations.” Yamamoto v. Bank of New York, 329 F.3d
1167, 1173 (9th Cir. 2003). The Tenth Circuit has held that a district court did not abuse
its discretion when it required the claimant to show ability to tender the loan proceeds in
response to the lender’s summary judgment motion. Sanders v. Mountain America Credit
Union, 621 Fed. App’x 520, 524–27 (10th Cir. 2015) (unpublished) (upholding district
court’s grant of defendant’s motion for summary judgment based on the borrowers’
inability to prove they could tender the value of the loan proceeds). Judge Johnson
dismissed a TILA rescission claim as untimely and because the complaint did not include
allegations that plaintiff was “willing and able to tender return of the Loan proceeds he
took.” Khalsa, No. 16 CV 579 WJ/WPL, MEMORANDUM OPINION AND ORDER
(Doc. No. 26) at 6. Under these authorities, the Court may dismiss Count I for this reason
as well.
5 Plaintiff argues that Gates and Ibarra lack persuasive authority because they were decided prior to the
Supreme Court’s decision in Jesinoski. However, Jesinoski did not deal with the issue of tender. The
Supreme Court held only that a borrower need not sue for rescission and may send a notice within the three
year period in order to exercise his right to rescind. 135 S.Ct. at 792.
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5.
Plaintiff failed to meet pleading requirements against assignee of
the Mortgage.
The Trust argues that, as an assignee of the Note and Mortgage, it cannot be
subject to claims for rescission and damages unless Plaintiff alleges that the original
lender’s failure to make the required TILA disclosures is apparent on the face of the
assignment documents. 15 U.S.C. § 1641(e)(1). Since the Complaint fails to allege that
the original lender’s TILA violation was apparent on the face of the assignment
documents, both Counts of the Complaint may also be dismissed for this reason. See, e.g.,
Lewis v. Greentree Mortgage Serv., 51 Fed. App’x 68, **1 (2d Cir. Nov. 21, 2002)
(unpublished) (upholding district court’s summary judgment in favor of lender because
evidence showed there was no TILA violation on the face of the mortgage documents
“that would render Greentree Mortgage Services liable as an assignee of the loan.”);
McZeal v. Ocwen Fin. Corp., 252 F.3d 1355, *1 (5th Cir. Mar. 28, 2001) (unpublished)
(upholding dismissal of claim against assignee because plaintiff did not plead that TILA
violation was “apparent on the face of the note.”).
B.
COUNT II
Under 15 U.S.C. § 1640, any creditor “who fails to comply with any requirement
imposed under this part, including any requirement under section 1635 of this title, . . . is
liable to such person” for damages. 15 U.S.C. § 1640(a). In Count II, Plaintiff alleges that
Defendants violated § 1635 by failing to properly respond to his Notice of rescission;
thus, Defendants are liable for statutory damages under § 1640. Defendants correctly
argue that since Plaintiff’s Notice was untimely and invalid, Defendants could not have
violated § 1635 as a matter of law. Therefore, the Court agrees with Defendants that
Plaintiff’s Count II claim for damages must be dismissed. See Belini v. Washington Mut.
13
Bank, FA, 412 F.3d 17, 25 (1st Cir. 2005) (“where debtor’s notice of rescission is
invalid[,] . . . then no damages can be assessed against the creditor for failing to respond
to the notice.”).
The Trust also asserts that Plaintiff’s Count II claim should be dismissed as
untimely. Section 1640 provides, “any action under this section may be brought in any
United States district court, or in any other court of competent jurisdiction, within one
year from the date of the occurrence of the violation.” 15 U.S.C. § 1640(e). The Trust
maintains that most courts have considered the loan consummation date as the “date of
occurrence” under this provision. (Trust Mot. at 6) (citing King v. State of Cal., 784 F.2d
910, 915 (9th Cir. 1986)). The Trust’s argument is correct as to claims for TILA
violations related to disclosures at the closing of the loan transaction. The United States
District Court in Colorado has found that the one year limitations period begins to run,
“when credit is extended through the consummation of the transaction between the
creditor and its customer without the required disclosures being made.” Betancourt v.
Countrywide Home Loans, Inc., 344 F. Supp. 2d 1253, 1258 (D. Colo. 2004) (citing
Dryden v. Lou Budke’s Arrow Finance Co., 630 F.2d 641, 646 (8th Cir. 1980)).
However, Plaintiff’s Count II claim is not based on the original lender’s failure to
make the required disclosures when this loan was consummated. Instead, Plaintiff claims
Defendants violated § 1635 by failing to respond to the Notice of rescission. Plaintiff
points to the Belini case, which held that the date of occurrence for that type of violation
is the date the creditor fails to respond to a valid notice of rescission. See Belini, 412 F.3d
at 26 (holding that the one-year limitations period for damages runs from twenty days
after the valid notice of rescission was sent to the creditor). Theoretically, if Plaintiff’s
14
Notice was timely and Defendants failed to properly respond, the “date of occurrence”
would be 20 days after June 6, 2016, and Plaintiff’s Count II claim would have been
timely. But, Plaintiff’s Notice was invalid. Consequently, Defendants did not violate
TILA in failing to respond, and the one year limitations period was not triggered. Thus,
Plaintiff’s Count II claim fails not because it was untimely, but because, as a matter of
law, Defendants did not violate TILA by failing to respond to the invalid Notice.
IT IS ORDERED that MOTION TO DISMISS PLAINTIFF’S COMPLAINT
(Doc. No. 13) and DEFENDANT BANK OF AMERICA, N.A.’S MOTION TO
DISMISS PURSUANT TO FED. R. CIV. P. 12(B)(6) (Doc. No. 18) are granted and
Plaintiff’s COMPLAINT FOR JUDCIAL [sic] NOTICE AND STATUTORY RELIEF
(Doc. No. 1) will be dismissed with prejudice.
SENIOR UNITED STATES DISTRICT JUDGE
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