Burton et al v. Shellpoint Mortgage Servicing, et al.,

Filing 20

ORDER granting 8 Defendant Banks' Motion to Dismiss; Plaintiffs' claims against Bank of America, N.A. and Bank of New York Mellon are DISMISSED with prejudice and without leave to amend; signed by Judge Ronald B. Leighton.(DN)

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HONORABLE RONALD B. LEIGHTON

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

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LAURENCE N. BURTON and JANET K.
BURTON,

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Plaintiffs,

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v.

CASE NO. C15-5769-RBL
ORDER GRANTING MOTION TO
DISMISS
[DKT. #8]

BANK OF AMERICA, N.A., et al.,

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Defendants.

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THIS MATTER is before the Court on the Defendant Banks’1 Motion to Dismiss [Dkt.
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#8]. Plaintiffs Burton borrowed the funds to purchase a home in 2005, and secured their promise
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to repay that loan with a deed of trust on the home. No foreclosure has been commenced, though
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Defendant Shellpoint sent the Burtons a Notice of Default in August 2014.
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Nevertheless, this is the third lawsuit the Burtons have filed in an effort to stave off
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foreclosure or avoid re-paying the loan. The first (2013) was dismissed without prejudice by the
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Pierce County Superior Court, and the second (2014) was dismissed with prejudice by this Court.
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[See Burton v. Bank of America, et al., Cause No. 14-cv-6027 RBL, Dkt. # 17].
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The moving Defendants are Bank of America, N.A., and Bank of New York Mellon.

ORDER GRANTING MOTION TO DISMISS - 1

This third case involves the Burtons’ claim that they effectively rescinded2 the loan in

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2 August, 2015, by sending their current servicer and creditor a notice of rescission under the
3 Truth in Lending Act:
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[Dkt. #1-1]. They seek injunctive relief in the form of an order requiring the Banks to cancel and
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return their promissory note, release any lien or deed of trust on the property, and refund the
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Burtons’ loan fees.
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The Banks argue that the Burtons’ “rescission claim” could have been litigated in the
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prior lawsuit between the same parties regarding the same subject matter, and that the current
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claim is barred by res judicata. They also argue that the Burtons’ TILA rescission claim is
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facially time-barred, because the loan closed ten years ago and the rescission period is a
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maximum of three years, even if the other rescission prerequisites were satisfied (which they are
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not).
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The Burtons argue that because they had not yet sent their notice of rescission, they could
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not have sought rescission in their prior lawsuit. Therefore, they claim, res judicata does not
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apply. They also argue that the Banks were obligated to respond to the notice of rescission within
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20 days, and that because they did not, the rescission is a fait accompi: the note and the deed of
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The Burtons’ complaint also alleges that they send a different “Notice of Rescission” in
September, 2010 —before either of their prior lawsuits. [Dkt. #1 at 2, para. 6]. That
24 “Presentment Letter” is attached to the Complaint as Exhibit B. [Dkt. #1-2].
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[DKT. #8] - 2

1 trust securing it are no longer in effect. They claim this is the result regardless of the timing of
2 their rescission notice, and suggest that there may be some question as to whether the loan was
3 actually “consummated” at all, and thus to whether the three year limitations period ever
4 commenced in the first place.
5 A. Rule 12(b)(6) Standard.
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Dismissal under Rule 12(b)(6) may be based on either the lack of a cognizable legal

7 theory or the absence of sufficient facts alleged under a cognizable legal theory. Balistreri v.
8 Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A plaintiff’s complaint must allege
9 facts to state a claim for relief that is plausible on its face. See Aschcroft v. Iqbal, 129 S. Ct.
10 1937, 1949 (2009). A claim has “facial plausibility” when the party seeking relief “pleads factual
11 content that allows the court to draw the reasonable inference that the defendant is liable for the
12 misconduct alleged.” Id. Although the Court must accept as true the Complaint’s well-pled facts,
13 conclusory allegations of law and unwarranted inferences will not defeat a Rule 12(c) motion.
14 Vazquez v. L. A. County, 487 F.3d 1246, 1249 (9th Cir. 2007); Sprewell v. Golden State
15 Warriors, 266 F.3d 979, 988 (9th Cir. 2001). “[A] plaintiff’s obligation to provide the ‘grounds’
16 of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and a formulaic
17 recitation of the elements of a cause of action will not do. Factual allegations must be enough to
18 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
19 (2007) (citations and footnotes omitted). This requires a plaintiff to plead “more than an
20 unadorned, the-defendant-unlawfully-harmed-me-accusation.” Iqbal, 129 S. Ct. at 1949 (citing
21 Twombly).
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On a 12(b)(6) motion, “a district court should grant leave to amend even if no request to

23 amend the pleading was made, unless it determines that the pleading could not possibly be cured
24 by the allegation of other facts.” Cook, Perkiss & Liehe v. N. Cal. Collection Serv., 911 F.2d 242,

[DKT. #8] - 3

1 247 (9th Cir. 1990). However, where the facts are not in dispute, and the sole issue is whether
2 there is liability as a matter of substantive law, the court may deny leave to amend. Albrecht v.
3 Lund, 845 F.2d 193, 195–96 (9th Cir. 1988).
4 B. The Burtons’ claims are barred by res judicata.
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In 2014, the Burtons sued in this Court, claiming that the Banks and the loan servicers

6 had violated the Deed of Trust Act and the Foreclosure Fairness Act, and, in turn Washington’s
7 Consumer Protection Act, in their conduct related to the same loan, note and deed of trust that
8 are the subject of this case. On the Defendants’ Motion, that case was dismissed with prejudice.
9 See Burton v. Bank of America, et al., Cause No. 14-cv-6027 RBL, Dkt. # 17].
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The doctrine of res judicata precludes re-litigation of claims that were raised in a prior

11 action, as well as those which could have been raised there. W. Radio Servs. Co. v. Glickman,
12 123 F.3d 1189, 1192 (9th Cir. 1997). An action is barred by res judicata when an earlier suit: (1)
13 involved the same claim or cause of action as the later suit; (2) involved the same parties; and (3)
14 reached a final judgment on the merits. Mpoyo v. Litton Electro-Optical Sys., 430 F.3d 985, 987
15 (9th Cir. 2005).
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Each of these elements is present here. The Burtons sued these same parties, regarding

17 the same subject matter, in 2014—four years after they claim they first sought “rescission” and
18 nine years after their loan closed, the deed of trust was recorded, and they moved into their
19 home. Their claim that they “could not have” sought rescission in 2014 because they had not yet
20 sought to rescind is flatly inconsistent with their current claim that they notified their lenders of
21 their intent to rescind in 2010. The rescission claim could have been brought in that earlier case.
22 The Burtons cannot split their claims. See Landry v Luscher, 95 Wn. App. 779. 780 (1999).
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[DKT. #8] - 4

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The 2014 suit involved the same parties and the same subject matter, and was adjudicated

2 on the merits. Res judicata bars this claim as a matter of law, and that legal conclusion cannot be
3 altered by any conceivable amendment to their current complaint.
4 C. The Burton’s TILA rescission claim is facially time barred.
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TILA provides an unconditional right to rescind within three days of the loan closing, and

6 a conditional right to rescind within three years of the closing. The longer period applies only if
7 the lender failed to make certain material disclosures—which the Burtons have not alleged is the
8 case here. Despite the Burtons’ existential query about whether their loan was ever “actually
9 consummated,” it is clear that they have lived in the home for more than ten years and that the
10 deed of trust they gave as security for their promise to re-pay the loan was recorded ten years
11 ago. The Supreme Court’s Jesinoski decision—quoted by the Burtons—reiterates that while the
12 three year limitation period may not apply to the commencement of an action, it absolutely
13 applies to the time frame for sending a rescission notice:
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The language [of §1635(a)] leaves no doubt that rescission is effected when the
borrower notifies the creditor of his intention to rescind. It follows that, so long as
the borrower notifies within three years after the transaction is consummated,
his rescission is timely. The statute does not also require him to sue within three
years.

17 Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015) (emphasis added).
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The Burtons’ loan was consummated in 2005. Their conditional right to rescind expired

19 in 2008—seven years before they sent the notice upon which this action relies, and two years
20 before the 2010 “Presentment Letter” they now claim was an attempt to rescind:
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The Burtons’ final argument is that, regardless of its timeliness, their rescission notice

2 triggered an affirmative duty on the part of the Banks to either agree that it was effective, or
3 commence a lawsuit to establish that it was not, within 20 days. They do not even address the
4 fact that rescission requires them to tender back the proceeds of the loan; they claim that the
5 Banks failure to timely respond to their facially time-barred notice means that the loan is a
6 nullity and they get to keep, literally, a free house.
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There is no legal or logical support for this position.

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The Banks’ Motion to Dismiss is GRANTED and the Burtons’ claims against them are

9 DISMISSED with prejudice and without leave to amend.
10 IT IS SO ORDERED.
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Dated this 5th day of May, 2016.

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A

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Ronald B. Leighton
United States District Judge

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