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Taylor v. Deutsche Bank National Trust Co.

United States District Court, D. Arizona

October 19, 2016

Allen C Taylor, et al., Plaintiffs,
v.
Deutsche Bank National Trust Company, et al., Defendants.

          ORDER

          Douglas L. Rayes United States District Judge

         Defendant has filed a motion to dismiss for failure to state a claim. (Doc. 12.) The motion is fully briefed, and neither party requested oral argument. For the reasons stated below, the motion is granted.

         BACKGROUND

         On November 16, 2005, Plaintiffs Allen and Lynell Taylor signed an Adjustable Rate Balloon Note (Note) to obtain a loan for $277, 500 in favor of the lender, New Century Mortgage Company. (Doc. 10, ¶ 5.) The Note was secured by a Deed of Trust (DOT) on real property located at 2457 E. Ivy Street, Mesa, AZ 85213. (Id., ¶ 4.) At closing, Plaintiffs were advised of their right to cancel the transaction by November 21, 2005, via a “Notice of Right to Cancel Form, ” which both Plaintiffs Dated: November 17, 2005. (Doc. 12-1 at 2.)[1]

         In June 2008, Plaintiffs stopped making payments on the Note. (Doc. 10-1 at 31.) On August 5, 2008, Defendant recorded a Notice of Trustee's Sale on the property for November 5, 2008. (Id. at 45.) On August 13, 2008, Tiffany & Bosco, as Trustee under the DOT, sent a letter notifying Plaintiffs that the loan amount was due and that the loan had been in default since May 1, 2008. (Id. at 41.) The letter also identified America's Servicing Company (ASC) as the creditor and loan servicer. (Id.)

         On September 18, 2008, Allen sent a letter to Tiffany & Bosco rescinding the loan. (Id. at 28.) On October 28, 2008, Plaintiffs filed for bankruptcy and the trustee's sale was continued. (Id. at 32-33.) On November 5, 2008, ASC filed a proof of claim in the bankruptcy court. (Doc. 10, ¶ 35.) The bankruptcy case proceeded, but Plaintiffs moved to dismiss their bankruptcy case after the stay was lifted. On April 25, 2010, Plaintiffs executed a Loan Modification Agreement with ASC, which “amends and supplements” the Note and DOT. (Doc. 12-1 at 52-56.) On September 28, 2010, Tiffany & Bosco recorded a Cancellation of Trustee's Sale. (Id. at 58.)

         On May 10, 2016, Plaintiffs filed suit against Defendant Deutsche Bank National Trust Company, as Trustee, in Maricopa County Superior Court. (Doc. 1-1.) Defendant removed the case to this Court on June 7, 2016. (Doc. 1.) On June 24, 2016, Plaintiffs filed an amended complaint alleging three counts: (1) quiet title, (2) false recordings perpetuated on rescinded loan creating perpetual and unresolved cloud on title, and (3) violation of the Truth in Lending Act (TILA). (Doc. 10.) Plaintiffs seek damages, an order cancelling the Note, an order quieting title in favor of Plaintiffs, and an order enjoining any foreclosure arising out of the DOT. (Id. at 35-36.) Defendant moves to dismiss the amended complaint. (Doc. 12.)

         LEGAL STANDARD

         To survive dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must contain factual allegations sufficient to “raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The task when ruling on a motion to dismiss “is to evaluate whether the claims alleged [plausibly] can be asserted as a matter of law.” See Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). When analyzing the sufficiency of a complaint, the well-pled factual allegations are taken as true and construed in the light most favorable to the plaintiff. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, legal conclusions couched as factual allegations are not entitled to the assumption of truth, Iqbal, 556 U.S. at 680, and therefore are insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2008).

         ANALYSIS

         All three of Plaintiffs' claims are grounded on the allegation that they rescinded the loan in accordance with TILA. (Doc. 10, ¶¶ 103, 145, 186.) Plaintiffs' quiet title claim alleges that the rescission rendered the Note, DOT, and Loan Modification Agreement void, and that Plaintiffs had no duty to tender the purchase price. (Id., ¶ 131.) The false recording claim alleges that Defendant recorded several documents that were void due to the alleged rescission. (Id., ¶ 155.) The TILA claim is based on Defendant's alleged failure to “honor” the rescission by failing to credit payments and clear their property of any security interest. (Id., ¶¶ 186-89.)

         Defendant argues Plaintiffs' claims should be dismiss for several reasons: (1) Plaintiffs fail to allege the loan was properly rescinded, (2) the claims are barred by the statute of limitations, (3) the Loan Modification Agreement extinguishes Plaintiffs' claims, (4) the quiet title claim fails for lack of tender, (5) the false recording claim fails because none of the alleged misstatements were material to Plaintiffs, and (6) the TILA claim fails because the allegations are conclusory. The Court agrees with Defendants that Plaintiffs' theory of rescission fails, that the claims are barred by the statute of limitations, and that the Loan Modification Agreement bars Plaintiffs' claims. As such, the Court need not address Defendant's remaining arguments.

         I. Rescission

         TILA provides a framework for rescission of consumer credit transactions by consumers. 15 U.S.C. § 1635. Generally, consumers have the right to rescind within “three business days following the consummation of the transaction.” § 1635(a). This period is extended to three years if “the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor.” § 1635(f). Once the obligor exercises the right to rescind, within twenty days, “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 ...


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