Kimball v. Flagstar Bank F.S.B.
881 F. Supp. 2d 1209
S.D. Cal.2012Background
- Plaintiffs Larry and Kathie Kim-ball own real property in San Diego; January 2008 loan of $350,000 secured by Deed of Trust naming Flagstar Bank, trustee Joan H. Anderson, and MERS as beneficiary (RJN Ex. A).
- Plaintiffs allege TILA/Reg Z violations and defective disclosures, including Notice of Right to Cancel timing, unsigned disclosures, and YSP/Estimated Closing Statement issues.
- Plaintiffs filed February 17, 2012 seeking rescission and statutory damages, asserting ten causes of action (e.g., TILA rescission/damages, fraud, UCL, quiet title, etc.).
- Defendants moved to dismiss the complaint on March 16, 2012; the motion was ripe for decision on the papers; no oral argument.
- Court granted the motion to dismiss several claims and denied as moot Plaintiffs’ motion to amend; certain claims were dismissed with leave to amend; a foreclosure occurred April 20, 2012; MERS was found to have authority to foreclose as nominee/beneficiary.
- Conclusion: overall dismissal of several claims with leave to amend remaining; declaratory relief and HOEPA claims dismissed with prejudice; Plaintiffs may amend surviving claims and possibly add Fannie Mae.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud/intentional misrepresentation pleading & statutes of limitation | Plaintiffs assert relaxed pleading due to lack of knowledge. | Need Rule 9(b) specificity; claims time-barred; no equitable tolling. | Claims dismissed (insufficient pleading; statute/time issues). |
| Breach of the implied covenant of good faith and fair dealing | Contract implicitly contains good faith/fair dealing duties. | Pre-loan conduct cannot support covenant; not tied to contract terms. | Dismissed with leave to amend. |
| Declaratory relief as a standalone action | Request for rights/duties and loan status; not duplicative. | Declaratory relief is not independent and duplicative; no substantial controversy. | Dismissed with prejudice. |
| Quiet title and tender requirement | Plaintiffs seek quiet title despite alleged rescission/forgiveness. | Tender requirement not satisfied; no adequate tender. | Dismissed with leave to amend. |
| TILA damages, rescission and HOEPA timing | TILA damages timely; rescission may extend; HOEPA claims supported. | Damages/time-barred; rescission is time-barred under §1635(f); HOEPA claims time-barred; tender needed. | Damages and HOEPA time-barred; rescission time-barred; damages/rescission claims dismissed with leave to amend. |
Key Cases Cited
- King v. State of Cal., 784 F.2d 910 (9th Cir. 1986) (equitable tolling may extend limitations in limited circumstances)
- Beach v. Ocwen Fed. Bank, 523 U.S. 410 (U.S. 1998) (right of rescission under TILA three-year limit is a repose period)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard requires plausibility, not mere conclusory allegations)
- Swartz v. KPMG LLP, 476 F.3d 756 (9th Cir. 2007) (necessity to plead fraud with the ‘who, what, when, where, how’ details)
- Yamamoto v. Bank of N.Y., 329 F.3d 1167 (9th Cir. 2003) (court may modify rescission sequence under 15 U.S.C. § 1635(b))