OPINION AND ORDER
On May 11, 2011, Magistrate Judge Dennis Hubei filed his Findings and Recommendation (doc. 39) that the court dismiss plaintiffs’ claim for statutory damages and their claims against defendant BAC Home Loans Servicing, but denying defendants’ motion to dismiss plaintiffs’ remaining claims. Magistrate Judge Hubei also recommended the court .grant plaintiffs’ motion to strike the Declaration of Kaley F. Fendall.
The matter is now before this court. 28 U.S.C. § 636(b)(1)(A); Fed. R.Civ.P. 72(b). Although plaintiffs’ timely filed partial objections, the parties subsequently stipulated to plaintiffs’ withdrawal of those objections “so that the court [may] review the Findings and Recommendation as not having been objected to by either party.” Stipulated Withdrawal of Plaintiffs’ Partial Objection, at 2 (doc. 43). This relieves me of my obligation to review Magistrate Judge Hubei’s factual findings
de novo.
28 U.S.C. § 636(b)(1)(C);
see also Thomas v. Arn,
Accordingly, I ADOPT Magistrate Judge Hubei’s Findings and Recommendation (doc. 39) as- my own opinion. I GRANT in part, and DENY in part defendants’ motion to dismiss (doc. 16) as follows. I GRANT defendants’ motion to dismiss plаintiffs’claim for statutory damages. I GRANT the motion to dismiss plaintiffs’ claims against defendant BAC Home Loans Servicing, and DISMISS the claims against BAC Home Loan Servicing without prejudice. I DENY the motion to dismiss plaintiffs’ remaining claims, including their claim for attorney fees and costs. Finally, I GRANT plaintiffs’ motion to strike the Declaration of Kaley F. Fendall.
IT IS SO ORDERED.
FINDINGS AND RECOMMENDATIONS ON DEFENDANT’S MOTION TO DISMISS AND PLAINTIFF’S MOTION TO STRIKE DECLARATION OF KALEY L. FENDALL
On August 26, 2010, the plaintiffs Jorge Cazarez Garcia and his wife, Miriam M. Marquez, filed a Complaint against the defendants Fannie Mae (the commonly-used nickname for the Federal National Mortgage Association) (“FNMA”), BAC Home Loans Servicing (“BAC”), and Abacus Mortgage, Inc. (“Abacus”), alleging violations of the Truth in Lending Act, 15 U.S.C. § 1601 et seq. (“TILA”), in connection with the plaintiffs’ 2007 refinance of their home. Dkt. # 1.
In their Complaint, the plaintiffs allege they refinanced their home with Abacus on August 27, 2007.
1
The plaintiffs claim Ab
The plaintiffs allege Abacus violated the TILA in two specific respects. First, they assert that the “Notice of Right to Cancel” (the “Notice”) given to them at the time of the transaction failed to comply with the Act because it omitted the date on which the rescission period expired. Dkt. # 1, ¶ 15 & Ex. A. Second, they claim the Notice violated the TILA in misstating the date of the transaction as August 24, 2007, when the “actual date of the transaction was August 27, 2007.” Id. The plaintiffs argue these defects in the Notice were material, extending the time within which they could rescind the transaction from three days to three years following consummation of the transaction. Id., ¶ 17 (citing 15 U.S.C. § 1635(f) 2 ). They further argue the right of rescission extends to any subsequent assignee of Abacus. Id. (citing 15 U.S.C. § 1641(c) 3 ).
The plaintiffs claim they tendered a notice of rescission to all three defendants by certified mail on August 2, 2010. Their notice also “explained that plaintiffs had arranged financing to permit them to tender back the principal owing after their rescission of this loan was honored.” Id., ¶ 18. According to the plaintiffs, BAC expressly denied their attempted rescission by letter dated August 18, 2010. They further claim that their notice of rescission mailed to Abacus at the address set forth on the Notice was returned as undeliverable. Id., ¶ 19.
The plaintiffs allege the defendants have failed to comply with their obligations under the TILA and its implementing regulations. They assert that they have prequalified to refinance their home at a 4.712% APR, and they will consummate that transaction once the defendants have complied with their obligations undеr 15
A. Return of all finance, interest and other charges paid in connection with this loan, which as of the date of filing this action consists of closing costs and fees of $1,909.85 and interest payments totaling $53,068.75. The total to be refunded as of the date of filing this action is $54,978.00.
B. Statutory damages of $4,000.00 for their failure to comply with their duties upon rescission.
C. Reasonable attorney fees and costs.
Dkt. # 1, ¶ 22. They further seek a “declaratory judgment that they have validly rescinded their loan under TILA and the security interest is terminated.” Id., p. 6.
On December 30, 2010, FNMA and BAC jointly filed a Motion to Dismiss, a supporting brief, and a Declaration of Kaley F. Fendall, one of the defendants’ attorneys. 5 Dkt. # 16, 17 & 18. The defendants claim the plaintiffs have failed to state a claim upon which relief can be granted. After receiving an extension of time to respond, Dkt. #22, the plaintiffs filed their response to the motion on January 27, 2011. Dkt. #23. Concurrently, the plaintiffs filed a motion to strike the declaration of Kaley F. Fendall. Dkt. # 24. After receiving several extensions of time to respond, Dkt. # 27, 30 & 33, the defendants filed a reply in support of their motion to dismiss, Dkt. # 35, and a response to the plaintiffs’ motion to strike the Fendall declaration, Dkt. #36. The plaintiffs notified the court that they will not be filing a reply in support of their motion to strike the declaration. Accordingly, both motions are fully briefed, and the court turns to its review of the defendants’ motion to dismiss and the plaintiffs’ motion to strike the Fendall declaration.
STANDARD OF REVIEW
Chief Judge Aiken of this court recently set forth the standard for the court’s consideration of a motion to dismiss in
Gambee v. Cornelius,
No. 10-CV-6265-AA,
Under Fed.R.Civ.P. 12(b)(6), a complaint is construed in favor of the plaintiff, and its factual allegations are taken as true. Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992 , 998 (9th Cir.2010). “[F]or a complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. United States Secret Serv.,572 F.3d 962 , 969 (9th Cir.2009). “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.” Ashcroft v. Iqbal [556 U.S. 662 ],129 S.Ct. 1937 , 1949 [173 L.Ed.2d 868 ] (2009). “[0]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.” Bell Atlantic Corp. v. Twombly,550 U.S. 544 , 563[,127 S.Ct. 1955 , 1969,167 L.Ed.2d 929 ] (2007). “[Generally the scope of review on a motion to dismiss for failure to state a claim is limited to the Complaint.” Daniels-Hall,629 F.3d at 998 .
Id. at *2.
THE NOTICE OF RIGHT TO CANCEL
The plaintiffs attach to their Complaint unsigned and incomplete copies of the Notice of Right to Cancel which they claim to have received at the time the transaction was consummated. See Dkt. # 1, Ex. A. The Notices attached to the plaintiffs’ Complaint misstate the transaction date as August 24, 2007 (the transaction actually was consummated on August 27, 2007); do not contain the deadline by which the plaintiffs could exercise their right to cancel; and are not signed by the plaintiffs. Id.
Attаched to the Fendall declaration are completed copies of the Notice (the “alternative Notices”). Dkt. # 18, Ex. 1, pp. 2 & 3. On the alternative Notices, the date has been corrected to August 27, 2007; the deadline for cancellation has been filled in as August 30, 2007; and both of these dates appear to have been initialed by the plaintiffs. In addition, it appears each of the plaintiffs signed an Acknowledgment of Receipt stating, “Each of the undersigned hereby acknowledges the receipt of two (2) completed copies of this notice of right to cancel.” Id.
The defendants argue the plaintiffs’ signatures on the alternative Notices, whereby the plaintiffs “expressly acknowledged] receipt of two complete copies of the [alternative Notice],” obviate their claim that the Notice was defective. Dkt. # 16, p. 4 (emphasis in original). They further assert the plaintiffs are аttempting to “take grave advantage of the consumer protection afforded by TILA,” arguing the plaintiffs are simply attempting “to take advantage of a more favorable interest rate ... after entering into a loan agreement.” Id., p. 2.
The plaintiffs move to strike the Fendall declaration, arguing the alternative Notices attached to the declaration have not been authenticated properly, they are evidence outside the pleadings that should not be considered on a motion to dismiss, and even if the court considers the alternative Notices submitted by the defendants, the case still is not appropriate for dismissal.
Because it appears the propriety of the court’s consideration of the alternative Notices could be dispositive of both the defendants’ motion and, indeed, of the plaintiffs’ case, the court will address that issue first.
The plaintiffs argue the alternative Notices have not been authenticated properly. They claim Ms. Fendall does not have “personal knowledge of the facts” as she claims in paragraph 1 of her declaration.
Id.
Ms. Fendall conceded this at oral
In support of their argument, the plaintiffs rely on
Blount v. Connecticut General Life Insurance Co.,
No. 01-CV-1341-BR, slip op.,
In support of their motion for summary judgment, the Blount defendants submitted the affidavit of their attorney with attached exhibits. The plaintiff moved to strike the affidavit because it was not based on the attorney’s personal knowledge, and failed to lay a proper foundation for admissibility of the exhibits. The court’s discussion of the issue is directly on point in the present inquiry:
“A writing is not authenticated simply by attaching it to an affidavit....” United States v. Dibble,429 F.2d 598 , 602 (9th Cir.1970). In order to lаy the foundation for receipt of a document in evidence, the party offering the exhibit must provide the “testimony of a witness with personal knowledge of the facts who attests to the identity and due execution of the document and, where appropriate, its delivery.” Id. In other words, the affiant must state specific facts from which the court could infer the affiant could identify correctly the document and knows the attachment is a true and correct copy of the genuine document. Id.
Although [the attorney] conclusorily alleges he has personal knowledge as to the authenticity of the documents attached to his affidavits, he provides no factual support. Defendants, nonetheless, argue the Court may infer [his] personal knowledge that the exhibits are authentic from the fact that he is Defendants’ attorney of record and is acting as their agent.
An attorney’s affidavit is treated likе all other affidavits pursuant to Rule 56(e) and is not sufficient unless it is based on personal knowledge.
Postscript Enterprises v. City of Bridgeton,
“Evidence that is not properly authenticated will not be considered by the court when reviewing a motion for summary judgment.
Orr v. Bank of America,
The defendants, however, argue the court should consider the alternative Notices because they were “partially generated by plaintiffs themselves, as [they] contain [] plaintiffs’ own signatures and acknowledgement.” Dkt. #35, pp. 2-3. They argue the plaintiffs should not be allowed to defeat the motion to dismiss “by deliberately omitting references to documents upon which their claims are based.”
Id.
(citing
Parrino v. FHP, Inc.,
“As a general matter, a district court may not consider any material outside of the pleadings when ruling on a Rule 12(b)(6) motion.
Lee v. City of Los Angeles,
The Parrino court held “that a district court ruling on a motion to dismiss may consider a document the authenticity of which is not contested, and upon which the plaintiffs complaint necessarily relies.” Id. The court further observed:
FN4. As Parrino notes, where a defendant attaches extrinsic evidence to a Rule 12(b)(6) motion, the court ordinarily must convert that motion into one for summary judgment under rule 56 to give the plaintiff an opportunity to respond. See Cortec [Indus., Inc. v. Sum Holding L.P.], 949 F.2d [42,] 48 [(2d Cir.1991) ]. Where, however, an attached document is integral to the plaintiffs claims and its authenticity is not disputed, the plaintiff “obviously is on notice of the contents of the document and the need for a chance to refute evidence is greatly diminished.” [Pension Benefit Guar. Corp. v.] White Consolidated Industries, 998 F.2d [1192,] 1196-97 [ (3d Cir.1993) ].
The defendants note that nowhere have the plаintiffs disputed that the alternative Notices contain their signatures, nor do the plaintiffs deny that the dates were inserted at the time they initialed and signed the alternative Notices. Nevertheless, the plaintiffs failure to dispute the authenticity of the alternative Notices does not amount to their admission that the alternative Notices are authentic or that they were provided with complete copies of the alternative Notices at closing. Thus, one of the prerequisites to the court’s consideration of the alternative Notices — i.e., that the authenticity of the documents not be contested — is absent here, with the result that the court cannot consider the unauthenticated documents in connection with the defendants’ motion to dismiss.
See, e.g., Newsom v. Countrywide Home Loans, Inc.,
Accordingly, the Fendall declaration and its attached exhibits should be stricken.
Relying, then, only on the defective Notices attached to the plaintiffs’ Complaint, it is clear the plaintiffs have stated a claim upon which relief could be granted. Accepting, for purposes of the defendants’ motion to dismiss, that the facts as alleged by the plaintiffs in their Complaint are true, the plaintiff received incomplete Notices at closing, which would form the basis for the plaintiffs’ claim that the defendants failed to comply with the TILA disclosure requirements. Therefore, the motion to dismiss should be denied.
However, should the District Judge disagree with my conclusion that the Fendall declaration and exhibits should be stricken, then the court must address the effect of those documents on the defendants’ motion to dismiss.
EFFECT OF SIGNED NOTICES
The defendants argue that the plaintiffs’ signatures on the alternative Notices conclusively prove the plaintiffs received complete copies of the alternative Notices, and preclude the plaintiffs’ action against not only FNMA, but any assignee of the plaintiffs loan. The plaintiffs disagree. Both parties’ arguments are based on various courts’ interpretations of two sections of the TILA.
Section 1641, entitled “Liability of assignees,” provides in pertinent part as follows:
Except as provided in section 1635(c) of this title, in any action or proceeding by or against any subsequent assignee of the original creditor without knowledge to the contrary by the assignee when he acquires the obligation, written acknowledgement of receipt by a person to whom a statement is required to be given pursuant to this subchapter shall be conclusive proof of the delivery thereof and ... of comрliance with this part. This section does not affect the rights of the obligor in any action against the original creditor.
15 U.S.C. § 1641(b).
Section 1635(c), referred to in section 1641(b), entitled “Rebuttable presumption of delivery of required disclosures,” provides:
Notwithstanding any rule of evidence, written acknowledgment of receipt of any disclosures required under this sub-chapter by a person to whom information, forms, and a statement is required to be given pursuant to this section [onthe right of rescission] does no more than create a rebuttable presumption of delivery thereof.
15 U.S.C. § 1635(c).
The defendants argue the “rebuttable presumption” standard found in section 1635(c) only applies to original creditors, not to subsequent assignees. They maintain the “conclusive proof’ standard of section 1641(b) should be applied to subsequent assignees of the original creditor when the borrower signed an acknowledgement of receiрt of the required disclosures. Dkt. # 17, pp. 6-9 & n. 2.
The plaintiffs disagree, based on a plain reading of the statutes and because they argue it would be inappropriate to apply the presumption standard on a motion to dismiss. Dkt. # 23, pp. 10-11. In support of this second argument, the plaintiffs rely on
Morris v. Bank of America,
No. C092849-SBA, slip op.,
Even if it were proper to take judicial notice of the copies of the notices proffered by Defendants, applicаtion of the rebuttable presumption under 15 U.S.C. § 1635(c) is inappropriate at this stage of the proceedings. By definition, a rebuttal [sic] presumption involves consideration of evidence to determine whether the presumption has been rebutted. See Glucksman v. First Franklin Finan. Corp.,601 F.Supp.2d 511 , 514 (E.D.N.Y.2009) (declining to apply 15
U.S.C. § 1635(c) on a motion to dismiss because it requires the consideration of evidence). The Court cannot consider evidence on a motion to dismiss unless it converts the motion to one for summary judgment under rule 56, which the Court declines to do. See Fed.R.Civ.P. 12(d); Lee v. City of Los Angeles,250 F.3d 668 , 688 (9th Cir.2001). While the presumption under section 1635(c) may ultimately prove dispositive of Plaintiffs’ TILA claim, that determination cannot be made on a motion to dismiss. See 5 B.C. Wright & A. Miller, Federal Practice & Procedure § 1357 (3d ed. 2006)[ ] (“[C]ourts have refused to consider presumptions in favor of the defendant on a motion to dismiss since presumptions are evidentiary standards that are inappropriate for evaluation at the pleadings stage.”).
Morris,
In the present case, both the plaintiffs and the defendants recognize that courts across the country conflict in their interpretations of whether or not to apply the “rebuttable presumption” standard or the “conclusive proof’ standard to rescission claims brought against an assignee. Cases cited by the defendants in support of their position include
Chernik v. Bank of America Home Loans,
No. 2:09-cv-02746, slip op.,
Besides
Morris,
discussed above, cases cited by the plaintiffs in support of their position include
Newsom v. Countrywide Home Loans, Inc.,
The plaintiffs argue cases cited by the defendant are distinguishable. They note that in Balderas, the notices considered by the court were attached to the plaintiffs complaint, not the defendant’s motion. They assert that Henderson and Johnston “do apply the conclusive proof standard, but neither case addresses § 1641 (b)’s exemption of § 1635(c).” Dkt. # 10, p. 10 n. 2. They further assert that Hughes “cites no law in support of its holding.” Id.
As the defendants acknowledge, the undersigned recently considered a motion to dismiss in a case similar to the one at issue here. In
Bakker v. Wells Fargo Home Mortgage,
No. CV-10-82, slip op.,
STATUTORY DAMAGES AND ATTORNEYS’ FEES
The defendants argue the plaintiffs “have failed to state a claim for statutory damages and attorneys’ fees for the additional reason that the imposition of statutory damages and attorneys’ fees upon assignees is improper where the TILA violation is not evident on the face of the loan documents.” Dkt. # 17, p. 10. The defendants assert that only the original creditor can be held liable for a monetary penalty or an award of attorney’s fees. Id. (citing 12 C.F.R. § 226.2(a)(17); 15 U.S.C. § 1640(a)). The defendants rely on 15 U.S.C. § 1641(a), which provides as follows:
Except as otherwise specifically provided in this subchapter, any civil action for a violation of this subchapter ... which may be brought against a creditor may be maintained against any assignee of such creditor only if the violation for which such action or proceeding is brought is apparent on the face of the disclosure statement, except where the assignment was involuntary. For the purpose of this section, a violation apparent on the face of the disclosure statement includes, but is not limited to (1) a disclosure which can be determined to be incomplete or inaccurate from the face of the disclosure statement or other documents assigned, or (2) a disclosurewhich does not use the terms required to be used by this subchapter.
The defendants argue section 1641(a) limits assignee liability “[b]ecause ‘Congress did not wish to impose liability for damages and attorneys’ fees on an assignee who was not responsible for and who has no notice of TILA disclosure violations at the time of assignment!)]’ ” Dkt. # 17, p. 10 (quoting
Bushong v. Paramount Equity Mortgage, Inc.,
No. 09-1080-AC, slip op.,
The plaintiffs contend the decisions in
Bushong
and
Russell,
upon which the defendants heavily rely, ignore the introductory language of section 1641(a), which limits assignee liability “[e]xcept as otherwise specifically provided in this subchapter.” The plaintiffs rely on
Fairbanks Capital Corp. v. Jenkins,
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, ... with respect to any person is liable-to such person in an amount equal to the sum of—
(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 or 1638(e)(7) of this title, the costs of the action, together with a reasonable attorney’s fee as determined by the court[.] ...
The Fairbanks court explained its interpretation of section 1640(a) as follows:
Section 1640(a)(3) provides that “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 of this title, the costs of the action, together with a reasonable attorney’s fee as determined by the court” is available. 15 U.S.C. § 1640(a)(3) (emphasis added). Congress’ [s] use of the disjunctive indicates that liability for attorney’s fees, at least, is not limited to actions against the creditor that initiated the loan but rather applies in “any action” in which a right to rescind is determined to exist.
[Section] 1641(e)(1) and its counterpart § 1641(a) plainly are not the exclusive means of imposing TILA liability on assignees. Both provisions state that acivil action may be brought against an assignee only for violations apparent from the disclosure statement “[e]xcept as otherwise specifically provided in this subchapter.” 15 U.S.C. § 1641(a) & (e)(1). But § 1641(c) is such an exception: it specifically provides that a customer has the right to rescind against “any assignee of the obligation,” Id. § 1641(c) (emphasis added), аnd not just against the more limited set of assignees described in § 1641(a) and (e)(1).
Finally, denying a consumer . whose demand for rescission was refused by an assignee the ability to recover attorney’s fees upon successful court action to enforce her TILA rights would undermine the policies underlying the TILA and its private enforcement mechanism. The TILA provides for an award of attorney’s fees to a successful consumer in order to ensure that the consumer is made whole and to encourage enforcement of the statute’s requirements. Hannon v. Security National Bank,537 F.2d 327 , 328 (9th Cir.1976); Corbett v. Keene Co-Operative Bank,498 F.Supp. 800 , 802 (D.N.H.1980); Liberty Loan Corp. v. Boyajian,407 F.Supp. 308 , 311 (D.R.I.1976); Jones v. Seldon’s Furniture Warehouse, Inc.,357 F.Supp. 886 , 887 (E.D.Va.1973). If consumers were precluded from recovering attorney’s fees in this context, they would be chilled from seeking enforcement even in meritorious cases, as it is common for TILA plaintiffs to be persons of limited means who are unable to finance expensive litigation.
In sum, this Court ... concludes that an assignee that refuses to honor a proper demand for rescission may in fact be held liable under the TILA for attorney’s fees.
Fairbanks,
In
Bussell,
Judge Papak found that “[although the
Fairbanks
court’s reasoning appears plausible at first blush, analysis of the statutory language at issue indicates that
Fairbanks
was wrongly decided.”
In
Bushong v. Paramount Equity Mortgage, Inc.,
No. CV 09-1080, slip op.,
[I]n Brodo v. Bankers Trust Co.,847 F.Supp. 353 , 359 (E.D.Pa.1994), [footnote omitted], the court stated that section 1641(a) limits assignee liability to violations that are apparent on the face of the disclosure statement because “Congress did not wish to impose liability for damages and attorney’s fees on an assignee who was not responsible for and who has no notice of TILA disclosure violations at the time of an assignment.” Id. 359. In Brodo, there were no TILA violations apparent on the faceof the disclosure statement. Id. The plaintiff argued that the assignee was nevertheless liable for refusing to respond to a valid rescission notice. Id. The court concluded that “[w]hile § 1641(c) provides that the right to rescind exists even against a creditor’s assignee, § 1640(a) permits only a ‘creditor’ to be held liable for a monetary penalty or an award of attorney’s fees for a TILA violation!.]” Id. Moreover, Brodo found that neither section 1641 nor any other section provides for a statutory penalty or an award of attorney’s fees to a plaintiff should an assignee fail to respond to a valid rescission notice. Id. Accordingly, rescission was deemed the only remedy in such a situation. Id.
This court agrees with the Brodo approach that Congress chose not to impose liability for damages and attorney’s fees on an assignee who was not responsible for or on notice that disclosure violations existed at the time of an assignment. Legislative history confirms that Congress enacted sections 1641(a) and (e) to narrow assignee liability. Taylor v. Quality Hyundai, Inc.,150 F.3d 689 , 693 (7th Cir.1998) (citing H.R. Conf. Rep. No. 96-842, at 80-81 (1980)). This court also agrees with Brodo “that neither section 1641 nor any other section provides for a statutory penalty or an award of attorney’s fees to a plaintiff should an assignee fail to respond to a valid rescission notice.”
Bushong,
Judge Acosta expressly disagreed with the Fairbanks court’s statutory interpretation, observing:
Section 1640(a) clearly makes refеrence only to creditors. Had Congress intended section 1640(a)’s remedies to apply to assignees, as the court in Fairbanks Capital concluded, then Congress would have made express reference to assignees as well. Rather, the court in Walker v. Gateway Fin. Corp.,286 F.Supp.2d 965 (N.D.Ill.2003), made the pertinent observation that imposing on assignees the damages which the statute imposes on creditors “would create an impermissible end ran around the obvious congressional purpose that underlies the Section (a) enactment of a statutory equivalent to a bona fide purchaser rule,” Walker,286 F.Supp.2d at 969 (disagreeing with “respected colleague” in same district who authored Fairbanks Capital decision).
Finally, it logically follows that creditors would be subject to greater potential liability than assignees because they are closely involved in the initial transaction with the debtor.
Id., at *8.
Adopting Judge Acosta’s recommendation, Judge Haggerty of this court observed, “The Senate Reрort cited in
Taylor
clarifies that assignees are liable only where a disclosure is inaccurate or incomplete based on the statement or other documents involved, and where incorrect terminology is used on the face of the disclosure statement.”
The plaintiffs in the present case maintain that the passage of the congressional history upon which Judge Haggerty, and the
Taylor
court, relied does not stand for the proposition “ ‘that assignees are liable only’ for facial violations.” Dkt. #23, p. 14 (quoting
Bushong,
Instead, [the passage to which Judge Haggerty cites] explains that the amendments “stat[e] explicitly that a consumer’s exercise of [rescission] is effective against an assignee. Without such protection for the consumer, the right of rescission would provide little or no effective remedy.” S.Rep. No. 96-368 at 32-33, reprinted in 1980 U.S.C.C.A.N. 236, 238.
Id. The plaintiffs misunderstand Judge Haggerty’s ruling. None of my distinguished colleagues has held that a consumer may not rescind as against an assignee; rather, they have held that even when rescission is available, the consumer may not recover attorneys’ fees from an assignee.
The 1979 amendments to the Truth in Lending Act were intended, among other things, to “limit[ ] creditor civil liability for statutory penalties to only significant violations,” S.Rep. No. 96-368 (1980), reprinted in 1980 U.S.C.C.A.N. 236, at 253. With regard to rescission, the legislative history described the amendments to the TILA as follows:
Section 512. Rescission. — This section contains several amendments regarding the consumer’s right of rescission. Under current law, when a transaction would result in a lien on a consumer’s home, the consumer is entitled to rescind the transaction within 3 days after receiving notice of his right to do so. This рrovision was enacted to give the consumer the opportunity to reconsider any transaction which would have the serious consequence of encumbering the title to his home....
Section 515. Civil Liability. — This section is intended to restrict the scope of creditor civil liability for statutory penalties to only those disclosures which are of material importance in credit shopping. The Committee believes this will eliminate litigation based on purely technical violations of the Act. Civil liability for actual damages and administrative liability would continue to attach to all the Act’s requirements.
The bill also makes explicit that a consumer may institute suit under Section 130 [i.e., 15 U.S.C. § 1640] to enforce the right of rescission and recover costs and attorney’s fees in a successful action.
Section 516. Liability of Assignees.— This section eliminates two uncertainties under present law as to an assignee’s liability for an original creditor’s violation of the Act.
Under present law, an assignee is generally liable only where a violation is ‘apparent on the face’ of the disclosure statement. What types of violations are covered is unclear. This section provides that violations are apparent on the face of a disclosure statement when disclosures are inaccurate or incomplete based on the statement or other documents involved, and where incorrect terminology is utilized.
In addition, this section eliminates ambiguity on the question of assignee liability for rescission by stating explicitly that a consumer’s exercise of this right is effective against an assignee. Without such protection for the consumer, the right of rescission would provide little or no effective remedy.
Id., 1980 U.S.C.C.A.N. at 264, 268.
The statutory scheme makes it clear that a consumer may sue an assignee to enforce the right of rescissiоn. It also is clear that when an assignee accepts the assignment of a loan containing a disclosure violation that is clear on the face of the applicable document, the assignee also is accepting liability for statutory damages,
Carried to a logical conclusion, then, it also.would seem both appropriate, and clear from the statutory scheme, that an assignee who makes the decision regarding whether or not to honor a consumer’s rescission notice also should be liable for the attorneys’ fees and costs associatеd with the consumer’s successful action to enforce the rescission. The original creditor, in such a case, has no further right to take any action with regard to the loan. As Judge Papak recently observed in
Dexter v. Homecoming Financial, L.L.C.,
No. CV 09-493-PK, Dkt. # 70, at pp. 24-26, when a consumer seeks rescission of a loan that has been assigned by the original lender to another holder, “the court obviously cannot require the original lender to terminate a security interest that it no longer possesses,” nor can the original lender grant rescission or cancel the loan.
Id.
(citing
Zakarian v. Option One Mortg. Corp.,
Notwithstanding other courts’ interpretations, I find that a common sense reading of the legislative history as a whole, together with the statutory, language, results in the conclusion that (1) a consumer may bring a civil action against an assignee for rescission; (2) in a successful rescission action, the consumer is entitled to recover attorneys’ fees and costs; but (3) statutory damages are available against an assignee only when disclosure violations are apparent on the face of the applicable document. Accordingly, I recommend that the defendants’ motion to dismiss be granted as to the plaintiffs’ claim for statutory damages, but denied as to their claim for attorneys’ fees and costs.
BAC’S STATUS AS A PARTY DEFENDANT
The defendants argue BAC is an improper party defendant because as “a mere servicer of plaintiffs’ loan, BAC cannot be held liable for rescission or statutory damages claims brought under TILA.” Dkt. # 17, p. 2. The plaintiffs “do not oppose dismissing BAC,” but request that BAC be dismissed without prejudice so that if FNMA establishes it is not the current assignee of the loan, then the plaintiffs could reassert their “claim against BAC under the final sentence of 15 U.S.C. § 1641(f)(2).” 8 Dkt. # 23, p. 3.
The undersigned recommends BAC be dismissed without prejudice.
CONCLUSION
For the reasons set forth above, the plaintiffs’ motion to strike the Fendall declaration is granted.
Further, the undersigned respectfully recommends that the defendants’ motion to dismiss be denied.
These Findings and Recommendation will be referred to a district judge. Objections, if any, are due by May 31, 2011. If no objections are filed, then the Findings and Recommendation will go under advisement on that date. If objections are filed, then any response is due by June 16, 2011. By the earlier of the response due date or
IT IS SO ORDERED.
Dated this 10th day of May 11, 2011.
Notes
. In paragraph 1 of their Complaint, the plaintiffs allege they refinanced their home on
. (f) Time limit for exercise of right
An obligor's right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever occurs first, notwithstanding the fact that the information and forms required under this section or any other disclosures required under this part have not been delivered to the obligor, except that if (1) any agency empowered to enforce the provisions of this subchapter institutes a proceeding to enforce the provisions of this section within three years after the date of consummation of the transaction, (2) such agency finds a violation of this section, and (3) the obligor’s right to rescind is based in whole or in part on any matter involved in such proceeding, then the obligor’s right of rescission shall expire three years after the date of consummation of the transaction or upon the earlier sale of the property, or upon the expiration of one year following the conclusion of the proceeding, or any judicial review or period for judicial review thereof, whichever is later. 15 U.S.C. § 1635(f).
. “Any consumer who has the right to rescind a transaction under section 1635 of this title may rescind the transaction as against any assignee of the obligation.” 15 U.S.C. § 1641(c).
. (b) Return of money or property following rescission When an obligor exercises his right to rescind under subsection (a) of this section, he is not liable for any finance or other charge, and any security interest given by the obligor, including any such interest arising by operation of law, becomes void upon such a rescission. Within 20 days after receipt of a notice of rescission, the creditor shall return to the obligor any money or property given as earnest mоney, downpayment, or otherwise, and shall take any action necessary or appropriate to reflect the termination of any security interest created under the transaction. If the creditor has delivered any property to the obligor, the obligor may retain possession of it. 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. Tender shall be made at the location of the property or at the residence of the obligor, at the option of the obligor. 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. The procedures prescribed by this sub-section shall apply except when otherwise ordered by a court.
15 U.S.C. § 1635(b).
The cited Regulation Z section 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 motion to dismiss was filed only by the defendants FNMA and BAC. The defendant Abacus has not appeared in the case. For purposes of this opinion, the movants will be referred to as the "defendants.”
. If the court finds the exhibits to the Fendall declaration are properly considered, then the defendants' motion to dismiss must be treated as a motion for summary judgment. Fed. R.Civ.P. 12(d). Accordingly, the court finds that case law considering the propriety of evidence submitted in support of a motiоn for summary judgment is relevant to the present inquiry.
. The defendants also cite
McCarthy v. Option One Mortgage Corp.,
In addition, the defendants cite
Gaona v. Town & Country Credit,
. ".... Upon written request by the obligor, the servicer shall provide the obligor, to the best knowledge of the servicer, with the name, address, and telephone number of the owner of the obligation or the master servicer of the obligation.” 15 U.S.C. § 1641(f)(2).