VICTOR BALDERAS and BELEN BALDERAS, Plaintiffs-Appellants, v. COUNTRYWIDE BANK, N.A., a National Banking Association; AAA FUNDING, INC., DBA First USA Funding, a California corporation; COUNTRYWIDE HOME LOANS, INC., DBA America’s Wholesale Lender, a New York corporation; MOR CAZAKOV, an individual; GALENA KOROL, an individual; DOES 1 through 10, inclusive, Defendants-Appellees.
No. 10-55064
United States Court of Appeals for the Ninth Circuit
December 29, 2011
21507
D.C. No. 3:09-cv-00564-MMA-JMA
Appeal from the United States District Court for the Southern District of California
Michael M. Anello, District Judge, Presiding
Argued and Submitted
June 9, 2011—Pasadena, California
Filed December 29, 2011
Before: Alex Kozinski, Chief Judge, Sandra S. Ikuta, Circuit Judge and Lawrence L. Piersol, Senior District Judge.*
Opinion by Chief Judge Kozinski;
Concurrence by Judge Ikuta
COUNSEL
Kevin J. Griffin (argued), Griffith Johnson, LLP, Dana Point, California; Nathan J. Sheridan and Dayna C. Carter, Goodman, Sheridan & Roff, LLP, Lake Forest, California, for appellant Victor Balderas, et al.
OPINION
KOZINSKI, Chief Judge:
The Balderases allege that they are immigrants who were rooked by a bank that signed them up for loans it knew they couldn’t afford, on terms they didn’t agree to. These are the facts as recited in the complaint: Mor Cazakov, a mortgage broker, cold-called the Balderases, representing that he could refinance their home, switch them to a fixed rate mortgage and let them cash out $50,000, all without a penalty. Subsequently, Soraya Qassim, a “duly authorized agent” of Countrywide Bank (Countrywide), filled out a uniform residential loan application (URLA) for them and showed up unannounced at their home, urging the Balderases to sign it. But the form was in English, which they can’t read, and it overestimated their income by over $40,000 per year. Qassim told them it was an informal document the bank needed, so the Balderases signed.
Three days later, on the evening of Monday, September 25, 2006, Cazakov showed up at their home with a notary public and loan documents also written in English. He told them that Countrywide “demanded” their signatures “that night” and he couldn’t and wouldn’t leave without getting them. The Balderases protested and asked to arrange the loan signing when their English-literate daughter could attend. But Cazakov said that Countrywide had instructed him to stay until he got the signatures, and he “engaged in a series of actions designed to intimidate, harass, and pressure [the Balderases] into signing the loan documents.” After six hours of unrelenting pressure by Cazakov and several unsuccessful attempts to read the paperwork, the Balderases capitulated and signed the documents just after midnight. On Wednesday, they called Cazakov and asked him to rescind the loans. He refused. They then called Countrywide a day later seeking the same relief. Countrywide also refused, falsely representing it was too late. In fact, the three-day statutory rescission period extended through the next day, Friday, September 29.
The Balderases filed a complaint alleging, among other things, a violation of the Truth In Lending Act (TILA). See
* * *
[1] The TILA is a federal consumer protection statute designed to promote “the informed use of credit” and assure “meaningful disclosure of credit terms to consumers.” Ford Motor Credit Co. v. Milhollin, 444 U.S. 555, 559 (1980) (quoting
[2] The Balderases claim they were given defective copies of the Notice of Right to Cancel. The disclosures they received were missing material provisions, in particular the date of closing and the date on which the right to rescind expired. When, as here, the notice is given in writing, rather than in electronic form, Regulation Z instructs creditors to “deliver two copies of the notice of the right to rescind to each consumer entitled to rescind,” and those copies must include “[t]he date the rescission period expires.”
The Balderases’ experience illustrates why lenders must allow borrowers to keep fully completed and accurate copies of the disclosure notices. Without this information, borrowers are left to guess when their right to rescind the loan transaction expires. Did the clock start ticking the day the Balderases signed the URLA? When they signed the loan documents? When Cazakov submitted the paperwork to Countrywide for processing? When Countrywide actually processed the paperwork? To add to the confusion, the Balderases claim that Cazakov falsely promised not to submit their paperwork to Countrywide “for a few days” in case they decided “not to proceed with the loan after their daughter had reviewed the contents.” And, when the Balderases tried to exercise their right to rescind, Cazakov and Countrywide told them, incorrectly, that it was too late, instead of telling them, correctly, that their rescission notice was timely but had to be submitted in writing.
[3] If the Balderases can prove that they were not allowed to keep two completed and accurate copies of the disclosure notice, the bank will have forfeited the benefit of the three-day cooling off period and the Balderases would have three years to rescind. See Semar v. Platte Valley Fed. Sav. & Loan Ass’n, 791 F.2d 699, 701-02 (9th Cir. 1986) (“If the lending institution omits the expiration date . . . the borrower may rescind the loan within three years after it was consummated.“). We need not consider whether the false statements as to the expiration of the rescission period allegedly made by phone when the Balderases tried to rescind orally operated as a separate waiver of the three-day rescission period.
[4] The district court erroneously held that the Balderases were entitled only to a three-day rescission period because they had, in fact, gotten a rescission notice that complied with the statutory requirements. In reaching this conclusion, the district court relied on Exhibit 14 to the complaint. Exhibit 14 is the rejection letter Countrywide sent in response to the Balderases’ written rescission demand. The Balderases attached the letter to their complaint, an important object lesson as to why it’s unwise to use a complaint as an ersatz document production. Attached to the rejection letter is a properly completed Notice of Right to Cancel bearing the Balderases’ signatures. Immediately above the signatures is a statement to the effect that the borrower “acknowledge[s] receipt of two copies of NOTICE of RIGHT TO CANCEL.” Countrywide’s rejection letter points out that the Balderases acknowledged they had received proper notice,
[5] The district court agreed, concluding that the signed copy of the notice included in the bank’s rejection letter, which the Balderases themselves let slip into the record by attaching it to their complaint, was “prima facie proof of delivery.” Balderas v. Countrywide Bank, N.A., No. 09cv564-MMA(JMA), 2009 WL 4783142, at *4 (S.D. Cal. Dec. 9, 2009) (quoting Garza v. Am. Home Mortg., 2009 WL 1139594, at *3 (E.D. Cal. April 28, 2009)). But Exhibit 14 only proved that the Balderases signed the document in Countrywide’s possession. The acknowledgment created a rebuttable presumption that the required disclosures were delivered to the borrowers. See
[6] Countrywide also seems to argue that the Balderases’ signature on the disclosure statement proves conclusively that it was delivered to them. After all, they must have had it in their possession when they signed it. But providing someone a document long enough to sign it does not comply with
[7] Delivery under the TILA requires a permanent physical transfer from one party to another. The Balderases claim that didn’t happen here. Instead, they were given documents to sign and those documents were then taken away. All they were left with were incomplete documents that didn’t tell them how long they had before they could renege on the loans. That missing information turned out to be critical when the Balderases told Countrywide they wanted out and were falsely told it was too late.
[8] Reading the complaint fully and fairly, as we must in a motion to dismiss, the Balderases claim that they received documents at the loan signing that didn’t comply with TILA. If Countrywide ended up with the only copies of the properly filled out documents then Countrywide didn’t comply with TILA because it never “deliver[ed] two copies of the notice of the right to rescind.”
Countrywide claims that the Balderases didn’t allege enough facts to rebut the signed notice’s presumption of delivery. But presumptions are not rebutted by allegations; they are rebutted by evidence. And the time for presenting evidence has not yet arrived. Complaints need only allege facts with sufficient specificity to notify defendants of plaintiffs’ claims. Here, the Balderases pleaded that the notice
Countrywide relies on Anderson v. Countrywide Financial, No. 2:08-cv-01220-GEB-GGH, 2009 WL 3368444 (E.D. Cal. Oct. 16, 2009), for support. In Anderson, the plaintiff alleged that the “incorrect” notices she received from her lender and included in her complaint rebutted the signed notices attached to the lender’s written correspondence that was included in her complaint. Id. at *2-3. The court stated that an “allegation [wa]s insufficient to rebut [TILA’s] presumption.” Id. at *3. Anderson erred and the district court here was wrong to follow suit.
But even if it turns out that the Balderases were left two copies of the completed form, as per Exhibit 14 of the complaint, Countrywide may well have an additional problem: The form purports to have been signed on Monday, September 25, and notifies the borrower that they have until September 28 to rescind. The Balderases, however, claim that the actual signing of the loan documents occurred after midnight, which would mean the loan transaction wasn’t consummated until Tuesday the 26th. According to this narrative, the rescission period extended until Friday the 29th. See
[9] As we’ve said before, “so long as the plaintiff alleges facts to support a theory that is not facially implausible, the court’s skepticism is best reserved for later stages of the proceedings when the plaintiff’s case can be rejected on evidentiary grounds.” In re Gilead Sciences Securities Litigation, 536 F.3d 1049, 1057 (9th Cir. 2008). Here, the Balderases clearly alleged in their complaint that they were never given a Notice of Right to Cancel that complied with TILA. If they can prove up this allegation at trial, they’ll win. A complaint containing allegations that, if proven, present a winning case is not subject to dismissal under 12(b)(6), no matter how unlikely such winning outcome may appear to the district court.
REVERSED and REMANDED.
IKUTA, Circuit Judge, concurring:
I concur in the opinion except for the penultimate paragraph, in which the majority takes the opportunity to give the Balderases some helpful legal advice. After clarifying that a lender must leave the TILA Notice of Right to Cancel with the