Sundby v. Marquee Funding Group, Inc.

• Court: District Court, S.D. California
• Decided: August 21, 2019
• Docket: 3:19-cv-00390
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 Dale Sundby, Trustee, Case No.: 19-CV-00390-GPC-MDD

12 Plaintiff, ORDER 13 v. (1) DENYING MARQUEE FUNDING 14 Marquee Funding Group, Inc.; Salomon GROUP’S MOTION TO DISMISS Benzimra, Trustee; Stanley Kesselman, 15 [ECF No. 30]; Trustee; Jeffrey Myers; Kathleen Myers;

16 Andres Salsido, Trustee; Benning (2) DENYING LENDER Management Group 401(k) Profit Sharing 17 DEFENDANTS’ MOTION TO Plan; Christopher Myers; Vickie McCarty; DISMISS [ECF No. 31]; 18 Dolores Thompson; Kimberly Gill Rabinoff; Steven M. Cobin, Trustee; 19 Susan L. Cobin, Trustee; Equity Trust 20 Company, Custodian FBO Steven M. Cobin Traditional IRA; Todd B. Cobin, 21 Trustee; Barbara A. Cobin, Trustee; 22 Fasack Investments LLC; and Does 1-X, 23 Defendants. 24 25 The matter before the Court arises from two loans that pro se Plaintiff, Dale 26 Sundby, obtained from the above-captioned Defendants, secured by a mortgage on his 27 primary residence. Plaintiff has sued the Defendants for damages pursuant to the Truth 28 1 in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., and for a declaration clarifying the 2 parties’ rights and obligations with respect to one of the loans. 3 On May 22, 2019, Defendant Marquee Funding Group, Inc. (“Marquee”), filed a 4 motion to dismiss Plaintiff’s First Amended Complaint (hereinafter “FAC”). (ECF No. 5 30.) This motion has been opposed and replied to (ECF Nos. 34, 36); upon request by the 6 Plaintiff, the Court permitted a sur-reply. (ECF No. 39.) On May 28, 2019, the 7 remaining defendants (hereinafter the “Lender Defendants”) filed a motion to dismiss. 8 (ECF No. 31.) This motion has also been fully briefed. (ECF Nos. 34, 35.) 9 Pursuant to Civil Local Rule 7.1(d)(1), the Court finds the matter suitable for 10 adjudication without oral argument. For the reasons explained below, the Court denies 11 both motions. 12 I. Background 13 A. Factual Allegations 14 1. The 2016 Loan 15 In 2016, Plaintiff, acting on behalf of his family trust, arranged with Marquee, a 16 mortgage broker, to obtain refinancing on an existing 2015 mortgage loan secured by 17 Plaintiff’s primary residence at 7740 Eads Avenue, La Jolla, CA 92037 (the “Eads 18 property”). (FAC ¶¶ 27–30, ECF No. 13.) 19 On March 10, 2016, Plaintiff submitted to Marquee a “Uniform Residential Loan 20 Application for a conventional fixed-rate mortgage. (Id.) Plaintiff’s application sought a 21 residential mortgage loan of $2,600,000, secured by his primary residence, and indicated 22 that the purpose of the loan was for refinancing. (FAC ¶¶ 27–31.). Plaintiff stated only 23 the Eads property under “Assets” and listed two loans secured by the Eads property as 24 “Liabilities.” (FAC ¶¶ 32–35.) Plaintiff’s application did not make any statement as to 25 the borrower’s “employer,” nor did it state any “income.” (FAC ¶¶ 32-33.) 26 27 28 1 Pursuant to this application, on March 30, 2016, Plaintiff signed a Note Secured by 2 a Deed of Trust (“2016 Note”), which included a prepayment paragraph.1 The 2016 Note 3 contains a “payments” paragraph prescribing a combined balloon payment and one 4 month of interest. It indicates that the borrower’s “payments are Interest Only.” (FAC ¶¶ 5 48–49.) That same day, Plaintiff signed an Amendment to the 2016 Note which stated 6 that “[i]t is hereby agreed that borrower is prepaying 11 months of interest through the 7 loan transaction.” (FAC ¶ 50.) 8 The 2016 Loan was funded on April 6, 2016. The corresponding Deed of Trust 9 was recorded on April 7, 2016. (FAC ¶ 52.) The Escrow Holder’s Final Settlement 10 Statement for this transaction indicated that Marquee was due a $39,000.00 broker’s fee, 11 designated as an “Origination Charge.” (FAC ¶¶ 53–54.) According to Plaintiff, 12 “Defendants did nothing to qualify Plaintiff for the 2016 Loan,” even though his 2016 13 application listed no employer, no income, or non-Property asserts. (FAC ¶ 131(e).) 14 2. 2017 Loan 15 In 2017, Plaintiff arranged with Marquee to obtain a $3,160,000 refinancing for his 16 residential mortgage loan. Plaintiff completed a “Uniform Residential Loan Application” 17 indicating, once again, the refinance purpose and the residential property at issue. (FAC 18 ¶ 55; see also ECF No. 33-1, at 7 (2017 application).) The 2017 application stated no 19 employer. According to Plaintiff, the amount listed as the borrower’s income, minus 20 expenses, was less than 10% of the $25,016.67 monthly interest on the loan. (FAC ¶¶ 21 58–59.) The non-property assets on the 2017 application were less than the non-property 22 liabilities. (FAC ¶ 60.) The 2017 application was submitted to Marquee on May 17, 23 2017. According to Plaintiff, despite these red flags, Defendants never qualified him for 24 the 2017 Loan. 25 26

27 1 “In lieu of a Prepayment Penalty Borrower agrees to pay the Lender a Minimum of 90 days 28 1 On June 27, 2017, Marquee emailed a bundle of loan documents to Plaintiff. 2 These documents included a deed of trust, a note secured by a deed of trust (the “Original 3 2017 Note”), a notice of right to cancel, a disclosure statement, a set of escrow 4 instructions, and a set of closing disclosures. (FAC ¶¶ 63–80.) The closing disclosures 5 indicated the loan’s purpose as “refinance.” (Id.) On June 28, 2017, Plaintiff signed all 6 the June 27, 2017 documents and initialed every page of each document not requiring a 7 signature. (FAC ¶ 82.) 8 On June 29, 2017, Marquee emailed Plaintiff a set of updated documents, and 9 requested Plaintiff to “review, print and sign” the updated documents, “confirming 10 acceptance of the vesting change.” (FAC ¶ 86.) These documents included (1) an 11 updated Note Secured by Deed of Trust (“Emailed 2017 Note,” ECF No. 33-1, at 28); 12 and a “Page 1” of an updated Deed of Trust (“Emailed 2017 Deed of Trust Page 1,” ECF 13 No. 33-1, at 26). (FAC ¶¶ 87–88.) 14 Under the Emailed 2017 Note, Plaintiff promised to make payments of the 15 principal, plus interest, to the “Lenders” named in Paragraph 1. Paragraph 5 contains a 16 “Prepayment Penalty,” which advises, “[i]f this loan is paid off or refinanced during the 17 first Six (6) month(s) of the term, a prepayment penalty equal to the difference between 18 Six (6) month(s) of interest and the date of prepayment shall be due tendered.” Paragraph 19 9, titled “Use of Proceeds,” states that “Loan Proceeds are intended to be used primarily 20 for business and commercial purposes and are not intended to be used for personal, 21 family or household purpose or in any manner which may result in the loan Transaction 22 not being exempt from Truth in Lending Act (TILA), 15 U.S.C.A. 1602(h).” 23 On June 29, 2019 Plaintiff initialed the bottom of the Emailed Deed of Trust Page 24 1, signed the Emailed 2017 Note, and sent back all of the updated documents to Marquee 25 via FedEx. (FAC ¶¶ 93–99.) Plaintiff also sent PDF versions of the updated loan 26 documents to Marquee. (FAC ¶ 100.) 27 3. Forbearance Letter and Subsequent Developments 28 1 On January 24, 2019, Marquee’s attorney emailed Plaintiff to advise him that 2 Marquee was in the process of finalizing a draft forbearance agreement. (FAC ¶ 101.) 3 On January 29, 2019, Plaintiff received the draft agreement, which stated: “Lender and 4 Marquee contend that the Loan Documents are enforceable, and that Lender can pursue 5 foreclosure; Borrower disputes such contentions.” (FAC ¶ 106.) 6 After receipt, Plaintiff noticed that the draft forbearance agreement named different 7 entities as Lenders than was stated on the Emailed 2017 Deed and the Emailed 2017 8 Note. On February 8, 2019, Plaintiff and obtained a certified copy of the deed for the 9 2017 Loan from the San Diego County Recorder (hereinafter the “Recorded 2017 10 Deed”). (FAC ¶¶ 107–108.) That deed was recorded on July 7, 2017 by Marquee, and 11 according to Plaintiff, was not the same as the Emailed 2017 Deed which he had signed 12 and returned to Marquee. (FAC ¶¶ 109.) 13 Plaintiff observes two primary differences between the two deeds. First, Plaintiff’s 14 signature, which he had affixed to the Emailed 2017 Deed of Trust Page 1, was missing 15 from the Recorded 2017 Deed. 16 Second, the Emailed 2017 Deed was made with reference to the entirety of the 17 Eads property, which, according to attachment Exhibit A, encompassed Parcels 1A, 1B, 18 2A, 2B, 3A, and 3B; the Recorded 2017 Deed, on the other hand, narrowed the property 19 conveyed to only “Parcels 1A, 1B and 2B.” (Compare ECF No. 33-1, at 26 (Emailed), 20 with ECF No. 31-3, at 50 (Recorded).) 21 Third, the lenders named in the first paragraph of the deeds were not identical, and 22 further, their stated ownership interest percentages are not the same. For example, 23 whereas in the Emailed 2017 Deed, “Jeffrey Myers and Kathleen Myers, husband and 24 wife as joint tenants,” were to obtain “an undivided 44.147% interest,” in the Recorded 25 2017 Deed, the same were to take “an undivided 44.148% interest.” (Compare ECF No. 26 33-1, at 26 (Emailed), with ECF No. 31-3, at 50 (Recorded).) Similarly, whereas in the 27 Emailed 2017 Deed, “Equity Trust Company Custodian FBO Steven M. Cobin 28 Traditional IRA” was to take “an undivided 15.823% interest,” the Recorded 2017 Deed 1 seems to have bifurcated that interest, providing instead that “Steven M Cobin and Susan 2 L. Cobin, Trustees of the Cobin Family Trust,” would take “an undivided 7.911 interest,” 3 and that the “Equity Trust Company Custodian FBO Steven M. Cobin Traditional IRA,” 4 would take the other undivided 7.911 interest. (Id.) 5 Observing these inconsistencies, Plaintiff asked Marquee to send him copies of the 6 loan documents which Plaintiff signed and returned on June 29, 2017—i.e., the emailed 7 documents. (See FAC ¶¶ 115–117 (asking Marquee to provide “the final 2017 loan 8 documents”).) On February 13, 2019, Marquee used a service called “Dropbox” to send 9 to Plaintiff documents responsive to his request. 10 According to Plaintiff, the deed Marquee sent via Dropbox was the Recorded 2017 11 Deed, not the Emailed 2017 Deed that he recalls signing. Plaintiff also alleges that the 12 escrow instructions received through Dropbox were not the ones he had signed, since the 13 Dropbox version was missing his signature. (FAC ¶ 127.) He further claims that the 14 note received through Dropbox (“Dropbox 2017 Note”) was not the same as the Emailed 15 2017 Note which he approved and signed. (FAC ¶¶ 118–119.) 16 During the course of briefing on the pending motions, the defending parties 17 produced two versions of the 2017 note. Marquee’s copy is introduced as an attachment 18 to the Declaration of Scot Fine (hereinafter the “Fine 2017 Note”). (ECF No. 30-1, at 37 19 (Decl. of Scot Fine, dated May 3, 2019).) Mr. Fine is the Chief Executive Officer of 20 Platinum Loan Servicing, Inc., the mortgage loan servicer to the 2016 and 2017 Loans. 21 (Id. at 8.) He avers that he has produced the note “as maintained within PLS’s loan 22 files.” (Id.) The Lender defendants introduced their copy of the 2017 note as an 23 attachment to the Declaration of Troy H. Slome (hereinafter the “Slome 2017 Note”). 24 (ECF No. 31-3, 61 (Decl. of Troy H. Slome, dated May 28, 2019).) 25 Notably, neither of the Defendants’ note documents are identical to the Emailed 26 2017 Note, and both are different from each other. 27 Plaintiff avers that before the official records search and receipt of the Dropbox 28 loan documents, Plaintiff had not known that the Emailed 2017 Note had been altered, 1 and that the Emailed 2017 Deed had not been recorded. On February 25, 2019, Plaintiff 2 “rescinded” the Emailed 2017 Note and the Emailed 2017 Deed because “they never 3 came into existence.” (FAC ¶ 128.) 4 B. Procedural History and Present Claims 5 Plaintiff filed his original complaint on February 26, 2019 (ECF No. 1), and 6 submitted the operative complaint, i.e., the FAC, on May 8, 2019. (ECF No. 13.) The 7 FAC alleges two causes of action against Marquee, several trustees, and a number of 8 “Lender defendants.”2 9 Plaintiff’s first cause of action articulates several TILA violations with respect to 10 his 2016 and 2017 Loans. As a definitional matter, Plaintiff contends that both loans are 11 “high cost mortgages” because they were secured by his principal dwelling and included 12 “prepayment fees” exceeding “in the aggregate, more than 2 percent of the amount 13 prepaid.” 15 U.S.C. § 1602(bb)(1)(A)(iii); § 1639(c)(1)(B). 14 Plaintiff’s substantive TILA allegations are three-fold. First, Plaintiff alleges that 15 the prepayment fees violated 15 U.S.C. § 1639(c)(1)(A), which forbids high cost 16 mortgages from including “prepayment penalties for paying all or part of the principal 17 before the date on which the principal is due.” 15 U.S.C. § 1639(c)(1)(A). Second, 18 Plaintiff alleges a violation of § 1639c(a), which imposes upon creditors the duty to make 19 a reasonable and good faith determination of the consumer’s ability to repay before 20 making a loan. Third, Plaintiff asserts that Marquee, as the loan originator, violated § 21 1639b(c)(3)(A)(i) by steering Plaintiff to a residential mortgage loan which he lacked a 22 reasonable ability to repay. For these TILA violations, Plaintiff seeks damages in 23 accordance with §§ 1639b and 1640. 24 Plaintiff’s second cause of action is styled as a declaratory judgment claim, but in 25 effect is also a request for rescission. Plaintiff seeks a declaration that the Recorded 2017 26

27 2 The Lender defendants appear to encompass several entities which were named as Lender in the 28 1 Deed and the Dropbox 2017 Note are void and with no effect. He also seeks a Court 2 order to reconvey the Eads property back to the family trust. 3 Marquee filed a motion to dismiss the TILA claims against it. (ECF No. 30.) The 4 Lender defendants filed a motion to dismiss both the TILA and declaratory judgment 5 claims. (ECF No. 31.) The Court will address sufficiency of the TILA claims first, and 6 then turn to the declaratory judgment claim. 7 II. Rule 12(b)(6) Standard 8 A Rule 12(b)(6) motion attacks the complaint as not containing sufficient factual 9 allegations to state a claim for relief. “To survive a motion to dismiss [under Rule 10 12(b)(6)], a complaint must contain sufficient factual matter, accepted as true, to ‘state a 11 claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) 12 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). In this respect, 13 “[d]ismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a 14 cognizable legal theory or sufficient facts to support a cognizable legal theory.” 15 Mendiondo v. Centinela Hosp Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). 16 While “detailed factual allegations” are unnecessary, the complaint must allege 17 more than “[t]hreadbare recitals of the elements of a cause of action, supported by mere 18 conclusory statements.” Iqbal, 556 U.S. at 678. “In sum, for a complaint to survive a 19 motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from 20 that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” 21 Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). 22 “Generally, a court may not consider material beyond the complaint in ruling on a 23 Fed. R. Civ. P. 12(b)(6) motion.” Intri-Plex Techs., Inc. v. Crest Grp., Inc., 499 F.3d 24 1048, 1052 (9th Cir. 2007). A court normally must convert a Rule 12(b)(6) motion into a 25 Rule 56 motion for summary judgment if it “considers evidence outside the pleadings . . . 26 A court may, however, consider certain materials—documents attached to the complaint, 27 documents incorporated by reference in the complaint, or matters of judicial notice— 28 1 without converting the motion to dismiss into a motion for summary judgment.” United 2 States v. Ritchie, 342 F.3d 903, 907–08 (9th Cir. 2003). 3 All the documents referred to in this case are cognizable by the Court upon a Rule 4 12(b)(6) challenge. The documents attached to Plaintiff’s opposition brief were 5 incorporated by reference in his FAC. The Court may thus consider them. See, e.g., 6 Mulinix v. Unifund CCR Partners, No. 07-1629DMS, 2008 WL 2001747 (S.D. Cal. May 7 5, 2008) (“A complaint is deemed to include materials incorporated by reference and 8 documents that, although not incorporated by reference, are ‘integral’ to the complaint.”). 9 Defendants’ materials are also appropriately subject to notice. For one, their proffered 10 deeds and notes are incorporated by reference in Plaintiff’s FAC, and are integral to 11 Plaintiff’s claim that they have been improperly altered. Furthermore, they are 12 independently judicially noticeable. See, e.g., Fimbres v. Chapel Mort. Corp., No. 09- 13 CV-0886-IEG (POR), 2009 WL 4163332, at *3 (S.D. Cal. Nov. 20, 2009) (taking judicial 14 notice of deed of trust). 15 III. Statutory Context and Plaintiff’s Claims 16 A. Dodd-Frank amendments to TILA 17 In 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer 18 Protection Act (“Dodd-Frank”), Pub. L. No. 111–203, 24 Stat. 1376 (2010), to amend 19 several sections of the Truth in Lending Act, 15 U.S.C. § 1601.3 Dodd-Frank was passed 20 “in response to a ‘financial crisis that nearly crippled the U.S. economy,’” which 21 Congress attributed “the simple failure of federal regulators to stop abusive lending, 22 particularly unsustainable home mortgage lending.’” Lusnak v. Bank of America, N.A., 23 883 F.3d 1185, 1189 (9th Cir. 2018) (quoting S. Rep. No. 111-176, at 2, 15 (2010)). 24 “Dodd-Frank brought about a ‘sea change’ in the law, affecting nearly every corner of the 25

26 3 See, e.g., Arizmendi v. Wells Fargo Bank, N.A., No. 117CV01485LJOSKO, 2018 WL 3219383, 27 at *4 (E.D. Cal. June 29, 2018). 28 1 nation’s financial markets.’” Id. (quoting Loan Syndications & Trading Ass’n v. S.E.C., 2 818 F.3d 716, 718 (D.C. Cir. 2016)). 3 As a result, residential mortgage lending practices were placed under increased 4 scrutiny pursuant to Title XIV of Dodd-Frank. These new requirements, now found in 5 relevant part, at 15 U.S.C. §§1639, 1639b and 1939c, provide “for the imposition of 6 additional standards in the mortgage lending industry.” Megino v. Linear Fin., No. 2:09- 7 CV-00370-KJD, 2011 WL 53086, at *8 n.1 (D. Nev. Jan. 6, 2011). Consistent with the 8 teleological thrust of Dodd-Frank, these sections were instituted with the explicit 9 Congressional purpose “to assure that consumers are offered and receive residential 10 mortgage loans on terms that reasonably reflect their ability to repay the loans and are 11 understandable and not unfair, deceptive or abusive.” 15 U.S.C. § 1639b(a)(2) 12 (referencing §§ 1639b, 1639c). 13 B. Plaintiff’s Ability-to-Repay Claims 14 Section 1639c(a)(1) states the general duty invoked by Plaintiff with respect to his 15 ability-to-repay claims: 16 In accordance with regulations prescribed by the Bureau [i.e., the Consumer Finance Protection Bureau (CFPB)], no creditor may make a residential mortgage loan unless 17 the creditor makes a reasonable and good faith determination based on verified and 18 documented information that, at the time the loan is consummated, the consumer has a reasonable ability to repay the loan, according to its terms, and all applicable taxes, 19 insurance . . . , and assessments. 20 15 U.S.C. § 1639c(a)(1). Subparagraph (a)(3) further provides that the determination 21 “shall include consideration” of the following factors: 22 [T]he consumer’s credit history, current income, expected income the consumer is 23 reasonably assured of receiving, current obligations, debt-to-income ratio or the 24 residual income the consumer will have after paying non-mortgage debt and mortgage-related obligations, employment status, and other financial resources other 25 than the consumer’s equity in the dwelling or real property that secures repayment 26 of the loan.

27 15 U.S.C. § 1639c(a)(3). 28 1 Plaintiff asserts that Marquee, as a loan originator pursuant to 15 U.S.C. § 1602(g), 2 and the Lender defendants, as creditors pursuant to 15 U.S.C. § 1602(dd)(2), violated § 3 1639c(a)(1) because they did nothing to qualify him for his 2016 and 2017 loans to 4 ensure that he had an ability to repay. He also pleads that Marquee violated § 5 1639b(c)(3)(A)(i) when it steered him toward residential mortgage loans which he lacked 6 a reasonable ability to repay. See 15 U.S.C. § 1639b(c)(3)(A)(i) (“The Bureau shall 7 prescribe regulations to prohibit . . . mortgage originators from steering any consumer to 8 a residential mortgage loan that . . . the consumer lacks a reasonable ability to repay . . . 9 .”). 10 C. Plaintiff’s Prepayment Penalty Claims 11 Under Dodd-Frank, TILA prohibits a “high-cost mortgage” from “contain[ing] 12 terms which a consumer must pay a prepayment penalty for paying all or part of the 13 principal before the date on which the principal is due.” 15 U.S.C. § 1639(c)(1)(A); see 14 also 12 C.F.R. 1026.34 (CFPB regulations). A “high-cost mortgage” is defined under 15 15 U.S.C. § 1602(bb)(1)(A) as “a consumer credit transaction that is secured by the 16 consumer’s principal dwelling.” 17 Plaintiff contends that both his 2016 and 2017 Loans were high-cost mortgages 18 because in each instance, “the credit transaction documents permit[ted] the creditor to 19 charge or collect prepayment fees or penalties more than 36 months after the transaction 20 closing or such fees or penalties exceed, in the aggregate, more than 2 percent of the 21 amount prepaid.” 15 U.S.C. § 1602(bb)(1)(A)(iii). He further avers that each loan 22 contained prepayment penalties as defined by § 1639(c)(1)(B) (“Construction: . . . any 23 method of computing a refund of unearned scheduled interest is a prepayment penalty if 24 it is less favorable to the consumer than the actuarial method . . . .”).4 Thus, Plaintiff 25

26 4 Plaintiff alleges that the 2016 Note included a prepayment provision in which he “agree[d] to 27 pay a prepenalty computed as follows: In lieu of a Prepayment Penalty Borrower agrees to pay the Lender a Minimum of 90 days Interest from the day of this loans funding.” (FAC ¶ 47.) The 2017 28 1 argues that defendants are liable for issuing him a high-cost mortgage with a prepayment 2 penalty in contravention of 15 U.S.C. § 1639(c)(1)(A). 3 IV. Cause of Action 1: TILA Claims 4 Both Marquee and the Lender defendants have submitted motions to dismiss 5 Plaintiff’s claims under TILA. While Defendants raise a plethora of arguments, there are 6 certain items which have not been disputed. Marquee does not dispute that it is a “loan 7 originator” as defined by TILA; similarly, the Lender defendants do not deny that they 8 are “creditors.” Further, Defendants do not quarrel with Plaintiff’s assessment that the 9 2016 and 2017 Loans contained prepayment penalties, nor have they challenged 10 Plaintiff’s characterization of the same as “high-cost mortgages.” 11 A. Overview of Arguments for Dismissal 12 Marquee presents three primary defenses in its motion to dismiss. (ECF No. 30.) 13 First, it contends that TILA’s wrongful mortgage lender steering provision, 15 U.S.C. § 14 1639b(c)(3)(A)(i), cannot support a cause of action because the CFPB never issued 15 regulations implementing the statute. Second, even assuming the viability of any such 16 cause of action, Marquee asserts that the 2017 Loan was a commercial business loan, 17 which is not subject to the anti-steering rule for residential mortgages. Third, Marquee 18 argues that Plaintiff failed to plead that his loans did not fall within the temporary or 19 bridge loan exception, 15 U.S.C. § 1639c(a)(8) (providing an exception for “temporary or 20 bridge loan[s] with a term of 12 months or less”). 21 The Lender defendants raise a number of points, two of which merit discussion 22 here.5 (ECF No. 31.) The Lender defendants’ first contention is that Plaintiff’s TILA 23 claims are time-barred and not subject to equitable tolling. Like Marquee, the Lender 24 25 refinanced during the first Six (6) month(s) of the term, a prepayment penalty equal to the difference 26 between Six (6) month(s) of interest and the date of prepayment shall be due tendered.” (FAC ¶ 96.)

27 5 Three of the Lender defendants’ arguments are so sparsely briefed that they may be considered waived. Out of an abundance of caution, however, the Court will address the balance of those 28 1 defendants also argue that Plaintiff’s loans were exempt from the ability to repay rule 2 because both the 2016 and 2017 loans were temporary or bridge loans. 3 The Court will address the Defendants’ arguments below. 4 A. Statute of Limitations 5 The Lender defendants argue that all of Plaintiff’s TILA allegations are time- 6 barred under 15 U.S.C. § 1640(e). Under their reading of of the statute, § 1640(e) 7 established a one-year limitations period for any action for damages under TILA, 8 commencing from the time the loan documents were signed. (ECF No. 31-2, at 10–11, 9 citing Carillo v. Countrywide Home Loans, No. 09CV2676 DMS (WVG), 2010 WL 10 1904883, *2 (S.D. Cal. 2010).) The Lender defendants contend that because the loan 11 documents at issue were signed in 2016 and 2017, and the action was not filed until 12 February of 2019, Plaintiff’s suit must be barred for untimeliness. 13 Plaintiff objects that the Lender defendants have selectively quoted from § 1640(e) 14 and relied on outdated caselaw to arrive at the one-year limitations period. Plaintiff 15 insists that he is timely under an exception to the one-year limitations period established 16 by Dodd-Frank. 17 Despite the fact that Plaintiff is proceeding without legal counsel, it is Plaintiff 18 who is correct on the law. Section 1640(e) provides as follows: 19 Except as provided in the subsequent sentence, any action under this section may be 20 brought in any United States district court, or in any other court of competent 21 jurisdiction, within one year from the date of the occurrence of the violation. . . . Any action under this section with respect to any violation of section 1639, 1639b, 22 or 1639c of this title may be brought in any United States district court, or in any 23 other court of competent jurisdiction, before the end of the 3-year period beginning on the date of the occurrence of the violation. 24 15 U.S.C. § 1640(e) (emphasis added). 25 Because Plaintiff asserts violations of §§ 1639(c), 1639b, and 1639c, his claims fall 26 within the three-year exception stated in the second sentence of the above quoted text. 27 See Carlos v. Beneficial Fin. I Inc., No. 17 C 1341, 2017 WL 5593317, at *4 (N.D. Ill. 28 1 Nov. 21, 2017) (discussing how “most of TILA is governed by a one-year statute of 2 limitations,” with the exception of the Dodd-Frank amendments, which are subject to a 3 three-year limitations period (quoting Prescott v. PHH Mortg. Corp., No. 16 C 288, 2017 4 WL 510449, at *4 (E.D. Va. Feb. 7, 2017)). The Lender defendants, who, over Plaintiff’s 5 vehement protestations, made much ado about caselaw construing a now-defunct version 6 of § 1640(e), are advised to refrain from cherry-picking favorable statutes of limitations 7 from outdated authorities.6 8 Plaintiff’s 2019 suit, alleging violations with respect to loans issued in 2016 and 9 2017, are timely pursuant to the three-year limitations period. 10 B. Bridge Loan Exception to the Ability to Repay Rule 11 Both Marquee and the Lender defendants make arguments predicated on 15 U.S.C. 12 § 1639c(a)(8). Subsection (a)(8) states that: 13 This subsection shall not apply with respect to any reverse mortgage or temporary or bridge loan with a term of 12 months or less, including to any loan to purchase a 14 new dwelling where the consumer plans to sell a different dwelling within 12 15 months. 16 15 U.S.C. § 1639c(a)(8). 17 1. Marquee 18 Marquee’s argument as to this subsection is easily dismissed. Marquee argues that 19 Plaintiff’s § 1639b claim (for wrongful mortgage originator steering) is subject to the 20 exception under § 1639c(a)(8) because Plaintiff did not allege that the 2016 and 2017 21 Loans were not temporary or bridge loans. (ECF No. 30-1, at 6.) This argument fails on 22 two grounds. First, the Court is not convinced that the temporary and bridge loan 23 exception applies to claims brought pursuant to § 1639b. Indeed, the statutory text 24 instructs that § 1639c(a)(8) applies to “[t]his subsection,” i.e., § 1639c(a). Second, even 25 assuming arguendo that the exception applies to a different section of the statute, i.e., § 26 27 6 The Lender defendants’ support for a 1 year limitations period, i.e., Carillo, 2010 WL 1904883, and Skrabe v. U.S. Bank, N.A., No. C10-03230 HRL, 2012 WL 6019586, *3 (N.D. Cal. 2012), both 28 1 1639b, Marquee’s argument belies a fundamental misunderstanding of what is required to 2 survive a motion to dismiss. Rule 12(b)(6) does not impose upon plaintiffs an obligation 3 to aver in the negative as to every exception to a statutory cause of action. 4 2. The Lender defendants 5 The Lender defendants’ arguments are slightly more compelling. They argue that 6 judicially-noticeable documents prove that the 2017 Loan7 was a “temporary or bridge 7 loan with a term of 12 months or less,” and that Plaintiff’s § 1639c(a) claims are legally 8 untenable as a result. (ECF No. 31-2, at 19.) Specifically, the Lender defendants contend 9 that the 2017 Note provides irrefutable evidence of a 12 month loan term. For this 10 proposition, they direct the Court to their version of the 2017 Note, i.e., the Slome 2017 11 Note. (ECF No. 31-3, 61.) The Lender defendants do not explain how they derive a 12 12 month loan term from the Slome 2017 Note, explaining only through Mr. Slome’s 13 declaration that their version of the note has “a one year term maturing on July 8, 2018.” 14 (ECF No. 31-3, at 2.) 15 Plaintiff disagrees that the 2017 Loan had a 12 month loan term. Although 16 Plaintiff does not concede its authenticity, Plaintiff urges that the plain terms of the 17 Slome 2017 Note belies the Lender defendants’ assertion of a 12 month loan term. 18 According to Plaintiff, the operative dates are June 27, 2017 (the date listed at the top of 19 the Slome 2017 Note) and July 8, 2018 (the date listed as the Payment Due Date), making 20 the loan term greater than 12 months. (ECF No. 34, at 6.) 21 At this juncture, the Court is not prepared to find that the Lender defendants have 22 demonstrated through judicially-noticeable documents the loan term for the 2017 Loan. 23 First, Lender defendants have not explained what about their note evinces a loan term of 24 12 months or less, or why Plaintiff’s proffered term, running from June 27, 2017 to July 25 8, 2018, is not the correct loan term. Indeed, they do not address Plaintiff’s contentions 26

27 7 The Lender defendants do not argue in their motion to dismiss that the 2016 Loan fell within the 28 1 in their reply brief.8 To be sure, elements of the Slome 2017 Note are suggestive of a 12 2 month loan term: Paragraph 2, “Interest,” states that interest commences on July 7, 2017, 3 and Paragraph 3, “Payments” states that July 8, 2018 is both the “Payment Start Date[]” 4 and the “Due Date” for the Note. (ECF No. 31-3, at 61.) But, without any explanation 5 from Lender defendants as to whether and how the length of a loan term can be discerned 6 from this information, the Court will not grant dismissal under § 1639c(a)(8). 7 Second, the Court is not prepared to credit any loan term dates calculated on the 8 basis of the Slome 2017 Note. Plaintiff contends that the instruments produced by the 9 Defendants in this case are inconsistent with, or altered versions of, the loan documents 10 he signed and approved in July of 2017. Plaintiff has pleaded that the Slome 2017 Note 11 is a void, illegitimate, and altered copy of the Emailed 2017 Note. Indeed, the two 12 versions of the Notes bear dissimilarities: as Plaintiff notes, there are different entities 13 specified as the “Lender,” those entities take interests in different percentages, and, 14 critically, the interest commencement and payment due dates are different. (Compare 15 ECF No. 33-1, at 20 (Plaintiff’s Emailed 2017 Note, interest commencing on July 5, 16 2017, due date July 6, 2018), with ECF No. 31-3, at 61 (Slome 2017 Note, interest 17 commencing on July 7, 2017, due date July 8, 2018).) And, even more disturbingly, the 18 Slome 2017 Note is also inconsistent with the version of the note produced by Marquee 19 in support of its motion to dismiss. (ECF No. 30-1, at 8, 37 (Fine 2017 Note).) 20 In light of the above, the Court will not dismiss Plaintiff’s § 1639c claims. Neither 21 motion to dismiss convinces the Court that Plaintiff’s claims should be barred as a 22 temporary or bridge loan pursuant to § 1639c(a)(8). 23 C. Lack of CFPB Regulations Construing § 1639b(c)(3)(A)(i) 24 25 26 27 8 To be precise, Lender defendants allude in their introductory paragraphs about a later argument as to the length of the loan term, but never briefed the issue in the body of their reply brief. (ECF No. 35, 28 1 The Court next turns to Marquee’s defense to Plaintiff’s wrongful mortgage 2 originator steering claim pursuant to 15 U.S.C. § 1639b(c)(3)(A)(i). (ECF No. 30-1, at 3 4–6.) That provision states: 4

5 (3) Regulations

6 The Bureau shall prescribe regulations to prohibit— 7 (A) Mortgage originators from steering any consumer to a residential 8 mortgage loan that— 9 (i) The consumer lacks a reasonable ability to repay . . . . 10 15 U.S.C. § 1639b(c)(3)(A)(i). 11 Marquee contends that Plaintiff has no cause of action because CFPB, i.e., the 12 “Bureau” charged with implementing the Dodd-Frank amendments to TILA, has not 13 promulgated any regulations to prohibit the conduct prescribed by § 1639b(c)(3)(A)(i). 14 Plaintiff counters that he has a right to sue under TILA directly, with or without 15 additional implementing regulations. To the extent that CFPB regulations are a necessary 16 predicate to suit, Plaintiff argues in the alternative that CFPB has exceeded its authority 17 by failing to implement § 1639b(c)(3)(A)(i) before the deadline specified by Dodd-Frank. 18 Because the parties’ contentions revolve around the relationship between TILA, 19 Dodd-Frank, and the CFPB, the Court provides a brief overview of the regulatory 20 background. 21 1. Regulatory Background 22 “Historically, Regulation Z of the Board of Governors of the Federal Reserve 23 System (Board), 12 CFR part 226, has implemented TILA.” Fowler v. U.S. Bank, Nat. 24 Ass’n, 2 F. Supp. 3d 965, 976 (S.D. Tex. 2014) (quoting Truth in Lending (Regulation Z), 25 76 Fed. Reg. 79768, 79768 (Dec. 22, 2011)). “[T]he Dodd-Frank Act transferred rule 26 making authority for TILA to the CFPB, effective July 21, 2011.” Id. at 977 (quotation 27 28 1 marks, citation, and alterations in the original omitted) (citing Designated Transfer Date, 2 75 Fed. Reg. 57252 (Sept. 20, 2010)). 3 In 2012, the CFPB proposed rules to implement § 1639b. After a notice and 4 comment period, the CFPB promulgated its final rules on January 20, 2013. The final 5 rules codified the regulations at 12 C.F.R. § 1026 et seq. and prescribed an effective date 6 of January 10, 2014. Id. To provide guidance, the CFPB issued “Official 7 Interpretations” alongside its final rules. See Loan Originator Compensation 8 Requirements Under the Truth in Lending Act (Regulation Z) (hereinafter “Official 9 Interpretation”), 78 Fed. Reg. 11280 (Feb. 15, 2013). Unlike the regulations, the CFPB 10 Official Interpretations were not subject to notice and comment. Miller v. Interstate Auto 11 Grp., Inc., No. 14-CV-116-SLC, 2015 WL 1806815, at *5 (W.D. Wis. Apr. 21, 2015) 12 (noting that CFPB’s commentary was not published to the federal register pursuant to 13 notice and comment). 14 2. No Regulation Implementing § 1639b(c)(3)(A)(i) 15 The parties agree that CFPB’s final rule construing § 1639b does not include any 16 regulations prohibiting mortgage originators from steering residential mortgagors without 17 regard to their ability to repay. Indeed, neither of the two most eligible candidates, i.e., 18 12 C.F.R. § 1026.34 (“Prohibited acts or practices in connection with high-cost 19 mortgages”), nor 12 C.F.R. § 1026.36 (“Prohibited acts or practices and certain 20 requirements for credit secured by a dwelling”), contain any such prohibition. As further 21 discussed infra, the CFPB’s decision not to issue regulations implementing § 22 1639b(c)(3)(A)(i) was deliberate. 23 3. Whether Plaintiff may sue directly under TILA, as 24 amended by Dodd-Frank, even if the CFPB did not issue 25 final rules 26 Plaintiff contends that he may sue directly under 15 U.S.C § 1639b(c)(3)(A)(i) 27 notwithstanding the absence of any implementing regulations. He also argues that Dodd- 28 Frank constrains the CFPB to effectuate the wrongful mortgage origination steering 1 provisions, and that the CFPB has exceeded its authority by failing to issue regulations by 2 the statutory deadline. 3 Marquee disagrees, insisting that no cause of action may lie against it until the 4 CFPB issues final rules. For this proposition, Marquee relies exclusively on the CFPB’s 5 Official Interpretation, 78 Fed. Reg. 11280. 6 a. The CFPB asserts that regulations are a predicate to 7 suit under TILA 8 In its Official Interpretation, the CFPB explained that it was deliberately omitting 9 from its final rule any regulation which would bear on the conduct described in “new 10 TILA section 129B(c)(3),” which includes 15 U.S.C. § 1639b(c)(3)(A): 11 12 Section 1403 of the Dodd-Frank Act also added new TILA section 129B(c)(3), which requires the Bureau to prescribe regulations to prohibit certain kinds of 13 steering, abusive or unfair lending practices, mischaracterization of credit histories 14 or appraisals, and discouraging consumers from shopping with other mortgage originators. 15 U.S.C. 1639b(c)(3). This final rule does not address those provisions. 15

16 Official Interpretation, 78 Fed. Reg. 11292 n.55. 17 The CFPB further stated its opinion that liability under § 1639b(c)(3) would not 18 trigger until the agency issued additional regulations. In other words, § 1639b(c)(3) was 19 not self-executing: 20 Because they are structured as a requirement that the Bureau prescribe regulations 21 establishing the substantive prohibitions, notwithstanding Dodd-Frank Act section 22 1400(c)(3), 15 U.S.C. 1601 note, the Bureau believes that the substantive prohibitions cannot take effect until the regulations establishing them have been 23 prescribed and taken effect. The Bureau intends to prescribe such regulations in a 24 future rulemaking. Until such time, no obligations are imposed on mortgage originators or other persons under TILA section 129B(c)(3). 25 Id. (emphasis added). Thus, if the Official Interpretation is binding, then the apparent 26 absence of any future rulemaking and resulting regulation would doom Plaintiff’s claim. 27 28 1 b. The CFPB’s interpretation is subject to Skidmore 2 deference 3 Plaintiff disputes that the CFPB’s Official Interpretations should bear on the instant 4 dispute. Plaintiff offers two reasons for rejecting the agency’s commentary: first, the 5 Official Interpretation was not issued pursuant to notice and comment, and in any event, 6 it stands in direct defiance of the timeline set by Dodd-Frank for issuing required 7 regulations. The Court agrees with Plaintiff. 8 As an initial matter, the Court agrees with Plaintiff that it need not grant especial 9 deference to the CFPB’s Official Interpretations. Unlike its regulations, the CFPB’s 10 Official Interpretations are not made pursuant to notice and comment rulemaking. This 11 renders them ineligible for Chevron deference. See Christensen v. Harris Cty., 529 U.S. 12 576, 586–87 (2000) (agency interpretations which are not arrived at after formal 13 adjudication or notice-and-comment rulemaking “lack the force of law” and do not 14 warrant Chevron deference). Instead, the CFPB’s interpretations are “entitled to respect” 15 under Skidmore, “but only to the extent that those interpretations have the power to 16 persuade.” Id. at 587 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)). In 17 accordance with the distinction drawn by the Supreme Court in Christensen, courts have 18 consistently recognized that “the CFPB’s commentary is not binding authority.” Nash v. 19 PNC Bank, N.A., No. CV TDC-16-2910, 2017 WL 1424317, at *4 (D. Md. Apr. 20, 20 2017); Barron v. EverBank, No. 1:16-CV-04595-AT-CCB, 2019 WL 1495305, at *10 21 (N.D. Ga. Feb. 7, 2019). 22 c. The CFPB’s interpretation is foreclosed by Dodd- 23 Frank 24 In footnote 55, the CFPB takes the following positions: (1) the Dodd-Frank 25 amendments at § 1639b(c)(3) have no effect unless they are promulgated as regulations, 26 and (2) the CFPB may decide when, and if at all, such regulations should issue. See 27 CFPB Official Interpretation, 78 Fed. Reg. 11292 n.55. For the following reasons, the 28 Court finds that both of these interpretations are squarely foreclosed by Dodd-Frank. 1 Recall that § 1639b originates from Title XIV of Dodd-Frank. Dodd-Frank “sets 2 outs a timetable for its effective date.” Krinsk v. SunTrust Bank, No. 8:09-CV-909-T- 3 27EAJ, 2012 WL 12906338, at *5 (M.D. Fla. Feb. 1, 2012). It specifically provides that 4 Title XIV takes effect as follows: 5 (c) REGULATIONS; EFFECTIVE DATE.— 6 (1) REGULATIONS.—The regulations required to be prescribed under this title or the amendments made by this title shall— 7 (A) be prescribed in final form before the end of the 18–month period 8 beginning on the designated transfer date; and (B) take effect not later than 12 months after the date of issuance of 9 the regulations in final form. 10 (2) EFFECTIVE DATE ESTABLISHED BY RULE.––Except as provided 11 in paragraph (3), a section, or provision thereof, of this title shall take effect 12 on the date on which the final regulations implementing such section, or provision, take effect. 13

14 (3) EFFECTIVE DATE.—A section of this title for which regulations have not been issued on the date that is 18 months after the designated transfer 15 date shall take effect on such date. 16

17 Pub. L. 111-203 § 1400(c), 124 Stat. 1376, 2136, 15 U.S.C. § 1601 Note. 18 According to § 1400(c)(1)(A) of Dodd-Frank, the CFPB was obligated to prescribe 19 regulations implementing § 1639b(c)(3) “before the end of the 18-month period 20 beginning on the designated transfer date.” Pub. L. 111-203 § 1400(c)(1)(A). Because 21 the Secretary of Treasury designated July 21, 2011 as the transfer date, this meant that the 22 CFPB was required to issue its regulations no later than January 21, 2013. See Berneike 23 v. CitiMortgage, Inc., 708 F.3d 1141, 1146 (10th Cir. 2013) (identifying the July 21, 24 2011 transfer date and calculating 18 months out to January 21, 2013).9 25

26 9 The designated transfer date is defined in Section 1062 of Dodd-Frank, and the Secretary of the 27 Treasury established July 21, 2011 as the designated transfer date pursuant to Section 1062. See Designated Transfer Date, 75 Fed. Reg. 57252-02 (Sept. 20, 2010); see also Patton v. Ocwen Loan 28 1 As noted supra, the CFPB did not implement § 1639b(c)(3) by January 21, 2013. 2 Purusant to § 1400(c)(3), the CFPB’s failure to act made the statute itself effective 3 without the aid of legislation. Section 1400(c)(3) commands that “[a] section of this title 4 [i.e., Dodd-Frank] for which regulations have not been issued on the date that is 18 5 months after the designated transfer date shall take effect on such date.” Pub. L. 111-203 6 § 1400(c)(3). The meaning of this provision is not subject to debate: “it is clear that 7 under Section 1400, the issuance of final regulations (or the passage of 18 months) 8 triggers the effective date of the statute.” Krinsk, 2012 WL 12906338, at *6. 9 Thus, pursuant to § 1400(c)(3), the CFPB’s failure to promulgate final regulations 10 by January 21, 2013 meant that 15 U.S.C § 1639b(c)(3) “automatically t[ook] effect” on 11 that date. Duncan v. LNV Corp., No. CV H-11-3797, 2012 WL 13041999, at *3 n.2 12 (S.D. Tex. July 20, 2012) (“The Bureau has not yet promulgated final regulations. It has 13 until January 21, 2013 to do so before the Dodd-Frank Act’s RESPA amendments 14 become automatically effective.”). 15 Because Dodd-Frank commands this conclusion, CFPB’s contrary interpretation of 16 the statute does not persuade. Although in issuing its Official Interpretation the CFPB 17 made a passing reference to the effective dates prescribed at § 1400(c), it decided, 18 without explanation, that “the substantive prohibitions” of Dodd-Frank “cannot take 19 effect until the regulations establishing them have been prescribed and taken effect,” and 20 that the CFPB might return to “prescribe such regulations in a future rulemaking.” CFPB 21 Official Interpretation, 78 Fed. Reg. 11292 n.55. Yet, by the time that the CFPB 22 published this commentary on February 15, 2013, the statutory deadline for final rules 23 had already elapsed, and the statute became “automatically effective” on the 18-month 24 deadline in the absence of any final regulation. Duncan, 2012 WL 13041999, at *3 n.2. 25 26

27 (noting that the “the designated transfer date” in § 1400(c) referred to the date set by the Secretary of 28 1 The CFPB was mistaken that there would be “no obligation” for mortgage 2 originators to comply with § 1639b(c)(3)(A)(i) until further rulemaking. The Court finds 3 the CFPB Official Interpretation totally deficient of any “power to persuade,” and 4 therefore “not entitled to respect.” Skidmore, 323 U.S. at 140. 5 4. Conclusion: Plaintiff may sue directly under the Dodd- 6 Frank amendments to TILA 7 Because § 1639b(c)(3)(A)(i) went into effect on January 21, 2013, the CFPB’s 8 failure to issue final regulations does not preclude Plaintiff’s claim. The Court will not 9 grant dismissal on this ground. 10 D. Residential Mortgage Loan Requirement 11 Marquee’s next argument fares no better. It posits that Plaintiff’s wrongful 12 mortgage originator steering claim fails because § 1639b(c)(3)(A) only applies to 13 “residential mortgage loan[s].” TILA defines a “residential mortgage loan” as a 14 “consumer credit transaction” secured by a “dwelling” which is “primarily for personal, 15 family, or household purposes.” 15 U.S.C. §§ 1602(dd)(5); (i). 16 According to Marquee, Plaintiff’s 2017 Loan was not a residential mortgage loan 17 because Paragraph 9 of the 2017 Note includes a statement that the loan proceeds were 18 intended primarily for business and commercial purpose, and not for personal, family, or 19 household use. (ECF No. 30-1, at 5–6.) 20 The Court does not agree. Plaintiff has alleged that the 2017 Loan was obtained 21 expressly for the purpose of refinancing the Eads property, i.e., Plaintiff’s “primary 22 residence.” (FAC ¶ 55–56.) To initiate the mortgage process, Plaintiff submitted a 23 “Uniform Residential Loan Application” to Marquee which advised that “all statements 24 made in this application are made for the purpose of obtaining a residential mortgage 25 loan.” (FAC ¶ 55; ECF No. 33, at 5.) Upon receipt of the 2017 application, Marquee 26 sent Plaintiff a bundle of loan documents, including a closing disclosure which indicated 27 that the 2017 Loan’s purpose was “refinance.” (FAC ¶ 77.) 28 1 Contrary to Marquee’s contentions, Paragraph 9 cannot stipulate away Plaintiff’s 2 well-documented assertion that his was a residential mortgage loan. As Plaintiff 3 explains, Paragraph 9 was inserted on June 29, 2017 at the insistence of a Marquee 4 representative; the Original 2017 Note which Plaintiff received on June 27, 2019 did not 5 contain this language. (ECF No. 33, at 6.) Plaintiff agreed to its addition only after the 6 Marquee representative assured him that the new verbiage was “just something 7 underwriting required at the last minute,” which would have no bearing on Plaintiff’s 8 intentions to use 96% of the loan proceeds to cover the loan’s closing costs. (Id.) 9 Moreover, Plaintiff declares under penalty of perjury that none of the 2017 Loan 10 proceeds were used for any business and commercial purpose. (Id. at 7; ECF No. 33-1, at 11 4.) 12 At the motion to dismiss stage, the Court takes Plaintiff’s well-pleaded allegations 13 as true. Marquee’s argument that Plaintiff’s 2017 Loan was not a residential mortgage 14 loan fails. 15 E. Remaining TILA arguments from the Lender defendants 16 The Lender defendants have a raised a handful of trifling points which the Court 17 will now address. Because of the perfunctory nature of Defendants’ arguments, the 18 Court’s discussion will be similarly curtailed. 19 1. Invocation of the Prepayment Penalty Provision 20 The Lender defendants assert, without authority, that the prepayment penalty 21 claims against them should be dismissed because they have never moved to enforce the 22 prepayment penalty provisions against Plaintiff. (ECF No. 31-2, at 19.) But, Plaintiff 23 correctly points out that TILA does not require the payment of prepayment penalties; it is 24 enough if the mortgage “contains terms under which a consumer must pay a prepayment 25 penalty.” 15 U.S.C. § 1639(c)(1)(A). 26 2. Bona Fide Error 27 The Lender defendants also argue that they may find safe harbor in 15 U.S.C. § 28 1640(e). However, their attempted reliance on 15 U.S.C. § 1640(e) veers sharply toward 1 frivolousness. (ECF No. 31-2, at 19.) Section 1640(e) provides safe harbor to creditors 2 for “[u]nintentional violations and bona fide errors”, such as “clerical, calculation, 3 computer malfunctioning and programing, and printing errors.” There is no ejusdem 4 generis canon capacious enough to shoehorn prepayment penalties, or the failure to 5 ascertain a reasonable ability to prepay, into the bona fide error exception. 6 3. Material Disclosures 7 Finally, the Lender defendants argue that none of the alterations to Plaintiff’s 2017 8 Loan documents were the kinds of “material disclosures” protected by TILA. (ECF No. 9 31-2, at 17.) Specifically, the Lender defendants cite King v. State of California, for the 10 proposition that it is not a material nondisclosure to withhold the identity of any given 11 creditor in a multiple creditor loan. 784 F.3d 910, 913 (9th Cir. 1986) (“[I]t is not a 12 material nondisclosure for Integrity to fail to disclose the identity of each creditor in this 13 transaction.”). 14 This argument is as misguided as the last. First, Plaintiff does not ground any of 15 his TILA claims on the alterations of the 2017 Loan documents; his TILA claims are 16 premised on the prepayment penalty provisions and the failure of the defendants to make 17 a reasonable inquiry into his ability to repay. Second, none of the TILA sections cited by 18 Plaintiff require him to plead material disclosure. While other sections of the statute do 19 have such a requirement, see, e.g., 15 U.S.C. § 1602(v) (defining “material disclosures”); 20 § 1639(a) (“Disclosures”), Plaintiff has not sought to invoke any of them. 21 F. Conclusion: TILA claims 22 Although the defendants raised many objections to Plaintiff’s TILA claims, none 23 of them were availing. Accordingly, the Court will not grant dismissal with respect to 24 Plaintiff’s first cause of action. 25 V. Cause of Action 2: Declaratory Judgment 26 Plaintiff’s second cause of action is styled as a request for declaratory relief. 27 Plaintiff seeks a determination that the alterations to the true 2017 Loan documents 28 rendered the Dropbox 2017 Note and Recorded 2017 Deed “void ab initio” and without 1 legal effect. (ECF No. 13, at 20.) He also requests “[t]he Court order full reconveyance 2 of the Property to the Family Trust.” (Id.) 3 A. The Parties’ contentions 4 The Lender defendants construe Plaintiff’s request for reconveyance as a claim for 5 rescission under TILA. (ECF No. 31-2, at 20.) They argue that TILA requires Plaintiff 6 to “allege [the] ability to tender the amount owed on the loan as a prerequisite to 7 rescission,” Lal v. American Home Servicing, 680 F. Supp. 2d 1218, 1222 (E.D. Cal. 8 2010), and that Plaintiff’s claim fails because he has not alleged any ability to tender the 9 payment due. 10 Plaintiff counters that his claim for reconveyance is not brought pursuant to TILA, 11 but rather, the common law rule voiding improperly altered deeds stated in cases like Lin 12 v. Coronado, 232 Cal. App. 4th 696 (2014). In response, the Lender defendants argue 13 that Plaintiff finds no refuge in Lin because its rule applies only where there are 14 “material” alterations. 15 B. Plaintiff’s second cause of action rests on California law, not TILA 16 17 As a preliminary matter, the Court finds that Plaintiff’s second cause of action is 18 not premised on any of the TILA violations described in his first cause of action. Instead, 19 the Court agrees with Plaintiff that his second cause of action derives from his allegations 20 that his 2017 Loan documents were altered after he signed and returned to Marquee the 21 Emailed 2017 Note and the Emailed 2017 Deed. 22 Because Plaintiff seeks rescission under the alteration theory in Lin, and not based 23 on TILA violations, Lender defendants’ argument that tender is mandatory under TILA is 24 misplaced. In any event, and as Lender defendants’ own cited authority confirms, 25 rescission under TILA does not categorically demand tender. See Yamamoto v. Bank of 26 New York, 329 F.3d 1167, 1172–73 (9th Cir. 2003) (holding that courts have the 27 discretion to require tender before permitting rescission under TILA, and that the same 28 1 “must be determined on a case-by-case basis, in light of the record adduced”). Thus, the 2 Lender defendants’ argument as to TILA tender fails. 3 C. Plaintiff need not allege tender because the deed is void 4 At same time, this determination as to TILA does not completely resolve the issue, 5 since rescission under California law also requires tender. See CAL. CIV. CODE § 1691 6 (rescission requires the moving party to “[r]estore to the other party everything of value 7 which he has receive from him under the contract or offer to restore the same upon 8 condition that the other party do otherwise”). 9 However, the duty to tender is somewhat flexible,10 and courts have recognized 10 that tender is excused when the underlying contract is void. See, e.g., Page v. Preuss, 11 226 Cal. App. 2d 494 (1964) (buyer under invalid conditional sale contract for sale of 12 truck and trailer may recover without offering to restore benefits received); Martinez v. 13 America’s Wholesale Lender, 446 F. App’x 940, 943 (9th Cir. 2011) (unpublished) 14 (holding that “the tender rule does not apply to a void, as opposed to a voidable, 15 foreclosure sale”). As relevant here, “[c]ourts have found that tender is not required 16 where the borrower attacks the validity of the underlying debt,” and where the “deed is 17 void on its face.” Kalnoki v. First Am. Tr. Servicing Sols., LLC, 8 Cal. App. 5th 23, 47 18 (2017) (citing first Stockton v. Newman, 148 Cal. App. 2d 558, 564 (1957), and then 19 Dimock v. Emerald Props., 81 Cal. App. 4th 868, 878–88 (2000)). 20 Plaintiff urges that the 2017 Loan documents are void pursuant to Lin. In Lin, the 21 California Court of Appeals examined the long-established common law rule that “when 22 a deed is altered or changed by someone other than the grantor before it is delivered or 23 recorded, and the alteration is without the grantor’s knowledge or consent, the deed is 24

25 26 10 CAL. CIV. CODE § 1693 (“A party who has received benefits by reason of a contract that is subject to rescission and who in an action or proceeding seeks relief based upon rescission shall not 27 denied relief because of a delay in restoring or in tendering restoration of such benefits before judgment unless such delay has been substantially prejudicial to the other party; but the court may make a tender 28 1 void and no title vests in the grantee or subsequent purchasers.” 232 Cal. App. 4th at 703 2 (citing 3 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 8:53, p. 8–145). To invoke the 3 rule, the alteration must be sufficiently material: “the only alterations which will affect 4 the validity of an instrument are those which are material; that is, alterations which 5 change the legal effect of the document.” Id. (quoting 3 American Law of Property (2nd 6 printing 1974) § 1285, p. 365). “The test for determining the materiality of an alteration 7 is not whether the liability of the either of the parties is increased or reduced as a result 8 but whether the instrument has the same legal effect after the alteration as it had before.” 9 Id. at 704 (quoting 30 Williston on Contracts (4th ed. 2004) § 75:12 p. 83). 10 Applying Lin, the Court concludes that Plaintiff has sufficiently alleged that the 11 Recorded 2017 Deed is void. Plaintiff alleges that several alterations were made to the 12 Emailed 2017 Deed after he signed the document, but before delivery to the grantors and 13 recordation by Marquee. Moreover, the alterations were not of a de minimis nature. The 14 Recorded 2017 Deed includes names of beneficiaries not named in the Emailed 2017 15 Deed, assigns them different ownership and interest percentages, and purports to be made 16 with respect to a different description of the Eads property.11 Each one of these 17 alterations is material on their own, since all three alterations change “the legal effect of 18 the document.” Id. 19 The Lender defendants argue that the alterations alleged by Plaintiff are 20 comparable to the ones found immaterial by the court in Lin. (ECF No. 35, at 11.) 21 However, the Court does not think any factual analogy to Lin is appropriate. 22 In Lin, the court was faced with a situation where the original deed specified a 75% 23 interest to one entity (River Forest) and 25% to another (Elevation), but also named Lin, 24 the plaintiff, “as a grantee without any stated percentage interest in the property.” Id. at 25

26 11 Recall that the Emailed 2017 Deed of Trust was made with reference to the entirety of the Eads 27 property, which, according to attachment Exhibit A thereto, encompassed Parcels 1A, 1B, 2A, 2B, 3A, and 3B; the Recorded Deed of Trust narrowed the property conveyed to only “Parcels 1A, 1B and 2B.” 28 1 675. Lin sued for reformation after discovering that the recorded deed only listed the two 2 other parties with the 75% and 25% interests as owners. In that context, the court 3 declined to find a material change because Lin never took any ownership interest under 4 the original deed. Differently put, since the original deed granted Lin 0% ownership 5 interest, her exclusion from the recorded deed affected no change in position; as a result, 6 “the alleged alteration of the deed was, as a matter of law, not material.” Id. at 703. 7 Unlike Lin, the liabilities of the parties are not static under the original and altered 8 instruments. As discussed supra, there are significant legal differences between the terms 9 of the original Emailed 2017 Deed and the altered Recorded 2017 Deed. At the risk of 10 stating the obvious, an altered deed, which names different beneficiaries, who take 11 interests differently, as to a different parcel of land, does not have “the same legal effect 12 after the alteration as it had before.” Id. Indeed, as evidenced by an unpublished 13 opinion12 by the Court of Appeals in Yanez v. Kler, alterations which modify the property 14 conveyed are material, and void the deed. No. E067499, 2018 WL 41409947, at *4–*5 15 (Cal. Ct. App. Aug. 30, 2018) (upholding under Lin the trial court’s ruling that a deed 16 was void because “Exhibit A to the grant deed,” which purported to convey a “Parcel 2,” 17 “was added to the grant deed after Yanez and his wife signed the grant deed” as to Parcel 18 1). This conclusion obtains even in this case, where the altered instrument theoretically 19 limits Plaintiff’s liability (the signed deed implicates the entirety of the Eads property but 20 the allegedly-altered deed pertains only to several of its parcels). This is because “the test 21 for determining the materiality of an alteration is not whether the liability of the either of 22 the parties is increased or reduced as a result.” Lin, 232 Cal. App. 4th at 703. 23 24 25 26 27 12 Federal courts “may consider unpublished state decisions, even though such opinions have no precedential value.” Employers Ins. of Wausau v. Granite State Ins. Co., 330 F.3d 1214, 1220 (9th Cir. 28 1 Plaintiff has sufficiently alleged that the Recorded 2017 Deed is void, and as a 2 ||result, his rescission claim is not defeated by a failure to allege tender. The Lender 3 defendants’ motion to dismiss Plaintiff's second cause of action is accordingly denied. + CONCLUSION ° No argument presented in either Marquee’s or the Lender defendants’ motions ° convince the Court that dismissal of Plaintiffs first amended complaint is warranted. ’ Both motions are hereby DENIED. [ECF Nos. 30, 31.] IT IS SO ORDERED.

1 || Dated: August 20. 2019 Casto 0h Hon. Gonzalo P. Curiel United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28