King v. State of Cal.
| Decision Date | 07 March 1986 |
| Docket Number | No. 83-6427,83-6427 |
| Citation | 784 F.2d 910 |
| Parties | Gwendolyn L. KING, for herself and on Behalf of all others similarly situated, Plaintiff-Appellant, v. STATE OF CALIFORNIA, George Deukmejian, Governor; March Fong Eu, Sec'y of State; John Van De Camp, Attorney-General; Integrity Home Loan, Inc., Patrick D. McCarron, President of Integrity Home Loan, John M. Plummer, Vice-President of Integrity Home Loan, et al., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Gwendolyn L. King, Phoenix, Ariz., for plaintiff-appellant.
Henry Ullerich, James H. Karp, Volk, Newman, Gralla & Karp, Los Angeles, Cal., for defendants-appellees.
Appeal from the United States District Court for the Central District of California.
Before FARRIS, PREGERSON and NORRIS, Circuit Judges.
Gwendolyn King appeals from the district court's dismissal of her complaint with prejudice. Her action under the Truth-In-Lending Act and the Civil Rights Act alleged that Integrity Home Loan had failed to disclose the identity of the third party lenders who had loaned money to her secured by deeds of trust on her home. She also alleged that the trust deeds were void because the trustee, R & T Financial Servicing Co., Inc., lacked corporate status, and that the power of sale provisions of the California Civil Code are unconstitutional. She further alleged violations of 42 U.S.C. Sections 1981, 1982, 1983, and 1985 and slander of title by Integrity.
King's action against the State of California and its Attorney-General sought declaratory and injunctive relief that would render the actions of R & T null on the ground that R & T's corporate powers were suspended for non-payment of tax.
The district court dismissed on three alternative grounds: King failed to file an opposition to the motions to dismiss; King failed to appear at the hearing on the motions to dismiss; and King's complaint failed to state a claim. King contends that the district court erred by not granting her a continuance to respond to the motions to dismiss and by holding that she failed to state a claim.
Integrity served as a loan broker on behalf of third party lenders in a series of three loans to Gwendolyn King. Each loan was secured by a deed of trust on King's home: a second trust deed, dated January 1, 1979, secured the first loan; a third trust deed, dated March 27, 1981, secured the second loan; and a third trust deed, dated November 17, 1981 and superseding the March 27, 1981 trust deed, secured the refinancing of the March 27, 1981 obligation. R & T was designated trustee under each trust deed. The identity of the third party lenders was not disclosed.
On December 1, 1981, the corporate franchise of R & T was suspended, pursuant to California Revenue and Taxation Code Section 23301. On June 4, 1982, Integrity recorded a Substitution of Trustee, substituting P.D. McCarron for R & T as the trustee under the trust deed. Integrity thereafter executed a reconveyance deed signed by McCarron, to eliminate the refinanced March 1981 obligation.
King filed a Chapter 7 bankruptcy petition and on July 7, 1983, obtained a discharge of her debts in bankruptcy. Title to King's home remains vested in the bankruptcy trustee.
On May 23, 1983, Integrity disclosed to King the identity of the lenders in each of the disputed transactions. On May 26, 1983, King attempted to rescind under 15 U.S.C. Secs. 1635(a) and (b), and 12 C.F.R. Pt. 226. Integrity then sought to foreclose on the security interest in King's home in a trustee's sale set for September 14, 1983. King filed with the State of California a request for quo warranto proceedings under the California Code of Civil Procedure section 803 to prevent the foreclosure sale.
On September 14, 1983, King, on behalf of herself and a class of borrowers who had dealt with Integrity, filed suit in federal court against Integrity, the State, various State officials, and the third party lenders.
In October 1983, both Integrity and the State filed a motion to dismiss King's complaint for failure to state a claim. On October 18, 1983, King filed the first of two ex parte applications to continue the hearing on the motions to dismiss and to extend the time for filing a response to the motions. The court granted King an extension to October 24, 1983 to file her response. King failed to file her response by that date. On November 4, 1983, she filed a second ex parte application for a continuance. On November 7, 1983, the court held a hearing on the motion to dismiss. King did not appear. The court denied King's untimely motion for a continuance and dismissed the complaint with prejudice. King timely appeals.
King argues that the district judge abused his discretion by denying her unopposed second ex parte application for a continuance. She argues that although she did not physically appear for the motion, her filed papers constitute an "appearance." She then failed to appear for the scheduled hearing of the motion to dismiss on November 7.
We cannot conclude on this record that the district judge abused his discretion in denying the motion for continuance. For the first of these motions, the judge extended the deadline for filing papers to October 24, 1983. That deadline expired without any action by King. Faced with an ex parte motion not attended by a movant who had failed to file her response even within an extended filing schedule, the district judge denied the motion for further continuance. Under the circumstances, we can find no abuse of discretion.
Since the district judge had before him neither King as opposing party nor her opposition papers, he was empowered by Local Rules 7.6 and 7.10 to dismiss her complaint on those grounds. Because it is unclear whether the district court dismissed for failure to conform to the local rules or dismissed on the merits, in the interests of justice we review the dismissal of the federal claims as going to the merits. Such review is de novo. See Compton v. Ide, 732 F.2d 1429, 1432 (9th Cir.1984).
A dismissal for failure to state a claim will be upheld if it appears to a certainty that the plaintiff can prove no set of facts in support of her claim that would entitle her to relief. Litchfield v. Spielberg, 736 F.2d 1352, 1357 (9th Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 1753, 84 L.Ed.2d 817 (1985). The allegations of a pro se complaint will be construed liberally. Hughes v. Rowe, 449 U.S. 5, 9, 101 S.Ct. 173, 175, 66 L.Ed.2d 163 (1980) (per curiam).
King brings two sets of claims under TILA, one for rescission and one for damages for each of the three loans dated June 1979, March 1981, and November 1981.
If a lender fails to make the required material disclosures, TILA gives an obligor the right to rescind any credit transaction in which a security interest is created in the obligor's home. 15 U.S.C. Section 1635. King's claim for rescission of the June 1979 loan is barred by the three-year absolute limitation on rescission actions set out in 15 U.S.C. Sec. 1635(f). The three years begin at the "consummation of the transaction or upon the sale of the property, whichever occurs first;" the period applicable to King began in June 1979 and expired in June 1982, more than a year before she filed suit.
The loan of March 1981 cannot be rescinded, because there is nothing to rescind. King refinanced that loan in November 1981, and the deed of trust underlying the March 1981 loan has been superseded.
As for the November 1981 loan, King's claim for rescission fails, because Congress amended the TILA and Regulation Z, effective April 1, 1981, in such a way as to eliminate her cause of action for material nondisclosure. King contends that failure to disclose all third-party lenders was material nondisclosure. The amended Regulation Z did not include a general disclosure provision, but classified the disclosure requirement according to whether the credit transaction was "open-end" or "closed-end." The transaction here would qualify as closed-end, because it does not fit any of the definitions of an open-end credit transactions. See C.F.R. Sec. 226.2(20) (1985). I closed-end transactions when there are multiple creditors, only the creditor making the disclosures need be identified on the disclosure statement. Id. Sec. 226.18(a). In addition, the new Regulation Z defines the term "material disclosures" as "the required disclosures of annual percentage rate, the finance charge, the amount financed, the total of payments and the payment schedule." Id. Sec. 226.23 n. 48. Under the new regulations, therefore, the identity of each creditor in a multiple creditor transaction is not a "material disclosure." Integrity's November 1981 loan thus did not violate the new Regulation Z, and King cannot rescind.
King contends that she can recover damages from Integrity for failing to disclose the identity of the third-party lenders.
Damages are not available for the November 1981 loan for the same reason that rescission is not available. Under the amended regulations, it is not a material nondisclosure for Integrity to fail to disclose the identity of each creditor in this transaction.
The June 1979 and March 1981 loans, however, are subject to the old regulations, under which nondisclosure of the identity of a lender does give rise to civil liability. Boncyk v. Cavanaugh Motors, 673 F.2d 256, 260 (9th Cir.1981); 15 U.S.C. Sec. 1640(a). Integrity does not dispute this but contends that King's claims are barred by the one-year statute of limitations set out in 15 U.S.C. Sec. 1640(e).
Section 1640(e) provides that "[a]ny action under this section may be brought within one year from the date of the occurrance of the violation." We have not yet determined when a...
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