Rowland v. Novus Financial Corp.

Decision Date17 January 1996
Docket NumberCivil No. 94-00875 ACK.
Citation949 F.Supp. 1447
PartiesJohn Lewis ROWLAND, Plaintiff, v. NOVUS FINANCIAL CORPORATION, formerly known as Sears Consumer Financial Corporation of Delaware, Defendant.
CourtHawaii Supreme Court

John Lewis Rowland, Mililani, HI, pro se.

Herman W.H. Lee, Oliver Lau Lawhn & Ogawa, Keith Y. Yamada, Oliver Lau Lawhn & Ogawa, Honolulu, HI, for defendants.


KAY, Chief Judge.


On November 17, 1994, Plaintiff John Lewis Rowland filed a complaint seeking enforcement of his Truth In Lending Act ("TILA") rescission rights. On June 30, 1995, Plaintiff filed a motion for summary judgment and on August 24, 1995, Defendant filed its opposition and cross-motion for summary judgment. On September 12, 1995, this court filed its order denying the respective motions for summary judgement.

On September 8, 1995, Plaintiff filed a final amended complaint. Defendant's motion to strike this final amended complaint was denied by Magistrate Judge Yamashita on October 10, 1995.

On October 16, 1995, the Defendant filed the instant motion to dismiss and for summary judgement. Magistrate Judge Yamashita granted the Defendant permission to file this second motion for summary judgement. On January 5, 1996, Defendant filed a Supplemental Memorandum in support of its motion for summary judgement.

The Plaintiff filed an untimely Opposition to this motion on January 4, 1996, which did not attack the motion on its merits,1 and thereafter filed his substantive Memorandum in Opposition on January 5, 1996. Defendant thereafter filed separate memoranda in reply to Plaintiff's January 4, 1996 Opposition and to Plaintiff's January 5, 1996 Opposition Memorandum. Defendant filed these memoranda on January 5, 1996, and January 8, 1996, respectively.

Plaintiff also filed a memorandum on January 8, 1996, in "reply" to Defendant's January 5, 1996, Supplemental Memorandum. In response, on January 8, 1996, Defendant filed a "Response to Plaintiff's Reply to Defendant's Supplemental Memorandum."

Defendant's Supplemental Memorandum raises two issues not previously addressed by Defendant: (1) the effect of the Plaintiff's bankruptcy on this court's jurisdiction to hear the TILA claims and (2) the September 1995 TILA amendments.2 The court will address the issue of how the pending bankruptcy impacts the court's jurisdiction to hear the case, but this order otherwise does not address the new issues raised for the first time by Defendant in its Supplemental Memorandum. Thus the court will not address the second issue raised in Defendant's Supplemental Memorandum, the September 1995 TILA Amendments.

This matter came for hearing before this court on January 9, 1996.


On June 23, 1993, Plaintiff entered into a consumer credit transaction with Preferred Financial Services secured by his principal dwelling in order to refinance his outstanding mortgages.3 That refinanced mortgage was assigned to Defendant that same day. Subsequently, on July 1, 1993, Plaintiff received two copies of a notice of the right to rescind.

In conjunction with the transaction, Plaintiff also received other loan documents including a federal disclosure statement and a settlement statement that itemized the charges of the loan. On July 14, 1993, the loan proceeds were disbursed to Plaintiff.

On November 15, 1994, Plaintiff sent Defendant a letter requesting rescission of the loan. On August 30, 1995, Plaintiff filed for Chapter 7 bankruptcy in the District of Hawaii. The Plaintiff's bankruptcy petition was not filed in this court until January 4, 1996, when it was eventually filed by Defendant.

I. Summary Judgment Standard

Summary judgment shall be granted where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). One of the principal purposes of the summary judgment procedure is to identify and dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Summary judgment must be granted against a party who fails to demonstrate facts to establish an element essential to his case where that party will bear the burden of proof of that essential element at trial. Id. at 322, 106 S.Ct. at 2552.

If the party moving for summary judgment meets its initial burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact, the nonmoving party may not rely on the mere allegations in the pleadings in order to preclude summary judgment.

T.W. Electrical Serv. v. Pacific Elec. Contractors Assoc., 809 F.2d 626, 630 (9th Cir. 1987) (citations omitted). Instead, Rule 56(e) requires that the nonmoving party set forth, by affidavit or as otherwise provided in Rule 56, "`specific facts showing that there is a genuine issue for trial.'" Id. (quoting Fed. R.Civ.P. 56(e)). At least some "`significant probative evidence tending to support the complaint'" must be produced. Id. (quoting First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968)). Legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979).

The standard for a grant of summary judgment reflects the standard governing the grant of a directed verdict. See Eisenberg v. Ins. Co. of North America, 815 F.2d 1285, 1289 (9th Cir.1987) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986)). Thus, the question is whether "reasonable minds could differ as to the import of the evidence." Id.

The Ninth Circuit has established that "[n]o longer can it be argued that any disagreement about a material issue of fact precludes the use of summary judgment." California Architectural Bldg. Products, Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, 484 U.S. 1006, 108 S.Ct. 698, 699, 98 L.Ed.2d 650 (1988). Moreover, "[w]hen the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (footnote omitted). Indeed, "if the factual context makes the non-moving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial." Franciscan Ceramics, 818 F.2d at 1468. Of course, all evidence and inferences to be drawn therefrom must be construed in the light most favorable to the nonmoving party. T.W. Elec. Services, 809 F.2d at 630-31.

II. Motion to Dismiss Standard

Under Fed.R.Civ.P. 12(b)(6), in determining whether to grant a motion to dismiss for failure to state a claim upon which relief can be granted, this Court must accept as true the plaintiff's allegations contained in the complaint and view them in a light most favorable to the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Wileman Bros. & Elliott, Inc. v. Giannini, 909 F.2d 332, 334 (9th Cir.1990); Shah v. County of Los Angeles, 797 F.2d 743, 745 (9th Cir.1986). Thus, the complaint must stand unless it appears beyond doubt that the plaintiff has alleged no facts that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir.1990). A complaint may be dismissed as a matter of law for two reasons: (1) lack of a cognizable legal theory or (2) insufficient facts under a cognizable legal theory. Balistreri, 901 F.2d at 699; Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 533-34 (9th Cir.1984).

In essence, as the Ninth Circuit has stated, "[t]he issue is not whether a plaintiff's success on the merits is likely but rather whether the claimant is entitled to proceed beyond the threshold in attempting to establish his claims." De La Cruz v. Tormey, 582 F.2d 45, 48 (9th Cir.1978), cert. denied, 441 U.S. 965, 99 S.Ct. 2416, 60 L.Ed.2d 1072 (1979). The Court must determine whether or not it appears to a certainty under existing law that no relief can be granted under any set of facts that might be proved in support of plaintiffs' claims. Id.


In a credit transaction in which a security interest is retained or acquired in a consumer's principal dwelling, that consumer shall have the right to rescind the transaction, except for certain enumerated transactions inapplicable here. See 12 C.F.R. § 226.23(a)(1). The consumer may exercise the right to rescind until midnight of the third business day following (1) consummation of the transaction, (2) delivery of the notice of the right to rescind, or (3) delivery of all material disclosures,4 whichever occurs last. See 12 C.F.R. § 226.23(a)(3). If the required notice or material disclosures are not delivered, the right to rescind shall expire three years after consummation, upon transfer of all of the consumer's interest in the property, or upon sale of the property,5 whichever occurs first. Id.; see also 15 U.S.C. § 1635(f).

In a transaction subject to rescission, a creditor shall deliver two copies of the notice of the right to rescind to each consumer entitled to rescind. See 12 C.F.R. § 226.23(b). The notice shall be on a separate document that identifies the transaction and shall clearly and conspicuously disclose several matters, including the date on...

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