attorney Michael E. Douglas Attorney at Law
  Personal Injury Attorney
  St. Paul Workers Compensation Lawyer work comp attorney
 > About Me
   :: My Commitment
   :: Our Community
 > Legal Practice Areas
  twin cities comsumer lawPersonal Injury
   :: Traffic Accidents
   :: Medical Malpractice
   :: Social Security Disability
   :: Premises Liability
   :: Wrongful Death
   :: Dog Bite
   :: Back/Spinal/Neck Injuries
   :: Whiplash
   :: Defective Medical Devices
   :: Defective Drugs
  Minnesota Personal InjuryWorkers Compensation
  St. Paul personal injuryConsumer Law
   :: Debt Collection
   :: Repossessions
   :: Foreclosures
   :: Loan, Credit, Banking
   :: Arbitration Agreements
   :: Deception and Fraud
   :: Auto Fraud / Lemon Law
   :: Warranties
   :: Predatory Lending
 > Contact Us
   :: Contact Us

Law Offices of Michael E. Douglas
P.O. Box 251551
Woodbury, Minnesota 55125-6551

 Saint Paul Lawyer


Reck v. Town & Country Credit Corp.: US District Court : CIVIL PROCEEDURE | EQUITY - Truth In Lending Act claims not pled w/9(b) particularity; unclean hands bar other claims

Daphne Reck,
v. Civil No. 07-3756 ADM/JSM
Town & Country Credit Corporation,
Deutsche Bank National Trust Company, &
Dennis Tureson, Jr.,
John M. Tancabel, Esq., Tancabel Law Office, St. Paul, MN, argued on behalf of the Plaintiff.
Seth J.S. Leventhal, Esq., Dorsey & Whitney LLP, Minneapolis, MN, argued on behalf of the
On November 1, 2007, the undersigned United States District Judge heard oral argument
on Defendants Motion to Dismiss [Docket No. 4]. Plaintiff Daphne Reck (Reck) asserts six
counts in her Complaint [Docket No. 1]. In Count 1 she seeks declaratory judgment that her
mortgage with Town & Country Credit (TCCC) is void; in Count Two she asserts that TCCCs
violation of provisions of the Truth in Lending Act (TILA) rescinds her mortgage; in Count
Three she seeks declaratory judgment that there was no default justifying TCCCs foreclosure of
her property; in Count IV, Reck alleges that the amount of the lenders fees violated Minn. Stat.
58.137 thus requiring the Court to declare the mortgage void and award Reck damages; in
Count V, Reck seeks an accounting to determine the correct settlement amount; and, in Count
VI, Reck seeks damages for the alleged negligence of TCCCs notary Dennis Tureson, Jr.
Compl. 57-104. Reck failed to respond to TCCCs motion regarding Counts IV and V in her
1 In considering a motion to dismiss, the pleadings are construed in the light most
favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
Hamm v. Groose, 15 F.3d 110, 112 (8th Cir. 1994).
memorandum opposing TCCCs motion and at oral argument. Accordingly, Counts IV and V
have been abandoned as claims for relief. For the reasons set forth below, this Court grants
TCCCs motion to dismiss the remaining counts.
Reck and her mother Diane Reck (Diane) jointly own and reside at 1145 Case Avenue
East, St. Paul, Minnesota 55106 (legally described as Lot 22, Block 8, Hillsdale, Ramsey
County, Minnesota) (the home). Id. 4-5, 10. TCCC is a Delaware corporation with its
principal place of business in California. Id. 13. Deutsche Bank National Trust Company
(Deutsche Bank) is a foreign corporation that maintains corporate offices in California. Id.
15. Dennis Tureson, Jr. (Tureson) resides in Minnesota where he was last registered as a
notary. Id. 18.
On August 23, 2002, Reck and Diane obtained a 6,300 mortgage on their home from
Ameriquest. Id. 19; Leventhal Decl. [Docket No. 6] Ex. G. In 2003, Reck applied and was
approved for a 0,000 adjustable rate refinance mortgage from TCCC. Compl. 20-23. On
November 5, 2003, a TCCC loan officer met Reck at her place of employment so she could sign
the mortgage loan documents. Id. 26. As part of the loan transaction, TCCC sought a security
interest in the home. Id. 31. Because Reck was not the sole owner of the home, the TCCC
loan officer gave her an unsigned quit claim deed, dated November 5, 2003, that would convey
Dianes interest in the home to Reck. Id. 33. The loan officer instructed Reck to obtain her
mothers signature on the deed. Id. 43. Reck contends that she obtained Dianes signature on
the quit claim deed when she knew Diane to be incompetent and without having a notary present
to witness the signing. Id. 36, 37. Reck subsequently executed the mortgage, which listed
TCCC as the lender and Reck as the sole borrower. Mortgage (Leventhal Decl. Ex. D). On
November 5, 2003, the same day Reck signed the loan documents but before she obtained her
mothers signature on the quit claim deed, Reck signed an affidavit of title stating that she was
the sole owner of the home. Leventhal Decl. Ex. H.
Recks loan payments on the TCCC mortgage were to start on January 1, 2004. Id. Ex.
F. On June 14, 2005, after Reck missed several payments, AMC Mortgage Services contacted
her to work out a forbearance plan to collect ,000 in missed payments. Id. Ex. J. The next
day, AMC sent Reck a notice cancelling the forbearance plan because of her failure to pay
,000 by June 15, 2005. Id. The June 15 letter also informed Reck that AMC was foreclosing
her property. Id. Despite AMCs stated intent to proceed with foreclosure of the home, it
continued to attempt to work out a forbearance plan with Reck and it appears that Reck made
some mortgage payments in 2005 and early 2006. Id. Despite these efforts, on October 19,
2006, the property was sold at a sheriffs sale. Compl. 55.
On November 5, 2003, when Reck signed the TCCC mortgage documents, she also
signed a Notice of Right to Cancel. Notice of Right to Cancel (NOR) (Leventhal Decl. Ex.
I). The notice informed her of the time period within which she could exercise her right to
cancel the mortgage and the steps she needed to take to exercise that right. Id. The NOR
indicates that the final date to cancel was November 8, 2003. Id. Reck signed the NOR and
dated it November 5, 2003. Id. On August 9, 2006, nearly three years later, Reck sent a notice
of rescission to TCCC. Compl. 51.
On May 18, 2007, Reck filed suit in Ramsey County District Court asserting these
claims. On August 20, 2007, TCCC removed the action to this Court.
III. Discussion
A. Motion to Dismiss Standard
Rule 12 of the Federal Rules of Civil Procedure provides that a party may move to
dismiss a complaint for failure to state a claim upon which relief can be granted. Fed. R. Civ. P.
12(b)(6). In considering a motion to dismiss, the pleadings are construed in the light most
favorable to the nonmoving party, and the facts alleged in the complaint must be taken as true.
Hamm, 15 F.3d at 112; Ossman v. Diana Corp., 825 F. Supp. 870, 879-80 (D. Minn. 1993). Any
ambiguities concerning the sufficiency of the claims must be resolved in favor of the nonmoving
party. Ossman, 825 F. Supp. at 880. A motion to dismiss should be granted as a practical
matter . . . only in the unusual case in which the plaintiff includes allegations that show on the
face of the complaint that there is some insuperable bar to relief. Frey v. City of Herculaneum,
44 F.3d 667, 671 (8th Cir. 1995).
Under Rule 8(a) of the Federal Rules of Civil Procedure, pleadings shall contain a short
and plain statement of the claim showing that the pleader is entitled to relief. A pleading must
contain enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v.
Twombly, 127 S. Ct. 1955, 1974 (2007).
B. Count II
Because Count II is the only federal law claim asserted by Reck, and thus the basis for
federal jurisdiction, the Court begins with its analysis of that claim. In Count II, Reck contends
that her mortgage with TCCC violated provisions of TILA allowing it to now be rescinded.
Reck contends that TCCC failed to deliver two copies of the NOR and failed to deliver all
material disclosures as required under TILA, 15 U.S.C. 1635(a), and Regulation Z, 12 C.F.R.
226. Compl. 64, 65. Reck contends that because TCCC did not provide her with any NOR
or, in the alternative, the correct NOR, id. 65(g), the right to rescind extended to three years
from the date of the consummation of the loan. Id. 64-67.
TCCC contends that the doctrines of unclean hands and laches bar Reck from the
equitable remedy of rescission. TCCC contends that Reck received and signed the NOR, that her
signed acknowledgment creates a presumption of receipt, and that Reck has not alleged any basis
to overcome that presumption. Next, TCCC asserts that it provided Reck with the correct form
and that even if it hadnt, that failure does not violate TILA as a matter of law. As for Recks
contention that she did not receive all material disclosures, TCCC asserts that Recks claim
cannot survive the Twombly standard because she failed to allege how any of the disclosures she
received were inaccurate or improper.
Recks contention that she did not receive any NOR is without any support in the record.
To the contrary, TCCC has evidence Reck received and signed the NOR. Leventhal Decl. Ex. I.
Further, it appears she received the correct NOR, Form H-8. In the settlement statement signed
by Reck on November 12, 2003, she indicated that the money owed on the original mortgage
was owed to Ameriquest, not TCCC. Leventhal Decl. Ex. G. At oral argument, TCCC admitted
that Ameriquest was its corporate relative but maintained that they are distinct legal entities.
Reck has not come forward with any facts demonstrating otherwise. Accordingly, the proper
form was Form H-8, which is used for borrowers refinancing a mortgage loan with a creditor
other than the original mortgage creditor. 12 C.F.R. 226 app. H (providing Form H-8 as the
2 Diversity jurisdiction is not available in this case. Although the amount in controversy
is sufficient, there is not complete diversity among the parties.
general model rescission form and Form H-9 as the form to be used when the borrower is
refinancing with the original creditor). Because Reck was provided with the correct NOR, and
TCCC did not violate any provisions of the TILA, Reck had until November 8, 2003, three days
after executing the mortgage, to rescind. Accordingly, the notice of rescission Reck mailed to
TCCC on August 9, 2006, was not timely and Count II is dismissed.
C. Supplemental Jurisdiction
Having dismissed the only federal claim at issue in this case, the Court must decide
whether to exercise supplemental jurisdiction over Recks remaining state law claims.2 It is
within this Courts discretion to exercise supplemental jurisdiction after dismissing Recks only
federal claim. Kan. Pub. Employees Ret. Sys. v. Reimer & Koger, 77 F.3d 1063, 1067-68 (8th
Cir. 1996). In order to decide whether to exercise supplemental jurisdiction, this Court must
balance factors such as judicial economy, convenience, fairness and comity. Quinn v. Ocwen
Fed. Bank FSB, 470 F.3d 1240, 1248-49 (8th Cir. 2006).
Because the state law claims in this case do not involve complex, novel issues of law, and
because the Court is able at this point to fully resolve the claims in this case, it exercises its
supplemental jurisdiction to decide the state law claims in the interest of judicial economy and
D. Count I
In Count I, Reck seeks declaratory judgment that the deed is invalid and, consequently,
the mortgage is also invalid. Compl. 61. Reck contends that the deed is invalid because Diane
lacked capacity to assign her interest in the home to Reck. Id. Reck also seeks declaratory
judgment that the mortgage was unconscionable. Id. Despite pleading unconscionability in her
complaint, Reck failed to respond to TCCCs motion to dismiss that portion of the complaint and
thus her unconscionability argument is waived. TCCC argues the equitable doctrine of unclean
hands bars Reck from claiming the mortgage is void because Diane lacked capacity to sign the
deed. TCCC contends that because Reck affirmatively alleges having obtained a quitclaim
deed from her mother when her mother was legally incompetent, and because Reck was the
only one in a position to recognize Dianes incompetency, Reck cannot benefit from her own
misconduct. Def.s Mem. in Support of Mot. to Dismiss [Docket No. 5] at 8.
Under Minnesota law, the doctrine of unclean hands will be invoked only to deny
equitable relief to a party whose conduct has been unconscionable by reason of a bad motive or
where the result induced by that partys conduct will be unconscionable either in the benefit to
that party or in the injury to others. Foy v. Klapmeier, 992 F.2d 774, 779 (8th Cir.1993). By
her own admission, Reck obtained her mothers signature on the quit claim deed at a time when
she believed her mother to be incompetent. Allowing her to benefit by declaring the mortgage
void as a result of that conduct would be unconscionable. Accordingly, the Court concludes that
the doctrine of unclean hands bars Reck from equitable relief and grants TCCCs motion to
dismiss Count I.
3 In Count III of her Complaint, Reck incorrectly identifies Ameriquest as the lender of
the refinance mortgage.
E. Count III
In Count III, Reck seeks declaratory judgment that there was no default justifying the
foreclosure. Reck contends that TCCC3 failed to credit a payment she made under the first
forbearance agreement (Agreement I), which if credited correctly would have fully satisfied
the requirements of Agreement I. Compl. 79-81. Reck asserts that because TCCC believed
Agreement I was incomplete, it made her enter into a second agreement (Agreement II). Id.
81. Reck then asserts that TCCC forced her to enter into the third and final agreement
(Agreement III) because it believed she was not current under Agreement II. Id. 84.
Even by accepting Recks assertion that TCCC failed to properly credit a payment she
made pursuant to Agreement I, and that there was no basis for negotiating subsequent
agreements, Reck is not entitled to relief under Count III. Reck failed to meet the pleading
requirements of Twombly by failing to set forth any facts demonstrating that she did not default
under Agreement III. Indeed, Reck does not allege that she was not in default under Agreement
III, rather she simply contends that Agreement III never should have been executed. Because
Reck failed to meet the pleading requirements set forth in Rule 8(a) and Twombly, Count III is
F. Count VI
In Count VI of her Complaint, Reck contends that Defendant Dennis Tureson, Jr., was
negligent. Reck contends that Tureson had a duty to determine whether Diane was competent to
sign the quit claim deed and a duty to observe Diane actually signing the document. Compl.
101-103. Reck asserts that Tureson did not witness Diane signing the document, that if he had
fulfilled that duty he would have determined that Diane was incompetent, and that because of his
negligence, she was damaged in excess of ,000. Id. 104.
In order to prove negligence in Minnesota the plaintiff must show: (1) that the defendant
had a duty of care; (2) the defendant breached that duty; (3) the plaintiff suffered an actual
injury; and (4) that the defendants breach of duty was the proximate cause of the plaintiffs
injury. Lubbers v. Anderson, 539 N.W.2d 398, 401 (Minn. 1995). Under Minn. Stat. 395.085,
a notary is required, in witnessing or attesting a signature, to determine, either from personal
knowledge or from satisfactory evidence, that the signature is that of the person appearing before
the officer and named in the document. It appears that Tureson failed his duty to comply with
that requirement of section 395.085; however, Reck must still demonstrate that by breaching his
duty, Tureson caused the injury. Tureson had no duty to determine competency and accordingly,
even if he had witnessed or attested to Dianes signature, he was under no obligation to evaluate
her competency before allowing her to sign. Because Reck has failed to set forth any facts
demonstrating causation, Claim VI is dismissed.
Based upon the foregoing, and all of the files, records and proceedings herein, IT IS
1. Defendants Motion to Dismiss [Docket No. 4] is GRANTED; and
2. Plaintiff's Complaint is DISMISSED WITH PREJUDICE.
s/Ann D. Montgomery
Dated: January 3, 2008.


  What day were you injured?

  / /

  What caused your injuries?
Traffic/Bicycle Accident
Work-Related Injury
Wrongful Death
Dog Bite
Slip and Fall

  How have your injuries affected

  your life?


  What kinds of medical care
  professionals have you seen?


  What has your treatment cost?


  Is Insurance Involved?
My insurance may cover

Someone else's insurance
        may cover this.

I already filed a claim.
I rejected a settlement

I accepted a settlement

  Were there any witnesses?
Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report



          By visiting this page or clicking the
  "submit" button above, you agree
  that you have read and accept this   "disclaimer".
Copyright © Michael E. Douglas, Attorney at Law, Saint Paul MN. All Rights Reserved.
Minnesota Law Firm representing Personal Injury, Car / Auto Accident, Workers Compensation, Medical Malpractice, Social Security Disability claims.
Dedicated to Injured Workers, Victims of Negligence, Car Accidents, Victims of Fraud, and those in need of legal assistance.