Girgis v. Countrywide Home Loans Inc., Case No. 1:10-CV-590

• Decision Date: 20 August 2010
• Docket Number: Case No. 1:10-CV-590
• Citation: 733 F.Supp.2d 835
• Parties: Joseph A. GIRGIS, et al., Plaintiffs, v. COUNTRYWIDE HOME LOANS, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

733 F.Supp.2d 835

Joseph A. GIRGIS, et al., Plaintiffs,

v.COUNTRYWIDE HOME LOANS, INC., et al., Defendants.

Case No. 1:10-CV-590.

United States District Court,

N.D. Ohio.

Aug. 20, 2010.

Gary Cook, Cleveland, OH, for Plaintiffs.

Barbara Friedman Yaksic, Richard A. Freshwater, McGlinchey Stafford, Cleveland, OH, for Defendants.

OPINION & ORDER

JAMES S. GWIN, District Judge:

Defendants Countrywide Home Loans, Inc. ("Countrywide") and Bank of America Corporation ("BAC") move the Court pursuant to Federal Rule of Civil Procedure 12(b)(6) to dismiss Plaintiffs Joseph and Nermine Girgis's Complaint in this putative class action alleging unlawful lending practices. [Doc. 12.] The Plaintiffs have responded. [Doc. 18.]

For the following reasons, this Court GRANTS IN PART and DENIES IN PART the Defendants' motion to dismiss.

I. Background

Plaintiffs Joseph and Nermine Girgis sue Defendants Countrywide and Bank of America, alleging that the Defendants engaged in various predatory lending and loan servicing practices targeted at unsophisticated borrowers. The case offers a near-perfect exemplar of the malady depressing our country-overextended borrowers reaching for property they cannot afford and lenders facilitating loans they should have known could never be repaid. The Girgises bring this suit as a putative class action, on behalf of themselves andall other Ohio residents for whom the Defendants originated and/or serviced loans in the past four years.

The Plaintiffs' claims arise out of mortgages the Plaintiffs obtained from Defendant Countrywide for two properties in the Miami, Florida area. [ See Doc. 1-1 at 38, 61.] With respect to the first property, 19333 Collins Ave., Apt. 808, Sunny Isles Beach, Florida, ("Unit 808"), the Plaintiff Joseph Girgis entered into two mortgage agreements dated September 19 and 20, 2006, agreeing to pay Defendant Countrywide $147,500.00 and $1,000,000.00, respectively. [Doc. 1-1 at 38, 51.] On April 13, 2007, the Girgises entered into two additional mortgage agreements to purchase 19333 Collins Ave., Apt. 1101, Sunny Isles Beach, Florida ("Unit 1101"), in the amounts of $920,000.00 and $115,00.00. [Doc. 1-1 at 61, 74.]

The Plaintiffs allege that the Defendants served as both originators and servicers of these mortgages. [Doc. 1-1 at ¶ 9.] The Plaintiffs claim that "individually and collectively" the Defendants engaged in illegal practices, including: failing to promptly post payments and assessing unwarranted late charges [Doc. 1-1 at ¶ 14]; charging numerous late fees for a single missed payment [Doc. 1-1 at ¶ 15]; charging improper fees to reinstate defaulted mortgages [Doc. 1-1 at ¶ 18]; charging un-itemized "corporate advances" that are added to loan balances [Doc. 1-1 at ¶ 17]; "force-placing" unnecessary casualty insurance on the Plaintiffs' property [Doc. 1-1 at ¶ 19]; engaging in abusive debt collection practices, including harassing the Plaintiffs, failing to properly notify them of amounts due, and failing to make required disclosures in connection with their debt collection activities [Doc. 1-1 at ¶ 21].

The Plaintiffs bring claims under the Home Ownership Equity Protection Act ("HOEPA"), 15 U.S.C. § 1639 et seq.; the Truth in Lending Act ("TILA"), 15 U.S.C. § 1602 and 12 C.F.R. § 226.2(a)(17); the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq.; the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., and the Real Estate Settlement Procedures Act of 1974 ("RESPA"), 12 U.S.C. §§ 2606 and 2614. The Plaintiffs also bring claims under Ohio law for violations of the Ohio Mortgage Brokers Act, Ohio Rev.Code § 1322.01 et seq., and for Civil RICO, for breach of fiduciary duty, for negligent and intentional misrepresentation, for civil conspiracy, for breach of contract, for fraudulent misrepresentation, for breach of the covenant of good faith and fair dealing, and for negligent and/or intentional infliction of emotional distress.

On April 20, 2010, the Defendants filed a motion to dismiss each of the Plaintiffs' claims against them pursuant to Federal Rule of Civil Procedure 12(b)(6). The Defendants allege that the Plaintiffs' Complaint lacks specific factual allegations and instead contains only legal conclusions. The Defendants say that even accepting the factual allegations in the Complaint that are adequately pleaded, all of the Plaintiffs' claims fail to state a claim upon which relief can be granted. [Doc. 12-1.] The Plaintiffs responded on June 18, 2010, arguing that their allegations are sufficient to withstand the Defendants' motion to dismiss. [Doc. 18.]

II. Legal Standard

A court may grant a motion to dismiss only when "it appears beyond doubt" that the plaintiff fails to state a claim upon which relief may be granted. Fed.R.Civ.P. 12(b)(6); Conley v. Gibson, 355 U.S. 41, 45, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim for relief that is plausible on its face.' "Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). The plausibility requirement is not a "probability requirement," but requires "more than a sheer possibility that the defendant has acted unlawfully."

Federal Rule of Civil Procedure 8 provides the general standard of pleading and only requires that a complaint "contain ... a short plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). "Rule 8 marks a notable and generous departure from the hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of discovery for a plaintiff armed with nothing more than conclusions." Iqbal, 129 S.Ct. at 1949 (citations removed).

In deciding a motion to dismiss under Rule 12(b)(6), "a court should assume the[ ] veracity" of "well-pleaded factual allegations," but need not accept a plaintiff's conclusory allegations as true. Id. at 1949-51.

III. Analysis

1. Allegations Against Bank of America

The Defendants move to dismiss all claims against Defendant Bank of America Corporation ("BAC"). They claim that the Plaintiffs make no specific factual allegations against BAC and instead are suing BAC solely in its capacity as the corporate parent of Defendant Countrywide. They argue that because parents and subsidiaries are separate entities, Countrywide's actions should not be attributed to BAC, and all claims against BAC should be dismissed. [Doc. 12-1 at 4.]

However, the Plaintiffs' Complaint alleges that BAC participated in the allegedly illegal or improper conduct at issue as a servicer of the Girgises' mortgages. In particular, the Plaintiffs provide evidence that BAC caused the "force-placed" insurance policy to be opened on the Girgises' property. [ See Doc. 1-1 at ¶ 19; pp. 83-86.] The Plaintiffs sue BAC not merely as the corporate parent of Countrywide, but as a servicer of their mortgages. BAC is therefore a proper party to this suit.

2. Plaintiffs' Claims Under the Truth in Lending Act

In 1968, Congress enacted the Truth in Lending Act ("TILA") to "promote the informed use of credit by requiring disclosures about its terms and costs." 12 C.F.R. § 226.1(b). It also "gives consumers the right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling." Id. Plaintiffs claim that Defendants violated TILA by failing to disclose certain unspecified charges, and by improperly calculating and disclosing the loans' Annual Percentage Rate, in violation of 15 U.S.C. 1632(a). [Doc. 1-1 at 23.] Plaintiffs also claim that they unilaterally rescinded their agreement with Countrywide, as authorized under 15 U.S.C. 1635, and that Defendants failed to honor their rescission. [Doc. 1-1 at 23.] Defendants argue that Plaintiffs have failed to state a claim under the Truth in Lending Act because they are barred by TILA's statute of limitations, because TILA applies only to mortgages on a consumer's principal dwelling, and because Plaintiff's complaint is not supported by sufficient factual allegations. [Doc. 12-1 at 19-21.]

i. Plaintiffs' right to rescind under TILA

TILA states that a consumer's right to unilaterally rescind applies only to credit transactions "in which a security interest ... is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended." 15 U.S.C. § 1635(a) (emphasis added). See also12 C.F.R. § 226.2(a)(11); Barrett v. JP Morgan Chase Bank, N.A., 445 F.3d 874, 875 (6th Cir.1998). In their complaint, Plaintiffs state that in each mortgage transaction at issue a security interest was taken in the Plaintiffs' principal residence. [Doc. 1-1 at ¶ 89.] While it is true that, in considering a motion to dismiss, all well-pleaded factual allegations must be taken as true, a court "need not indulge in unreasonable inferences." HMS Property Mgmt. Group Inc. v. Miller, 69 F.3d 537 (Table), 1995 WL 641308 at *3 (6th Cir. Oct. 31, 1995) ( citing Blackburn v. Fisk Univ., 443 F.2d 121, 124 (6th Cir.1971)). Furthermore, "a court may disregard allegations contradicted by facts established by exhibits and attached to the pleading." Id. ( citing Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir.1987)).

In their Complaint, the Plaintiffs state that they are citizens of Ohio, that they reside in Cuyahoga County, and that their residence is 3153 Adams Lane, Westlake, Ohio. [Doc. 1-1 at ¶¶ 3, 22-23.] The exhibits to the Complaint show that each of the relevant mortgages was secured by a condominium in Florida. [Doc. 1-1 at 38, 61.] Two of the mortgages attached to Plaintiffs' complaint refer to a "second home rider." [Doc. 1-1 at 41, 64.] Furthermore, the mortgages at issue were taken out on two separate Florida properties, and "a consumer can have only one principal dwelling at a time." Scott v. Wells Fargo...