In re Hopkins, Bankruptcy No. 06-15503bif.

Citation372 B.R. 734
Decision Date22 June 2007
Docket NumberBankruptcy No. 06-15503bif.,Adversary No. 07-0114.
PartiesIn re Kellyann HOPKINS and Robert J. Hopkins, Debtor. Kellyann Hopkins and Robert J. Hopkins, Plaintiff, v. First NLC Financial Services, LLC, Litton Loan Servicing, LP, and JP Morgan Chase Bank, N.A., Defendant.
CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Eastern District of Pennsylvania

David A. Scholl, Law Office of David A. Scholl, Newtown Square, PA, for Debtors.

MEMORANDUM

BRUCE FOX, Bankruptcy Judge.

The above-captioned adversary proceeding was filed by the debtors on March 14, 2007, alleging one count under the Truth in Lending Act (TILA), 15 U.S.C. §§ 1601, et seq., against defendants First NLC Financial Services, LLC and JP Morgan Chase Bank, N.A. A second count under the Real Estate Settlement and Procedures Act (RESPA), 12 U.S.C. §§ 2601, et seq., was asserted against those two defendants as well as defendant Litton Loan Servicing, LP.

Insofar as Count I is concerned, the plaintiffs allege that defendant First NLC loaned them money on September 7, 2005, but did not provide them with certain variable rate disclosures and booklets required by 12 C.F.R. § 226.19, which failure constitutes a material violation of TILA. Complaint, 412. They also assert that First NLC failed to provide them with accurate disclosures of "certain terms of the transaction," including the correct "finance charge," which failure also gives rise to a material violation of the TILA. Id., ¶ 13. These failures were purportedly "apparent on the face of the loan documents" thereby rendering any assignee of First NLC also liable for TILA violations. Id., ¶ 14. Finally, in Count I, the plaintiffs aver that they exercised their right to rescind the loan transaction, but defendants First NLC and JP Morgan wrongfully refused to rescind the loan. Id., ¶ 15.

As for relief in Count I, the plaintiffs seek rescission of the September 2005 loan transaction, pursuant to 15 U.S.C. § 1635, as well as statutory damages under TILA, plus costs and attorneys' fees.

In Count II, the plaintiffs allege that the defendants failed to adequately respond to the plaintiffs' November 27, 2006 "qualified written request" for information regarding the mortgage transaction, purportedly violating 12 U.S.C. § 2605(e), (f), and allegedly rendering them liable for damages, as well as attorneys' fees and costs under RESPA. Complaint, ¶ 17.

On April 12, 2007, defendant First NLC filed an answer to the complaint, plus affirmative defenses, which pleading it amended on April 17, 2007. Then on April 27, 2007, First NLC filed a motion for judgment on the pleadings. On April 12, 2007, defendants JP Morgan and Litton jointly filed a motion to dismiss, asserting that the plaintiffs failed to state any claims against them. These two motions from the three defendants are presently before me.

At oral argument held on those motions, the parties all agreed that First NLC was the loan originator and original holder of the note and mortgage, JP Morgan is the loan assignee from First NLC, and Litton is simply the loan servicer. Based upon that understanding, the plaintiffs conceded that Count II should be dismissed against defendants First NLC and JP Morgan, as their RE SPA claim was applicable only to loan servicers such as Litton.1

In addition to dismissal of Count II, First NLC contends that it is also entitled to judgment on the pleadings as to Count I because Exhibit A to plaintiffs' complaint, a loan document signed by them,2 identifies the loan as involving a variable interest rate, and this document has a box checked stating that "variable rate disclosures have been provided at an earlier time." In addition, First NLC contends that the plaintiffs failed to allege in their complaint that misdisclosure of the finance charge exceeded the permissible tolerance amount; and this defendant asserts that the plaintiffs' rescission election was untimely.

Defendant JP Morgan maintains that Count I should be dismissed for failure to state a claim for the reasons articulated by First NLC, and because the loan documents attached by the plaintiffs to their complaint reveal no error on the face of the documents in the computation of the finance charge. In addition, to the extent that the plaintiffs alleged that certain charges were excessive and/or should have been included in the finance charge, JP Morgan argues that the complaint fails to state a cause of action by failing to identify which charges were improperly excluded.

Finally, defendant Litton argues that dismissal of Count II is mandated because its response to the plaintiffs' qualified written request was statutorily sufficient under RESPA.

I.

The defendants various contentions seeking dismissal of plaintiffs' two causes of action should be evaluated against the following background.

A.

The defendants have proceeded under two different provisions of Federal Rule of Civil Procedure 12 (incorporated into bankruptcy adversary proceedings by Fed. R. Bankr.P. 7012(b)), although the application of these provisions is similar. Subsection (c) of Rule 12 provides:

After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

As explained by the Third Circuit Court of Appeals, a trial court may not grant a motion for judgment on the pleadings

unless the movant clearly establishes there are no material issues of fact, and he is entitled to judgment as a matter of law.... We must view the facts presented in the pleadings and the inferences to be drawn therefrom in the light most favorable to the nonmoving party.

Sikirica v. Nationwide Insurance Co., 416 F.3d 214, 220 (3d Cir.2005); see, e.g., Hayes v. Community General Osteopathic Hosp., 940 F.2d 54, 56 (3d Cir.1991); Institute for Scientific Information, Inc. v. Gordon & Breacit, Science Publishers, Inc., 931 F.2d 1002, 1004 (3d Cir.1991); Society Hill Civic Ass'n v. Harris, 632 F.2d 1045, 1054 (3d Cir.1980). Thus, when a Rule 12(c) motion is raised by a defendant, the factual assertions made in the plaintiffs amended complaint are accepted as true, as well as reasonable inferences from those facts.

Similarly, a claim should not be dismissed for failure to state a cause of action under Rule 12(b)(6), incorporated by Federal Rule of Bankruptcy Procedure 7012(b), unless it appears beyond doubt that the plaintiff can prove no set of facts in support of that claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). A trial court must accept as true all of the well-pleaded facts alleged in the complaint and any reasonable inferences therefrom. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Gibson, 355 U.S. at 45-46, 78 S.Ct. 99.

A motion to dismiss pursuant to Rule 12(b)(6) may be granted only if, accepting all well pleaded allegations in the complaint as true, and viewing them in the light most favorable to plaintiff, plaintiff is not entitled to relief. Bartholomew v. Fischl, 782 F.2d 1148, 1152 (3d Cir.1986). "The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236[, 94 S.Ct. 1683, 40 L.Ed.2d 90] ... (1974).

In re Burlington Coat Factory Securities Litigation, 114 F.3d 1410, 1420 (3d Cir. 1997).

Thus, as defendant First NLC acknowledged, when a defendant files a Rule 12(c) motion, the appropriate standard for determination is identical to that used in deciding whether to grant a Rule 12(b)(6) motion to dismiss a complaint for failure to state a cause of action: that is, either motion can only be granted if, after accepting as true the plaintiffs' factual averments and reasonable inferences, the defendant is entitled to judgment as a matter of law. See Institute For Scientific Information, Inc. v. Gordon and Breach, Science Publishers Inc., 931 F.2d at 1004. (One technical difference between a motion under Rule 12(b)(6) and one under Rule 12(c) is the timing. The former motion must be filed before any responsive pleading, while the latter motion is filed after the close of the pleadings. See Turbe v. Government of the Virgin Islands, 938 F.2d 427, 428 (3d Cir.1991)). "In this fashion the courts hope to insure that the rights of the nonmoving party are decided as fully and fairly on a rule 12(c) motion, as if there had been a trial." Society Hill Civic Ass'n v. Harris, 632 F.2d at 1054 (quoting 5 C. Wright & A. Miller, Federal Practice and Procedure, § 1368, at 690 (1969)).

Moreover, even if a complaint is defective in failing to sufficiently plead a claim, leave to amend, rather than dismissal, may be appropriate. "[U]nless the facts alleged in the complaint clearly show that the plaintiff has no legitimate claim, courts ordinarily will allow the plaintiff leave to amend the complaint." 2 Moore's Federal Practice, § 12.34[5] at 12-77 (3d ed.1999). But where repleading could not correct the defects in a party's claim, a court should not grant leave to replead. See e.g., Alston v. Parker, 363 F.3d 229, 235 (3d Cir.2004) ("We have held that even when a plaintiff does not seek leave to amend, if a complaint is vulnerable to 12(b)(6) dismissal, a District Court must permit a curative amendment, unless an amendment would be inequitable or futile."); Peterson v. Philadelphia Stock Exchange, 717 F.Supp. 332, 337 (E.D.Pa. 1989); see generally Mosler v. M/K Ventures Intl Inc., 103 F.R.D. 385 (N.D.Il...

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