Patrowicz v. Transamerica Homefirst, Inc.
| Citation | 359 F.Supp.2d 140 |
| Decision Date | 02 March 2005 |
| Docket Number | No. 3:04CV1362 (MRK).,3:04CV1362 (MRK). |
| Parties | Lucie Juneau PATROWICZ, Executrix of the Estate of Gertrude Philibert, Plaintiff, v. TRANSAMERICA HOMEFIRST, INC., Financial Freedom Senior Funding Corporation, Metropolitan Life Insurance Company, Defendants. |
| Court | U.S. District Court — District of Connecticut |
This lawsuit arises out of a "reverse mortgage" between Defendant Transamerica HomeFirst, Inc. ("HomeFirst"), the predecessor in interest to Defendant Financial Freedom Senior Funding Corporation ("Financial Freedom"), and Gertrude Philibert dated July 29, 1996. Under a reverse mortgage, a borrower typically receives an initial lump sum and subsequent monthly payments secured by the equity in his or her residence, and the borrower is not required to repay any principal or interest until the occurrence of a defined maturity event such as the sale of the residence or death of the borrower. The particular reverse mortgage in this case also included a deferred annuity feature, which was provided by Defendant Metropolitan Life Insurance company ("MetLife").
In her Complaint, the Executrix of Ms. Philibert's Estate (Ms. Philibert died in 2003) alleges that the terms of Ms. Philibert's reverse mortgage were unconscionable and oppressive and imposed excessive fees and charges, including, in particular, contingent interest equal to 50% of the appreciated value of her property, maturity fees of 2% of the sales price of the home, non-contingent interest of 9.950% per year and a premium for a deferred annuity that did not begin unless and until Ms. Philibert lived to beyond age 88 (she died at 87). See Complaint at First Count ¶ 16, Third Count ¶ 30, attached as Ex. A to Notice of Removal [doc. # 1]. The Complaint also asserts that Defendants sought to enrich themselves at the expense of their elderly customers by concealing material terms in the loan documents and inducing Ms. Philibert to sign the reverse mortgage through false or misleading representations. See id. at Second Count ¶¶ 18-27. Finally, the Complaint charges that Defendant Financial Freedom failed to deliver a proper release of mortgage when the reverse mortgage was paid off in 2004 and it imposed a reconveyance preparation fee of $65.00 that was not authorized by the loan documents. See id. at Third Count ¶ 32; Fourth Count ¶ 2. The Complaint alleges four causes of action: (1) breach of the covenant of good faith and fair dealing; (2) intentional misrepresentation; (3) violation of Connecticut's Unfair Trade Practices Act ("CUTPA"), Conn. Gen.Stat. § 42-110a et seq.; and (4) a violation of Connecticut's mortgage release statute, Conn. Gen.Stat. § 49-8. See generally Complaint attached as Ex. A to Notice of Removal [doc. # 1].
Presently pending before the Court are motions to dismiss by Defendants Financial Freedom and HomeFirst [doc. # 22] and Defendant MetLife [doc. # 28]. Both motions are principally based on grounds of res judicata and release, stemming from the fact that Ms. Philibert was a member of a class action that was settled by way of a final judgment entered by the Superior Court of San Mateo County, California in In re Reverse Mortgage Cases, No. 4061 (Cal. Sup.Ct. June 16, 2003), aff'd, 2004 WL 602643 (Cal.Ct.App. Mar. 26, 2004), review denied, (Cal. July 21, 2004). For the reasons stated below, the Court GRANTS MetLife's Motion to Dismiss [doc. # 28] and GRANTS IN PART and DENIES IN PART Financial Freedom's and HomeFirst's Motion to Dismiss [doc. # 22].
On a motion to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the Court should "construe the complaint in the light most favorable to the plaintiff, accepting the complaint's allegations as true." Todd v. Exxon Corp., 275 F.3d 191, 197 (2d Cir.2001). "A complaint should not be dismissed for failure to state a claim `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id. at 197-98 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
The defense of res judicata or release may be raised on a Rule 12(b)(6) motion to dismiss if "all relevant facts are shown by the court's own records." AmBase Corp. v. City Investing Co. Liquidating Trust, 326 F.3d 63, 72 (2d Cir.2003) (); see, e.g., Waldman v. Village of Kiryas Joel, 207 F.3d 105, 114 (2d Cir.2000); Conopco, Inc. v. Roll Int'l, 231 F.3d 82, 86 (2d Cir.2000); Hackett v. Storey, No. 3:03CV395 (JBA), 2003 WL 23100328 (D.Conn. Dec. 30, 2003). Moreover, in ruling on a motion to dismiss, a court is not limited to the factual allegations of the complaint but may consider "documents attached to the complaint as exhibits or incorporated in it by reference, to matters of which judicial notice may be taken or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit." Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir.1993). Therefore, in considering a res judicata defense, a court may judicially notice prior pleadings, orders, judgments, and other items appearing in the court records of prior litigation that are related to the case before the Court. See, e.g., Ambase, 326 F.3d at 72-73; Hackett, 2003 WL 23100328, at *2.
Here, Financial Freedom asks the Court pursuant to Rule 201 of the Federal Rules of Evidence to take judicial notice of the following pleadings from the Reverse Mortgage Cases: (1) the Third Consolidated Amended Complaint (the "Consolidated Complaint"); (2) the Order Certifying a Settlement Class and Approving Class Notice (the "Certification Order"); (3) the Judgment on Final Approval of Class Settlement (the "Final Judgment"); (4) the decision of the California Court of Appeal affirming the final Judgment; and (5) the California Supreme Court's decision to deny a petition for review of the Court of Appeal's decision.1 See Req. for Jud. Not in Support of Mot. to Dismiss of Def. Financial Freedom Sr. Funding Corp. (" ") [doc. # 26]. Because the requirements of Rule 201 are met, the Court will grant Financial Freedom's request and take judicial notice of the foregoing pleadings.
The pleadings reveal that the Defendants in this case were also sued regarding their reverse mortgage practices in the Reverse Mortgage Cases. The Consolidated Complaint in the Reverse Mortgage Cases, which was brought as a class action "to rectify financial abuse of the elderly," alleged that the Defendants had "issued `reverse mortgages' to capitalize upon the pressing need of the elderly for liquid funds in their old age." See Consolidated Complaint ¶ 1, attached as Ex. A to Req. for Jud. Not. [doc. # 26]. In particular, the Consolidated Complaint asserted — in language reminiscent of Plaintiff's Complaint in this case — that Defendants concealed the "high costs and excessive charges" associated with the class members' reverse mortgages, that the terms and fees of the mortgages (including contingent interest, annuity charges, maturity fees) were "unfair," "excessive" and "oppressive," that the "combined effect of all charges was not properly disclosed and made the product as a whole unfair," and that Defendants engaged in a "practice of deception" and made representations about the reverse mortgages that were "false and misleading." See, e.g., id. at ¶¶ 1, 38, 41, 44, 47, 56, 73.
After four and one-half years of litigation, the San Mateo Superior Court preliminarily approved a class settlement in the Reverse Mortgage Cases, certified a nationwide settlement class (the "Class"), approved notice to the members of the class in preparation for a fairness hearing on the settlement, and specified the procedures for opting out of the Class or objecting to the proposed settlement. See Certification Order, attached as Ex. B to Req. for Jud. Not. [doc. # 26].
The Certification Order defined the Class as follows:
1. Individuals who at any time prior to January 1, 1999 entered into a reverse mortgage loan with Transamerica HomeFirst, Inc. which charges the following fees: (1) "Contingent Interest" of 50% of the appreciation in value of the borrower's property between the date the loan was made and the date it became or becomes due; and (2) a premium for a deferred annuity acquired as part of the loan; and/or (3) a "Maturity Fee" of 2% of the value of the property as the loan's maturity....
2. Legal successors-in-interest (such as conservators, executors, administrators, or guardians) of any borrower described in paragraph 1, above; and
3. Heirs of any borrower described in paragraph 1, above, who has died and does not have a legal successor-in-interest as defined in paragraph 2, above.
See id. at *4. It is apparent from the face of the Complaint in this case — and Plaintiff does not deny it — that the Class approved by the San Mateo Superior Court included Ms. Philibert.
The Settlement Agreement and Release are attached to the Certification Order. Under the terms of the Release, members of the Class (and their heirs and successors in interest, among others) release and discharge each of the Defendants and their affiliates () from:
any and all causes of action, claims, rights, damages ... of any kind arising now or in the future out of or in connection with or related to the facts and claims alleged or asserted in any of the complaints filed in the Litigation ... whether presently known or...
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