Stephens v. Bank of Am. Home Loans, Inc.

• Decision Date: 25 January 2017
• Docket Number: No. 5:16-CV-660-F,5:16-CV-660-F
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: MARK T. STEPHENS and WENDY S. ELLIOTT f/k/a WENDY S. STEPHENS, Plaintiff, v. BANK OF AMERICA HOME LOANS, INC. (formerly COUNTRYWIDE HOME LOANS, INC.), BANK OF NEW YORK MELLON AS TRUSTEE, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., BSI FINANCIAL SERVICES and HUTCHENS LAW FIRM, Defendants.

MARK T. STEPHENS and WENDY S. ELLIOTT f/k/a WENDY S. STEPHENS, Plaintiff, v. BANK OF AMERICA HOME LOANS, INC.(formerly COUNTRYWIDE HOME LOANS, INC.),BANK OF NEW YORK MELLON AS TRUSTEE,MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.,BSI FINANCIAL SERVICES and HUTCHENS LAW FIRM, Defendants.

No. 5:16-CV-660-F

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NORTH CAROLINA WESTERN DIVISION

January 25, 2017

ORDER

This matter is before the court on the motions to dismiss filed by Bank of America, N.A. ("BANA"), Countrywide Home Loans, Inc. ("Countrywide"), Bank of New York Mellon f/k/a the Bank of New York, as successor trustee to JP Mortgage Chase Bank, N.A., as trustee on behalf of the certificate holders of the CWHEQ Inc., CWHEQ Revolving Home Equity Loan Trust, Series 2006-E ("BNY"), and Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively, "the BANA Defendants"),¹ Hutchens Law Firm ("Hutchens") and BSI Financial Services, Inc. ("BSI") (collectively, "Defendants") pursuant to Rule 12(b)(1) and Rule 12(b)(6) of the Federal Rules of Civil Procedure. [DEs 16, 25, 28]. Plaintiffs, pro se, responded. [DEs 24, 32-33]. Defendants did not reply. For the reasons stated below, Defendants' motions areallowed in part and denied in part.

I. BACKGROUND²

This matter concerns alleged federal and state law violations associated with two mortgage loans - the first consummated in 2005 and the second in 2006 - both of which were secured by a deed of trust on 998 West Durness Court, Wake Forest, North Carolina ("the property"). Compl. ¶ 2.

On August 10, 2005, Ms. Elliot executed a promissory note evidencing a loan ("the priority loan") in the amount of $154,800.00 for the benefit of Countrywide Bank, a Division of Treasury Bank, N.A., which was secured by a deed of trust on the property listing MERS as nominee for the lender and the lender's successors and assigns and recorded in the Wake CountyRegistry. BSI Mem., Ex. A [DE 29-2], Ex. B [DE 29-3 at 2-3].

Plaintiffs' priority deed of trust subsequently underwent two assignments. In particular, MERS assigned it to Bank of America, N.A., successor by merger to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP, which in turn assigned it to Wilmington Savings Fund Society, FSB, d/b/a Christiana Trust as Trustee for Ventures Trust 2013-I-H-R ("original trustee"). Id., Ex. C [DE 29-4], Ex. D [DE 29-5],

On March 10, 2006, Plaintiffs executed a home equity line of credit ("HELOC") promissory note in the amount of $20,423.00 for the benefit of Countrywide secured by a deed of trust on the property, listing MERS as nominee for the lender and the lender's successors and assigns and recorded in the Wake County Registry. Id., Ex. E [DE 29-6 at 4], Ex. F [DE 29-7]. In September 2015, MERS assigned the HELOC deed of trust to BNY. BANA Mem., Ex. E [DE 17-5],

On an unspecified date, Plaintiffs defaulted on their priority loan. Subsequently, Hutchens, on behalf of BSI, sent Ms. Elliot a pre-foreclosure notice dated April 20, 2016. Hutchens' Mem., Ex. G [DE 29-8]. At the time, the total amount past due on the priority loan was $12,264.20.³ Id. The pre-foreclosure notice advised Ms. Elliot of the required process in order to cure her default and avoid foreclosure.⁴ Id.

On July 7, 2016, Plaintiffs filed the instant action against Defendants asserting federal claims under the Truth in Lending Act, 15 U.S.C. § 1601 et seq. ("TILA"), the Home Ownership and Equity Protection Act ("HOEPA"), 15 U.S.C. § 1639 et seq., a 1994 amendment to TILAand the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq., as well as state law claims for wrongful foreclosure, fraud in the concealment, fraud in the inducement, intentional infliction of emotional distress ("IIED") and quiet title.⁵

II. STANDARD OF REVIEW⁶

To state a claim for relief, a pleading must contain "a short and plain statement of the claim showing the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A complaint must be dismissed if it does not allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). The purpose of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint, not to resolve conflicts of fact or to decide the merits of the action. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). In evaluating a 12(b)(6) motion, a court accepts all well-pled facts in the complaint as true and construes those facts in the light most favorable to the plaintiff. Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); Adcock v. Freightliner LLC, 550 F.3d 369, 374 (4th Cir. 2008). Legal conclusions, recitations of the elements of a cause of action, and bare assertions devoid of further factual enhancement do not constitute well-pled facts for Rule 12(b)(6) purposes. See Iqbal, 556 U.S. at 678.

The standard for evaluating the sufficiency of the pleading in the instant case is particularly flexible because "a document filed pro se is to be liberally construed, and a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus, 551 U.S. 89, 93 (2007) (internal citationomitted). Notwithstanding the court's obligation to liberally construe a pro se plaintiffs allegations, however, the court cannot ignore a clear failure to allege facts which set forth a claim cognizable in a federal district court. See Weller v. Dep't of Soc. Servs., 901 F.2d 387, 391 (4th Cir. 1990) ("The 'special judicial solicitude' with which a district court should view such pro se complaints does not transform the court into an advocate. Only those questions which are squarely presented to a court may properly be addressed.").

Here, Defendants seek dismissal of Plaintiffs' federal claims based in part on limitations grounds - an affirmative defense that a party typically must raise in a pleading under Fed. R. Civ. P. 8(c). An affirmative defense is not usually an appropriate basis for dismissal. Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007). However, an affirmative defense may be reached through a Rule 12(b)(6) motion as long as "all facts necessary to the affirmative defense clearly appear on the face of the complaint." Id.; see, e.g., Rice v. PNC Bank, N.A., No. PJM 10-07, 2010 U.S. Dist. LEXIS 40424 (D.Md. Apr. 26, 2010) (granting a motion to dismiss TILA claim as untimely). If the complaint does not clearly reveal the existence of a meritorious affirmative defense, it is inappropriate for the court to consider it under a Rule 12(b)(6) motion. Richmond, Fredericksburg & Potomac R.R. Co. v. Forst, 4 F.3d 244, 250 (4th Cir. 1993).

III. FEDERAL CLAIMS

Plaintiffs allege violations of and purport to assert various rights under TILA, HOEPA and RESPA. Defendants provide no substantive briefing as to these claims, arguing only that they are time-barred by the relevant statutes of limitations.

A. Violations of TILA and HOEPA (Counts Seven and Nine)

Plaintiffs allege that Defendants violated TILA and HOEPA by failing to (1) provide "material disclosures," (2) "tak[e] into account the intent of the State Legislature in approving [TILA] which was to inform home buyers of the pros and cons of adjustable rate mortgages," and (3) advise Plaintiffs "to compare similar loan products with other lenders." Compl. ¶ 123. Plaintiff seeks both damages and rescission remedies.

TILA governs the terms and conditions of consumer credit by, inter alia, requiring lenders to disclose certain details about loans and loan fees and costs. 15 U.S.C. § 1601 et seq. TILA "was subsequently amended by HOEPA, which requires lenders to make additional disclosures to borrowers of 'high-cost' or 'high-rate' loans." Cunningham v. Nationscredit Fin. Servs. Corp., 497 F.3d 714 (7th Cir. 2007) The Board of Governors of the Federal Reserve System issued Regulation Z to implement the mandates and directives of TILA, as amended by HOEPA.⁷ 12 C.F.R § 226.1(a).

1. Liability under TILA

In reviewing the sufficiency of Plaintiffs' TILA claims, the court first considers whether Defendants are subject to TILA's requirements. Liability for violations of TILA rests only with "creditors" and their "assignees." See Harris v. Option One Mortg. Corp., 261 F.R.D. 98, 105 (D.S.C. 2009); 15 U.S.C. § 1635; 15 U.S.C. § 1640; 15 U.S.C. § 1641. Under TILA, a "creditor" is defined as someone who both "(1) regularly extends . . . consumer credit which is payable by agreement in more than four installments or for which the payment of a finance charge is or may be required;" and "(2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement." 15 U.S.C. § 1602(f); see also Cetto v. LaSalle Bank Nat'l Ass'n, 518 F.3d 263, 269-72 (4th Cir. 2008). Regulation Z also defines a "creditor" as "[a] person who regularly extends consumer credit . . . , and to whom the obligation is initiallypayable, either on the face of the note or contract, or by agreement when there is no note or contract." 12 C.F.R. § 226.2(a)(17)(i) (footnote omitted).

In this case, there are no allegations in the complaint that give rise to the plausible inference that Hutchens, BSI or MERS are "creditors" within the meaning of TILA or Regulation Z. Nor are there factual allegations suggesting these defendants are or were an assignee of the loan.⁸ Indeed, numerous courts have found that MERS is neither a creditor nor assignee under TILA and this court agrees. See Slimm v. Bank of Am. Corp., No. 12-5846 (NLH/JS), 2013 U.S. Dist. LEXIS 62849, at *53 (D.N.J. May 2, 2013) (collecting cases). Without any factual allegations suggesting that these defendants are creditors or assignees within the meaning of TILA, any claims...