IN RE MAROUN

427 B.R. 200

In re Edith C. MAROUN, Debtor Edith C. Maroun, Plaintiff v. The New York Mortgage Company, LLC, Fremont Investment & Loan, Litton Loan Servicing L.P., Deutsche Bank National Company as Trustee, Defendants.

Bankruptcy No. 08-13121-MWV. Adversary No. 09-1109-MWV.

United States Bankruptcy Court, D. New Hampshire.

February 11, 2010.

COPYRIGHT MATERIAL OMITTED

George Maroun, Jr., Esq., Law Office of George Maroun, Jr., for Edith C. Maroun.

Joseph A. Foster, Esq., McLane, Graf, Raulerson & Middleton, Scott Markowitz, Esq., Tarter, Krinsky & Drogin, LLP, for

Hypotheca Capital, LLC f/k/a The New York Mortgage Company, LLC.

MEMORANDUM OPINION

MARK W. VAUGHN, Chief Judge.

This matter comes before the Court on a motion for judgment on the pleadings (Ct. Doc. No. 42) pursuant to Federal Rule of Civil Procedure 12(c) filed by The New York Mortgage Company, LLC ("New York Mortgage"), and the Plaintiff's objection thereto. In the complaint, the Plaintiff seeks to rescind her mortgage and collect damages pursuant to N.H.Rev.Stat. Ann. § 358-A, 15 U.S.C. §§ 1635, 1638, and 1639, and common law claims of breach of contract, intentional misrepresentation, breach of the covenant of good faith and fair dealing, unjust enrichment, and fraud. On February 1, 2010, the Court held a hearing on the motion and took the matter under advisement.

JURISDICTION

This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. §§ 1334 and 157(a) and the "Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire," dated January 18, 1994 (DiClerico, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b). It is important to note that the Plaintiff failed to set forth the jurisdictional statement in her complaint. Neither party raised the issue of jurisdiction nor requested prior to judgment that the proceeding be declared "non-core." Consent to the treatment of this proceeding as "core" is implied from the actions of the parties. Additionally, New York Mortgage moved for a final judgment in the form of dismissal of the complaint.

BACKGROUND

In November 2006, Edith C. Maroun (the "Plaintiff") entered into a residential refinancing agreement secured by a mortgage (the "Loan and Mortgage") with Fremont Investment & Loan ("Fremont"). Fremont General Corporation¹ is the parent company of Fremont, and New York Mortgage brokered the transaction between the Plaintiff and Fremont. The Loan and Mortgage has since been assigned to Deutsche Bank National Company. At some point, the Plaintiff defaulted on her obligations under the Loan and Mortgage. Subsequently, on October 28, 2008, the Plaintiff filed her Chapter 13 petition in bankruptcy. The Plaintiff brings the current action against all of the named defendants for joint and several liability asserting that Fremont and New York Mortgage violated several state and federal laws by engaging in predatory lending, failing to provide material disclosures, misrepresenting facts, committing fraud, and breaching contracts. The Plaintiff seeks to rescind her mortgage and collect actual damages. New York Mortgage filed a motion for judgment on the pleadings requesting the Court to dismiss the complaint.

DISCUSSION

"Once a defendant files an answer, the pleadings are closed. At that time, a party may file a motion for judgment on the pleadings." Dartmouth Hitchcock Med. Ctr. v. Cross Country Travcorps, Inc., 2009 WL 2020204, *1 (D.N.H.2009) (citing Fed. R.Civ.P. 12(c)). A motion for judgment on the pleadings is considered in the same manner as a Rule 12(b)(6) motion to dismiss. Curran v. Cousins, 509 F.3d 36, 43-44 (1st Cir.2007). "Because a Rule 12(c) motion calls for an assessment of the merits of the case at an embryonic state, the court must view the facts contained in the pleadings in the light most favorable to the nonmovant and draw all reasonable inferences therefrom...." Perez-Acevedo v. Rivero-Cubano, 520 F.3d 26, 29 (1st Cir. 2008) (internal citations omitted). "Those facts may be derived from the complaint, from documents annexed to or fairly incorporated in it, and from matters susceptible to judicial notice." Warren Freedenfeld Assoc., Inc. v. McTigue, 531 F.3d 38, 44 (1st Cir.2008). Like a Rule 12(b)(6) motion to dismiss, to survive a Rule 12(c) motion, factual allegations in the complaint "must be enough to raise a right to relief above the speculative level" and cross the line between "possibility" and "plausibility" of entitlement to relief. Bell Atlantic Corp., 127 S.Ct. at 1965-66; Notinger v. Costa (In re Robotic Vision Sys., Inc.), 374 B.R. 36, 43 (Bankr.D.N.H.2007). "Determining whether a complaint states a plausible claim for relief will ... be a context-specific task that requires the ... court to draw on its judicial experience and common sense." Ashcroft v. Iqbal, ___ U.S. ___, ___, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). The focus of the inquiry is not "whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Gilbert v. Essex Group, Inc., 930 F.Supp. 683, 686 (D.N.H.1993) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).

I. Violations of the New Hampshire Consumer Protection Act

Counts I and II of the Plaintiff's complaint allege violations in conjunction with the New Hampshire Consumer Protection Act (the "CPA"). N.H.Rev.Stat. Ann. § 358-A. The CPA exempts "trade or commerce that is subject to the jurisdiction of the bank commissioner ..., the financial institutions and insurance regulators of other states, or federal banking or securities regulators who possess the authority to regulate unfair or deceptive trade practices." Id. at § 358-A:3. New York Mortgage argues that it is subject to both the New Hampshire bank commissioner under N.H.Rev.Stat. Ann. § 397-A, and regulated by the State of New York Banking Department. Thus, the exception in § 358-A:3 applies, and New York Mortgage contends the Plaintiff's claims under the CPA should be dismissed.

The Plaintiff's complaint avers that New York Mortgage brokered the transaction that is the subject of this proceeding. When New York Mortgage acts in the capacity of a mortgage broker or mortgage banker in the State of New Hampshire, it is subject to the jurisdiction of the New Hampshire bank commissioner pursuant to N.H.Rev.Stat. Ann. § 397-A:2. Section 397-A regulates mortgage bankers and mortgage brokers and protects consumers from the same practices as proscribed under the CPA. See N.H.Rev.Stat. Ann. § 397-A:2, VI. Moreover, N.H.Rev.Stat. Ann. § 383:10-d provides that the banking commissioner "shall have exclusive authority and jurisdiction to investigate conduct that is or may be an unfair or deceptive act or practice under RSA 358-A and exempt under RSA 358-A:3, I...." Thus, New York Mortgage falls within the exception under § 358-A:3, I and is exempt from claims arising under the CPA. As such, Counts I and II of the complaint are dismissed.

II. Violations of the Truth in Lending Act

In Count VII of the complaint, the Plaintiff alleges that Fremont violated the Federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq, by failing to give the Plaintiff conspicuous notice of her right to cancel the transaction, and failing to provide a TILA disclosure with an accurate estimate of the cost of credit. 15 U.S.C. § 1635; 12 C.F.R. § 226.23; 12 C.F.R. § 226.18; 12 C.F.R. § 226.19. New York Mortgage moves to dismiss Count VII, because: (1) the action is time-barred, (2) New York Mortgage is not a "creditor" as defined by TILA, and (3) the notice of right to cancel was sufficient. Because the Court agrees that New York Mortgage is not a "creditor" under TILA as set forth below, there is no need to address the merits of the other arguments.

TILA provides that:

the creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations of the Board, appropriate forms of the obligor to exercise his right to rescind any transaction subject to this section.

15 U.S.C. § 1635.

Only creditors can be liable for damages and rescission for failure to comply with TILA's terms. 15 U.S.C. § 1640. Under TILA, a "creditor" is defined as:

a person who both (1) regularly extends, whether in connection with loans, sales of property or services, or otherwise, 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. Because Fremont was the person to whom the loan obligation was initially payable, New York Mortgage cannot be a "creditor" under TILA. See Iannuzzi v. Washington Mut. Bank, 2008 WL 3978189, *7-8 (E.D.N.Y.2008) (holding that mortgage broker was not a creditor within the meaning of TILA); accord Viernes v. Executive Mortgage, Inc., 372 F.Supp.2d 576, 580-82 (D.Haw.2004); Robey-Harcourt v. Bencorp Fin. Co., 326 F.3d 1140, 1142-42 (10th Cir.2003); Wilson v. Homecomings Fin. Network, Inc., 407 F.Supp.2d 893, 896 (N.D.Ohio 2005); Noel v. Fleet Fin., 971 F.Supp. 1102, 1109 (E.D.Mich.1997). Consequently, Count VII of the complaint is dismissed.

III. Remaining Claims of the Complaint

A. Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing

Count III of the Plaintiff's complaint alleges breach of contract in connection with the Loan and Mortgage. Similarly, Count V alleges breach of the covenant of good faith and fair dealing in connection with the Loan and Mortgage. New York Mortgage...