UNITED STATES DISTRICT COURT DISTRICT OF MASSACHUSETTS
January 19, 2011
ROBERT D. MANTZ, PLAINTIFF,
WELLS FARGO BANK, N.A., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Tauro, J.
This action arises out of a refinance loan that Defendant Option One Mortgage Corporation ("Option One") extended to Plaintiff, Robert D. Mantz, and his wife, Jamie C. Mantz, on November 11, 2006 ("the loan"). Plaintiff's Complaint alleges violations of the Truth in Lending Act ("TILA"), the Real Estate Settlement Procedures Act ("RESPA"), the Credit Repair Organizations Act ("CROA"), the Racketeer Influenced and Organizations Act ("RICO"), and fraud and misrepresentation.*fn1 Plaintiff seeks rescission pursuant to TILA; a declaration of this court that all documents used by Defendants in forming a contract with Plaintiff "be deemed null and void"; actual damages; statutory damages; punitive damages; and costs.*fn2
Presently at issue are Defendants Wells Fargo Bank, N.A. ("Wells Fargo") and American Home Mortgage Servicing Incorporated's ("AHMSI's") Motion to Dismiss [#10]; Defendant Option One's Motion to Dismiss [#18]; Plaintiff's Cross Motion for Summary Judgment against Defendants Wells Fargo and AHSMI [#13]; and Plaintiff's Cross Motion for Summary Judgment against Defendant Option One [#20]. For the following reasons, Defendants Wells Fargo and AHMSI's Motion to Dismiss is ALLOWED; Defendant Option One's Motion to Dismiss is ALLOWED; and Plaintiff's Cross-Motions for Summary Judgment are DENIED.
A. Factual Background*fn3 In 2000, Plaintiff purchased a home in Medfield, Massachusetts.*fn4 In 2006, Plaintiff had a mortgage home loan through EMC Mortgage Corporation ("EMC") with monthly payments of $2739 per month.*fn5 A 2006 licensed appraisal indicated the value of his home to be $497,500.*fn6 In 2006, at the time of the credit transaction in question, Plaintiff owed EMC $232,300 for the property, but he was unemployed and had no source of income.*fn7 The Mantzes lived on a single fixed income from Jamie Mantz's job as an ophthalmic medical technician.*fn8
On or about September 9, 2006, as part of a Chapter 13 bankruptcy plan, Plaintiff submitted a loan refinance application to Sunset Mortgage Corporation ("Sunset").*fn9 Sunset's representative, "Miss Uniacke,"*fn10 indicated that Sunset and Defendant Option One agreed that Plaintiff and his wife should increase the amount of their prior home loan mortgage by approximately $100,000.*fn11 At Sunset's direction, Plaintiff listed himself as the "co-borrower" and his wife as the "borrower."*fn12 Several documents clearly defined the Mantzes' income level and Plaintiff never tried to conceal or inflate their income level.*fn13
Plaintiff has a high school education and had indicated repeatedly to
Uniacke that he was not familiar with the procedures surrounding
refinancing.*fn14 Plaintiff told Defendants that he
was putting complete trust in them.*fn15 Defendants
never discussed or disclosed to Plaintiff the Yield Spread Premium
prior to settlement.*fn16 Defendants also never
discussed "stated income"prior to settlement and Plaintiff did not
know the meaning of the phrase "stated income"at the time that he
signed the document.*fn17 In fact, Plaintiff assumed
that he was confirming the information on the
income documents submitted with the refinance application.*fn18
To this day, Plaintiff has no knowledge of the level of
income that Defendants misrepresented on his application to make the
home loan refinance appear suitable for approval.*fn19
Settlement proceedings occurred on November 15, 2006, and Plaintiff's home loan refinance transaction was assigned credit transaction number 0022553168.*fn20 Plaintiff alleges that the documents signed on November 15, 2006 are void because they were procured through Defendants' fraud and misrepresentation.*fn21 Plaintiff further alleges that he only signed the documents because he might have lost his home if the refinance transaction did not occur.*fn22
Since November 2006, Defendant Option One has failed to supply
Plaintiff with required monthly billing statements.*fn23
In March 2007, Defendant AHMSI became the servicer of the
loan and also failed to submit any scheduled monthly billing
statements.*fn24 In addition, Plaintiff submitted many
Qualified Written Requests ("QWRs") to Defendants to request specific
information related to the true cost of the credit, but Defendants
have failed to answer the requests.*fn25
On September 18, 2008, Plaintiff sent proper notification that he was exercising his extended right-to-cancel on credit transaction number 0022553168.*fn26 On September 22, 2008, Defendants Wells Fargo and Option One received Plaintiff's notice to cancel/rescind.*fn27 To date, Defendants have received four separate letters of notification that Plaintiff has exercised his extended right-to-cancel.*fn28
Plaintiff alleges that Defendants violated their fiduciary duties to Plaintiff because it was clear that Plaintiff would not be able to sustain the monthly home loan payment.*fn29
B. Procedural Background Plaintiff filed his Complaint in this case on November 17, 2009.
Approximately a year and a half earlier, on June 27, 2008, Plaintiff and his wife filed a lawsuit against Defendant Wells Fargo in Massachusetts Superior Court, Norfolk County.*fn30
Plaintiff asserted violations of TILA and RESPA and sought rescission of the mortgage loan.*fn31
Plaintiff also alleged that Wells Fargo "participated in unscrupulous predatory home loan practices with the intent to dispossess the plaintiffs of their home and defraud them of the substantial equity therein."*fn32
In the state court case, Plaintiff refused to answer interrogatories concerning his rescission claim. Defendant Wells Fargo filed a Motion to Compel Plaintiffs to Produce Further Answers to Interrogatories,*fn33 which the Superior Court allowed.*fn34
Plaintiff never provided supplemental answers to the interrogatories, and on October 18, 2010, the Superior Court dismissed Plaintiff's case with prejudice.*fn35
A. Counts One and Two: TILA
1. Res Judicata
The doctrine of res judicata provides that federal courts must "give the same preclusive effect to state court judgments that those judgments would be given in the courts of the State from which the judgments emerged."*fn36 The elements necessary to establish res judicata and thereby preclude relitigation are "' identity of cause of action and issues,  the same parties, and  judgment on the merits by a court of competent jurisdiction.'"*fn37
Regarding the first element, the doctrine of res judicata applies to claims that derive from the "'same transaction or series of connected transactions.'"*fn38 The doctrine of res judicata applies even if a party "is prepared in a second action to present different evidence or legal theories to support his claim, or seeks different remedies."*fn39 With respect to the second element, the doctrine of res judicata may still apply even if the parties in the two lawsuits are not the same, as long as the non-similar party in the second lawsuit is in privity with a party in the first lawsuit.*fn40 The requirement of privity is met if the party asserting res judicata has succeeded to the interest in the property of a party that prevailed in a prior action.*fn41 Finally, regarding the third element, a judgment of dismissal "for failure to answer interrogatories . . . operate[s] with full preclusive effect."*fn42 Similarly, a dismissal "with prejudice"constitutes "'an adjudication on the merits as fully and completely as if the order had been entered after trial.'"*fn43
Here, the doctrine of res judicata bars relitigation of Counts One and
Two against Defendant Wells Fargo. First, Counts One and Two assert
the same cause of action as the fifth count in the state court action
because the claims in both cases arise out of the same loan,
they seek the same relief (rescission) under TILA.*fn44
That Plaintiff has articulated allegations and legal theories
here that do not appear in his state court complaint is immaterial for
res judicata purposes.*fn45 Second, the parties in the
state court action (Plaintiff, his wife, and Defendant Wells Fargo)
are the same as the parties in this action. Third, the Superior Court
properly had jurisdiction over the state court action and issued a
judgment on the merits. The Superior Court's dismissal "with
prejudice" for failure to answer interrogatories has full preclusive
Counts One and Two must also be dismissed against Defendant Option One. The analysis of the first and third res judicata elements remain the same for Plaintiff's claims against Defendant Option One. With respect to the second element, Defendant Option One, although not a party to the state case, was in privity with Defendant Wells Fargo. Defendant Option One originated the loan at issue and assigned the mortgage to Wells Fargo, which puts the two Parties in privity.*fn47
2. TILA Statute of Limitations Counts One and Two must also be dismissed against Defendant AHMSI because the claims are time-barred by the applicable statutes of limitations. Under TILA, claims for damages must be brought within one year from the date of the alleged violation.*fn48 Additionally, TILA provides a borrower who refinances a mortgage on his or her principal dwelling a limited right to rescind the transaction.*fn49 If the borrower does not receive adequate notice of the statutory right to rescind, the rescission period is extended for three years from the date of the closing.*fn50 This three-year period is a rigid deadline.*fn51
Here, Plaintiff's claims under Counts One and Two are time-barred. The loan closing occurred on November 15, 2006.*fn52 Defendants received the right of rescission notice on September 22, 2008, so the statute of limitations for Count Two began to run twenty days later, on October 16, 2008.*fn53 Plaintiff's claim for damages under Count Two thus expired on October 16, 2009. Regarding Count One, viewing the evidence in the light most favorable to Plaintiff and assuming that Plaintiff did not receive the required TILA disclosures, Plaintiff's claim for damages expired on November 15, 2007 and his rescission right expired on November 15, 2009. Because Plaintiff did not file this action until November 17, 2009, his claims under TILA had expired.
B. Count Three: RESPA
1. Res Judicata
As described above, Count Three must be dismissed against Defendants Wells Fargo and Option One as a matter of res judicata. The analysis of all elements remains the same, except that Count Three of this action and the seventh count of the state court action seek the same relief under RESPA.*fn54
2. RESPA Statute of Limitations Count Three must also be dismissed as against Defendant AHMSI. Claims under RESPA must be brought within one year of the date of the occurrence of the violation of Section 2607.*fn55
Plaintiff's claim under Section 2607 expired one year from the date of the loan, November 15, 2007. Plaintiff's claim therefore expired on November 15, 2009, and Plaintiff did not file this action until November 17, 2009.
3. 12 U.S.C. § 2605
Plaintiff also asserts a claim against Defendant AHMSI under Section 2605 of RESPA. Section 2605 requires mortgage loan servicers who receive a "qualified written request" ("QWR") for action or information from a borrower to respond and, if necessary, to act within statutorily mandated periods of time.*fn56 RESPA defines a QWR as a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that-
(i) includes, or otherwise enables the servicer to identify, the name and account of the borrower; and
(ii) includes a statement of the reasons for the belief of the borrower, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the borrower.*fn57
Some courts have held that a plaintiff who alleges a violation of this
provision must assert to whom the request was made, when the request
was made, how the defendant failed to respond to the request, whether
the statutory period for responding has elapsed, and whether the
defendant meets the statutory definition of a servicer.*fn58
Other courts have held that "alleging a breach of RESPA
duties alone does not state a claim under RESPA. Plaintiffs must, at a
minimum, also allege that the breach resulted in actual
damages."*fn59 Because the First Circuit has not
opined on pleading requirements under Section 2605, this court adopts
the above-mentioned requirements.
Here, Plaintiff has not pled sufficient facts to support his claim under Section 2605 of RESPA. Plaintiff alleges that Defendant AHMSI violated Section 2605 by "failing to acknowledge Qualified Written Requests within the required time allowed and/or failing to specifically respond to the specific requests denoted in the aforementioned Qualified Written Requests."*fn60 But Plaintiff does not plead his claim under Section 2605 with any greater specificity. Indeed, Plaintiff does not specify when he sent the QWRs, nor does he claim that the alleged failure to respond to the QWRs resulted in actual damages. For these reasons, Plaintiff's claim against Defendant AHMSI under Section 2605 fails to state a claim upon which relief may be granted and must also be dismissed.*fn61
C. Count Four: CROA
Count Four, Plaintiff's claim under CROA, also fails to state a claim
upon which relief may be granted.*fn62 CROA governs
transactions that involve credit repair organizations.*fn63
Pursuant to CROA, the term "credit repair organization" means
any person who uses any instrumentality of interstate commerce or the
mails to sell, provide, or perform (or represent that such person can
or will sell, provide, or perform) any service, in return for the
payment of money or other valuable consideration, for the express or
implied purpose of-
(i) improving any consumer's credit record, credit history, or credit rating; or
(ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (I); and . . . does not include- . . .
(ii) any creditor (as defined in section 103 of the Truth in Lending Act . . .), with respect to any consumer, to the extent the creditor is assisting the consumer to restructure any debt owed by the consumer to the creditor.*fn64
Section 103 of TILA defines a "creditor" 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.*fn65
Here, Count Four must fail because none of the Defendants fall within the definition of a "credit repair organization," even under Plaintiff's description of each Defendant.*fn66 Moreover, Defendants all fall within the statutory exception for "creditors."*fn67
D. Count Five: Fraud and Misrepresentation
As described above, Count Five must be dismissed as against Defendants Wells Fargo and Option One as a matter of res judicata. Although Plaintiff's state-court complaint did not allege "fraud and misrepresentation" as a specific count, Plaintiff's claim for fraud and misrepresentation here relies on the "'same transaction or series of connected transactions'"*fn68 as his state-court TILA and RESPA claims.
Count Five must also be dismissed as against Defendant AHMSI because
the claim is time-barred. Massachusetts law provides a three-year
statute of limitations for "actions of tort, actions of contract to
recover for personal injuries, and actions of replevin."*fn69
This statute of limitations also applies to claims of fraud
This statute of limitations begins to run "'when a plaintiff discovers, or any earlier date when she should reasonably have discovered, that she has been harmed or may have been harmed by the defendant's conduct.'"*fn71 In the context of mortgage loan transactions, the statute of limitations on fraud claims begins to run on the date of the closing, as potential plaintiffs are on notice for fraud when they sign loan documents.*fn72
Here, the three-year statute of limitations applies to Plaintiff's fraud and misrepresentation claim. As the loan transaction occurred on November 15, 2006, Plaintiff was on notice on that day of any alleged fraud or misrepresentation.*fn73 For that reason, Plaintiff's fraud and misrepresentation claimed had expired by November 17, 2009, and Count Five must be dismissed as against Defendant AHMSI.
E. Count Six: RICO
Count Six, which alleges a violation of RICO, must be dismissed for failing to allege the requisite elements of a RICO violation. To state a claim for a civil RICO violation, "a plaintiff must allege each of the four elements required by the statute: '(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity.'"*fn74 A plaintiff must allege each of these elements with particularity.*fn75
An "enterprise" under RICO consists of "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity."*fn76 A "pattern" under RICO "requires at least two acts of racketeering activity,"*fn77 and those acts must be "both 'related' and 'amount to or pose a threat of continued criminal activity.'"*fn78 Finally, "racketeering activity" can refer to any of a number of activities, including mail fraud.*fn79
Here, Plaintiff has not properly pled the alleged RICO violation. First, Plaintiff has not pled "enterprise" among Defendants. In the Complaint, Plaintiff explains that Defendant Option One originated the note and then assigned it to Defendant Wells Fargo, and Defendant AHMSI is the current servicer of the note.*fn80 Plaintiff does not allege that either Defendant Wells Fargo or Defendant AHMSI was involved in the origination of the note. Accordingly, Plaintiff has not pled facts sufficient to show an enterprise among Defendants.
Second, Plaintiff's Complaint does not establish a "pattern," as his entire claim is based on one loan transaction*fn81 rather than any type of related or continuous criminal activity.
Finally, Plaintiff has failed to properly plead that Defendants used the mails in furtherance of the alleged fraud. Although the Complaint alleges that Defendants "communicated and transmitted documents with each other through means using Telephone, Facsimiles and the United States Postal Service,"*fn82 Plaintiff fails to plead the time, place, or content of these alleged activities.*fn83
Accordingly, Plaintiff's RICO claim against all Defendants fails to meet the statutorily required elements and must be dismissed.
F. Plaintiff's Cross Motions for Summary Judgment
Finally, because this court dismisses all counts of Plaintiff's Complaint, Plaintiff's Cross Motions for Summary Judgment against each Defendant must be denied.
For the foregoing reasons, Defendants Wells Fargo and AHMSI's Motion to Dismiss [#10] is ALLOWED; Defendant Option One's Motion to Dismiss [#18] is ALLOWED; and Plaintiff's Cross Motions for Summary Judgment [#13, 20] are DENIED.
AN ORDER HAS ISSUED.
Joseph L. Tauro United States District Judge