The opinion of the court was delivered by: Diamond, District Judge.
Presently before the court is a motion to dismiss plaintiffs' amended
class action complaint*fn1 pursuant to Fed.R.Civ.P. 12(b)(6) filed by
defendant Federal Home Loan Mortgage Corp. ("Freddie Mac" or "FHLMC").
For the following reasons, the motion will be granted, and all claims
against Freddie Mac will be dismissed.
Under Fed.R.Civ.P. 12(b)(6), a plaintiff's complaint must be dismissed
for failure to state a claim if a defendant demonstrates "beyond a doubt
that plaintiff can prove no set of facts in support of his 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). In ruling on a 12(b)(6) motion, the court
is required to accept as true all allegations in the complaint and all
reasonable inferences that can be drawn therefrom, and to view them in
the light most favorable to the non-moving party. See Oshiver v. Levin,
Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 (3d Cir. 1994).
Moreover, in assessing motions to dismiss, courts must be cautious,
"particularly where granting such a motion would terminate the litigation
before the parties have had their day in court." Kiser v. General
Electric Corp., 831 F.2d 423, 427 (3d Cir. 1987), cert. denied,
485 U.S. 906, 108 S.Ct. 1078, 99 L.Ed.2d 238 (1988).
On March 22, 1974, plaintiffs, Walter Paslowski and his wife Janice
Paslowski (the "Paslowskis"), entered into a mortgage agreement with
South View Savings & Loan Association ("South View") obligating them
to repay $26,000.00 for a loan at an interest rate of 8.5% ver annum.
Complaint ¶ 10. Contemporaneously, the Paslowskis executed a bond
with South View. Id. The mortgage agreement and bond required the
Paslowskis to repay their mortgage debt in 300 monthly payments of
$210.00 for principal and interest. over the course of 25 years. Id. at
¶ 11. In addition to the monthly payment for interest or principal,
the Paslowskis were required under the mortgage and bond to pay South
View monthly installments
equal to one-twelfth of the annual real estate taxes levied on the
property. Id. at ¶ 12.*fn2
In late 1983, Community Savings Association ("Community") acquired the
Paslowskis' mortgage and other South View mortgages when it consolidated
with South View. Id. at ¶ 17. On April 1, 1987, Freddie Mac*fn3
purchased the Paslowskis' mortgage and other Community mortgages. Id. at
¶. 19. Although Freddie Mac purchased the mortgage loan, Community,
pursuant to a "seller/servicer" agreement with Freddie Mac, continued to
control all aspects of the mortgage servicing operations of the
Paslowskis' mortgage until November 16, 1994, when Freddie Mac entered
into a seller/servicer agreement with Standard Mortgage Corporation of
Georgia ("Standard"), to service the Paslowskis' mortgage.*fn4
On September 8, 1998, the Paslowskis fully prepaid their mortgage which
was satisfied on November 10, 1998. Id. at ¶ 22.
Plaintiffs' amended complaint challenges numerous aspects of the
mortgagees' administration of the mortgage loan agreement First, the
complaint alleges that South View breached its contractual obligations
contained in the loan documents by ceasing to capitalize its mortgagors'
bill payments and instead establishing tax and insurance "escrow"
accounts into which it placed monthly bill payments belonging to the
Paslowskis and other mortgagors, which it later removed to pay bills when
they became due. Id. at ¶ 26. The complaint alleges that Community
continued this improper practice of placing bill payments in escrow
rather than capitalizing them, and that, in 1984, Community began paying
mortgagors interest at the rate of 1 1/2% on money held in escrow, a rate
significantly lower than the effective rate of interest under
capitalization. Id. at ¶ 28. The complaint alleges that these
practices continued after Freddie Mac purchased the loan in 1987. Id. at
Second, the complaint alleges that, on numerous occasions, South View
and its successors underestimated the total annual costs of the
Paslowskis' tax bill, so that their payments were insufficient. To cover
the shortfalls in the tax payments, the complaint alleges that South View
and its successors loaned money to the Paslowskis and added the loans to
their mortgage debt, without giving them any notice as required under the
loan documents or an opportunity to cover the shortfalls. Id. at ¶¶
Third, the complaint alleges that South View, Community, and Freddie
Mac charged the plaintiffs interest on loan advances for time periods
that predated the date of distribution. Id. at ¶¶ 37-39.
Fourth, the complaint alleges that after Standard began servicing
Freddie Mac mortgages in 1994, it failed to pay Community mortgagors
interest until March of 1996 for interest that had accrued during 1995 on
money held in escrow, in violation of Community's 1984 agreement to pay
escrow interest to its mortgagora "at year end, and on a yearly basis
thereafter." Id. at ¶ 41.
Finally, the complaint alleges that the defendants concealed from
plaintiffs the fact that Freddie Mac acquired their mortgage in 1987. Id.
at ¶ 43.
Based on the foregoing allegations, the complaint asserts eight causes
of action, six of which name Freddie Mac as defendant.*fn5 Count I
asserts a claim for breach of contract based on the failure to
"capitalize" mortgagor's tax and insurance payments, by over billing
mortgagors to maintain the tax and insurance escrow accounts, and by
paying lower interest on the escrowed bill payments. Count II asserts a
breach of contract claim for adding loan advances to unpaid mortgage
balances without notice, for charging interest for loan advances
predating the date of disbursement, and for untimely payment of interest
accruing in 1995 on money held in escrow. Count III asserts a claim under
the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73
P.S. §§ 201-1 et seq. (the "CPL"), based on false representations that
the mortgage contracts authorized the placement in escrow of bill
payments made by mortgagors and that the mortgagors could be charged for
the maintenance of those escrow accounts. Count IV also asserts a claim
under the CPL based on the mortgagees' concealment of the fact that they
added loan advances to plaintiffs unpaid mortgage balances without
notice, and that they charged plaintiffs interest for loan advances that
predated the dates in which the loan advances were disbursed. Count V
alleges a violation of the CPL based on concealment of the fact that
Freddie Mac was the ...