The opinion of the court was delivered by: FRANKLIN VAN ANTWERPEN, District Judge
Plaintiffs John and Mabel Johnson assert an array of federal and
state claims against Defendant mortgage broker The Knox Financial Group,
L.L.C. ("Knox") and lender Banc One Acceptance Corporation d/b/a Bank
One, N.A. ("Bank One") (collectively "Defendants"). Specifically, Count
One of Plaintiffs' Second Amended Complaint contends that Defendant Bank
One violated the federal Truth in Lending Act, 15 U.S.C. § 1601
et seq. ("TILA"), and the federal Home Ownership and Equity
Protection Act, 15 U.S.C. § 1639 et seq. ("HOEPA"). With respect to state based claims, the Second Amended Complaint avers
violations of the Pennsylvania Credit Services Act, 73 Pa.C.S. § 2181
et seq. ("CSA"), the Pennsylvania Loan Broker Trade Practice
Regulations, 37 Pa.ADC 305.3(a)(1)-(4), and the Pennsylvania Unfair Trade
Practices and Consumer Protection Law, 73 Pa.C.S. § 201-1 et
seq. ("UTPCPL"). These claims arise out of a refinance mortgage loan
that the parties closed on November 29, 2000.
Presently before the Court is Defendant Bank One's Motion For Summary
Judgment on Count One of the Second Amended Complaint, Defendants' Motion
To Dismiss Second Amended Complaint, and Plaintiffs' Cross-Motion For
Partial Summary Judgment As To Their Truth-In-Lending Claims Against
Bank. For the following reasons, we grant-in-part and deny-in-part
Defendant Bank One's Motion For Summary Judgment and deny Plaintiffs'
Cross-Motion For Partial Summary Judgment. In light of these findings, we
deny Defendants' Motion To Dismiss Second Amended Complaint.
I. Statement of Jurisdiction
We have jurisdiction to adjudicate Plaintiffs' federal TILA and HOEPA
claims pursuant to 28 U.S.C. § 1331. We exercise our supplemental
jurisdiction under 28 U.S.C. § 1367(a) to consider Plaintiffs' state
law claims, as they arise out of the same transaction or occurrence as do
their federal claims.
The court shall render summary judgment "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law." Fed.R.Civ.P. 56(c). An issue is "genuine" only if
there is a sufficient evidentiary basis on which a reasonable jury could find for the
non-moving party. Anderson v. Liberty Lobby. Inc.,
477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A factual dispute is
"material" only if it might affect the outcome of the suit under
governing law. Id. at 248, 106 S.Ct. 2505, 91 L.Ed.2d 202.
On a motion for summary judgment, the moving party bears the initial
burden of identifying those portions of the record that it believes
demonstrate the absence of material fact. Celotex Corp. v.
Catrett. 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
To defeat summary judgment, the non-moving party must respond with facts
of record that contradict the facts identified by the movant and would
support a favorable jury finding. Id. at 321 n.3,
106 S.Ct. 2548, 91 L.Ed.2d 265 (quoting Fed.R.Civ.P. 56(e)); Anderson.
477 U.S. at 248-49, 106 S.Ct. 2505, 91 E.Ed.2d 202; see First Nat'l
Bank of Pa. v. Lincoln Nat'l Life Ins. Co., 824 F.2d 277, 282 (3d
Cir. 1987). The party opposing summary judgment may not rest upon mere
allegations or denials, but must set forth specific facts, presenting
affirmative evidence showing that there is a genuine issue for trial.
Anderson. 477 U.S. at 256-57, 106 S.Ct. 2505, 91 E.Ed.2d 202.
III. Procedural Posture and Background
The following section outlines the basic facts and procedural history
surrounding this matter. We undertake a more in-depth review of the facts
in connection with our legal analysis.
At some time in the year 2000, Plaintiffs were solicited by Defendant
Knox to refinance the mortgage on their home in Easton, Pennsylvania.
Plaintiffs had previously procured two loans in connection with their
residence. The first, a mortgage from Delta Funding Corporation
("Delta"), closed on February 3, 1998. (J. Johnson Aff. ¶ 5.) At that
time, pursuant to Delta's instructions, Plaintiffs transferred the title to the home from
themselves and their daughter, Joanne Cressman, to themselves only.
(Id. at ¶ 5.) Plaintiffs have been the exclusive owners of
the home since that time. (Id.) On October 7, 1998, Plaintiffs
closed a subsequent loan from Indymac Mortgage Holdings, Inc. ("Indymac")
(Id. at ¶ 6.) The present loan ("Loan") was made to
Plaintiffs by Defendant Bank One on November 29, 2000. Defendant Knox
brokered the Loan, and Third-Party Defendant Chelsea Settlement Agency of
Pittsburgh, Inc. ("Chelsea") served as the settlement and title insurance
agent for the Loan. Plaintiffs obtained the Loan in an effort to reduce
their monthly mortgage payments (Id. at ¶ 10) and repay
credit card indebtedness (Second Am. Compl. ¶ 8.)
As detailed in our prior Memorandum and Order entered on July 7, 2003,
see Johnson v. Banc One Acceptance Corp., 278 F. Supp.2d 450,
453 (E.D. Pa. 2003), the principal amount of the Loan was $72, 000 at an
annual percentage rate of 10.765 percent. The refinancing Loan, secured
by the Plaintiffs' residence, was structured such that Plaintiffs were
required to make one hundred and seventy-nine monthly payments of $621.15
commencing on January 18, 2001, and a single balloon payment of $59,
231.22 as the one hundred eightieth payment on December 18, 2015. This
meant that Plaintiffs' total payments would amount to $170, 417.07 over
fifteen years. As indicated on the face of the Truth in Lending
Disclosures form, of this, some $103, 588.07 was the "finance charge" and
$66, 829.00 was the "amount financed." (Second Am. Compl. Ex. A.) The
Truth in Lending form further reveals that there were prepaid finance
charges of $5, 171.00, as well as other itemized charges which include
charges for "Insurance Companies" of $627.40, "fld/transunion" of $6.00,
"tl srch/chelsea tl" of $10.00, and "tx info/chelsea" of $15.00.
(Id.) The settlement statement associated with the transaction
clarifies that charges imposed for an abstract or title search ($10), notary
fees ($10), title insurance ($627.40), flood determination ($6) and tax
information ($15) were not included in the calculation of the prepaid
finance charges. (Id. at Ex. C.)
Plaintiffs allege, inter alia, that their new monthly payments
in fact exceeded their prior monthly mortgage payments in contradiction
of Knox's solicitation. They sought to rescind the refinancing Loan by
letter dated September 30, 2002. (Id. at Ex. B.) Bank One did
not respond to their letter, and Plaintiffs subsequently filed suit.
This action was originally commenced on January 28, 2003. Plaintiffs
submitted an Amended Complaint to this Court on May 6, 2003. In a
Memorandum and Order entered on July 7, 2003, this Court granted-in-part
and denied-in-part Defendants' Motion To Dismiss Plaintiffs' Amended
Complaint. See 278 F. Supp.2d 450. Specifically, we allowed
Plaintiffs to proceed forward with their claims that (1) Defendant Bank
One violated TILA by failing to include in the computation of the finance
charge the title insurance premium and notary charges; (2) Defendant Bank
One failed to make disclosures required pursuant to the HOEPA; and (3)
Defendants violated the Pennsylvania CSA, the Pennsylvania Loan Broker
Trade Practice Regulations, and the UTPCPL. Id at 456-57, 458-460. The
parties were provided a period of discovery. We granted Defendants'
Motion To Dismiss Plaintiffs' Amended Complaint with respect to,
inter alia, Plaintiffs' allegation that Defendant Bank One
violated TILA by failing to respond to their exercise of their alleged
right of rescission. Id. This Court, however, reinstated that
claim by Order dated August 5, 2003, and it now appears in Count One of
the Second Amended Complaint. We noted that Plaintiffs' rescission claim
would not be time barred in the event the Loan falls within the purview of HOEPA.*fn1 The August 5, 2003
Order further permitted Plaintiffs to amend the Amended Complaint.
Defendants Bank One and Knox thereafter moved to join Chelsea as a
third-party defendant on October 8, 2003. Defendants filed the motions
sub judice on March 16, 2004.
Count One of Plaintiffs' Second Amended Complaint seeks rescission of
the Loan transaction, statutory damages and attorney fees against Bank
One. Plaintiffs aver two alternative theories in support of their claim
to the remedy of rescission. First, Plaintiffs contend that Defendant
Bank One violated TILA through its failure to accurately disclose the
finance charge associated with the Loan. (Second Am. Compl. ¶ 25.)
Assuming Plaintiffs are correct in their assertion that a materially
inaccurate TILA-prescribed disclosure extends the applicable rescission
period statute of limitations to three years, see infra notes 1, 14, then
Defendant Bank One is entitled to summary judgment only if it demonstrates that
the disclosed finance charge was accurate as a matter of law.
See 15 U.S.C. § 1605(f); Regulation Z,
12 C.F.R. § 226.23(g). Second, if, as Plaintiffs contend in Count One, the
Loan is subject to the provisions of the HOEPA, and if the appropriate HOEPA
pre-settlement disclosures were not furnished, then Plaintiffs must be
permitted to rescind. When the terms of a mortgage meet the prerequisites
of 15 U.S.C. § 1602(aa), HOEPA requires a creditor to deliver certain
pre-closing disclosures at least three business days prior to the loan
closing. Newton v. United ...