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Schafer v. Decision One Mortgage Corp.

May 29, 2009


The opinion of the court was delivered by: Gene E.K. Pratter, J.


Plaintiff Frances L. Schafer brings suit against the lender in a serial loan transaction, the two assignees and present holders of the loans at issue, and the loan broker. Against the lender and the present holders of the loans, Ms. Schafer seeks a declaration of rescission, statutory damages, finance charges and fees under the Truth in Lending Act, 15 U.S.C. § 1601, et seq. ("TILA"), plus reasonable attorneys' fees and costs. She asserts state law claims against the loan broker.

There are four pending motions in this case: a motion to dismiss filed by Greenwich Capital Financial Products, Inc. ("Greenwich"), a motion to dismiss filed by Decision One Mortgage Corporation ("Decision One") and HSBC Mortgage Corporation ("HSBC"), a motion to sever filed by Decision One and HSBC, and a motion to remand filed by Ms. Schafer. For the reasons that follow, the Court grants both of the motions to dismiss, leaving the motion to sever and motion to remand moot.


Ms. Schafer entered into a mortgage loan transaction on December 21, 2004 with Decision One to refinance the existing mortgage on her residence in Exton, Pennsylvania. Compl. at ¶¶ 3, 6. Ms. Schafer asserts that, contrary to her expectation that she would receive a single loan from Decision One, Decision One "split" the loan transaction into two loans, resulting in a serial loan transaction. Id. at ¶ 6. Ms. Schafer states that she was not provided with disclosures that accurately described the loans she received; rather, she was presented with inaccurate Notices of Right to Cancel. She claims as well that she was charged excessive title insurance costs and other costs that were improperly excluded from the finance charge disclosed to her, including a "kickback" to the loan broker, Evergreen Mortgage & Funding Services, Inc. ("Evergreen"). Id. at ¶¶ 4, 7, 8. All of these improprieties, she alleges, constitute material violations of TILA. Id. The smaller of the two loans eventually was assigned to HSBC and the larger was assigned to Greenwich. Id. at ¶ 2.

On July 14, 2005, Ms. Schafer filed a Chapter 7 petition for bankruptcy. She did not reference her TILA claims in the Bankruptcy Schedules, and she did not list them as assets to be exempted from distribution to the trustee. See In re Schafer, No. 05-19676 (DWS), at No. 1 (Bankr. E.D. Pa. 2005) (Voluntary Petition for Bankruptcy with accompanying schedules), attached to Defendant Greenwich's Motion to Dismiss as Ex. A. Ms. Schafer avers that she was not aware in 2005 that she had any claims arising from her 2004 loan transaction, and, she claims, neither was the attorney who was then representing her. Pl.'s Mem. Of Law in Opp. to Mot. of Defs. Decision One and HSBC to Dismiss at 2.*fn1 Ms. Schafer was granted a discharge in bankruptcy on November 2, 2005, and the Chapter 7 bankruptcy case was closed two weeks later. See id.

On June 6, 2007, a foreclosure action was brought against Ms. Schafer in the Chester County Court of Common Pleas, arising out of Ms. Schafer's default on the larger of her two loans, which had been assigned to Greenwich. See docket sheet from Deutsche Bank Nat'l Trust Co. v. Schafer, No. 2007-5464-C0 (Pa. C.C.P. Chester County), attached to Defendant Greenwich's Motion to Dismiss as Ex. B. See also Compl. at Ex. D. On February 13, 2008, the court in the foreclosure action entered judgment against Ms. Schafer. Id.

Prior to the foreclosure action judgment, Ms. Schafer's present counsel sent letters to HSBC, Decision One, Deutsche Bank National Trust Company (the entity which had instituted foreclosure proceedings against Ms. Schafer), and Countrywide Home Loans, Inc. (the entity servicing the loan owned by Greenwich) on or about October 29, 2007, requesting rescission of the loans due to material violations of the TILA. See Compl. at ¶¶ 9-10, Ex. D. Ms. Schafer contends that these letters constituted qualified written requests under the Real Estate Settlement Procedures Act, 12 U.S.C. 2605(5)(e) ("RESPA"). Id.

Ms. Schafer received two responses from Countrywide, neither of which indicated that Countrywide or Greenwich would honor Ms. Schafer's rescission request. Compl. at ¶ 10, Ex. E, Ex. F. HSBC denied the rescission request outright. See Compl. at Ex. G.

In 2008, Ms. Schafer filed a Chapter 13 bankruptcy case to stay a sheriff's sale of her home. See Pl.'s Mem. of Law in Opp. to Mot. of Defs. Decision One and HSBC to Dismiss at 3. This Chapter 13 Bankruptcy case remains extant and predated Ms. Schafer's October 28, 2008 filing of a civil complaint in the Chester County Court of Common Pleas against Decision One, HSBC, Greenwich and Evergreen, which was removed to this Court on December 5, 2008.


A Rule 12(b)(6) motion to dismiss tests the sufficiency of a complaint. Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Although Rule 8 of the Federal Rules of Civil Procedure requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed. R. Civ. P. 8(a)(2), in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests," Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1964-65 (2007) (quoting Conley, 355 U.S. at 47), the plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Id. (citations omitted). Specifically, "[f]actual allegations must be enough to raise a right to relief above the speculative level . . . ." Id. at 1965 (citations omitted). To survive a motion to dismiss, a civil complaint must allege "factual content [that] allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. __, No. 07-1015, 2009 WL 1361536, 2009 U.S. LEXIS 3472, at *12 (May 18, 2009).

The Court "must only consider those facts alleged in the complaint and accept all of those allegations as true." ALA, Inc. v. CCAIR, Inc., 29 F.3d 855, 859 (3d Cir. 1994) (citing Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)); see also Twombly, 127 S.Ct. at 1965 (stating that courts must assume that "all the allegations in the complaint are true (even if doubtful in fact)"). The Court must also accept as true all reasonable inferences that may be drawn from the allegations, and view those facts and inferences in the light most favorable to the non-moving party. Rocks v. Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989). The Court, however, need not accept as true "unsupported conclusions and unwarranted inferences," Doug Grant, Inc. v. Greate Bay Casino Corp., 232 F.3d 173, 183-84 (3d Cir. 2000) (citing City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 263 n.13 (3d Cir. 1998)), or the plaintiff's "bald assertions" or "legal conclusions," Morse v. Lower Merion Sch. Dist., 132 F.3d. 902, 906 (3d Cir. 1997).

The Court may consider the allegations contained in the complaint, exhibits attached to the complaint, matters of public record and records of which the Court may take judicial notice. See Tellabs, Inc. v. Makor Issues & Rts., 127 S.Ct. 2499, 2509 (2007); Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). Specifically, a court may take judicial notice of the record from a state court proceeding and consider it on a motion to dismiss. See, e.g., Poli v. SEPTA, No. 97-6766, 1998 WL 405052, at *3, n.1 (E.D. Pa. Jul. 7, 1998). A court may also take judicial notice of documents from a bankruptcy proceeding, and consider them on a motion to dismiss. See Ieradi v. Mylan Labs., Inc., 230 F.3d 594, 600 n. 3 (3d Cir.2000) ("Under Federal Rule of Evidence 201, we may take judicial notice at any stage of the proceeding of a fact not subject to reasonable dispute that is capable of accurate and ready determination by resort to a source whose accuracy cannot be reasonably questioned."); Freeman v. Kmart Corp., No. 06-2412, 2007 WL 1576463, at *3 (E.D. Pa. May 30, ...

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