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Garczynski v. Countrywide Home Loans Inc.

August 12, 2009


The opinion of the court was delivered by: Baylson, J.


Plaintiffs Casimir Garczynski and Laura Garczynski ("Plaintiffs") bring this action against Defendant Countrywide Home Loans Inc. ("Countrywide") in a single count First Amended Complaint under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL").*fn1 Plaintiffs allege that Countrywide violated the "catch-all" provision of the UTPCPL, which prohibits fraudulent or deceptive conduct that is likely to create confusion or misunderstanding. Plaintiffs seek damages and injunctive relief. Countrywide moves to dismiss the action under Fed. R. Civ. P. 12(b)(6).

The Court concludes that Plaintiffs' factual allegations are insufficient to demonstrate that they are entitled to relief and that their interpretation of the UTPCPL has been rejected by many other courts. Although not specifically briefed by the parties, it also appears that any amendment would be futile because Plaintiffs' claims are barred by the parol evidence rule, are untimely, and contravene the specific terms of the written mortgage agreements entered into between Plaintiffs and Defendant. Although in theory Plaintiffs might be able to bring a common law claim for breach of contract if their claim was that Defendant did not live up to the terms of the agreement, they make no such allegations.

I. Factual Background

Plaintiffs are a married couple residing in Philadelphia. (Am. Compl. ¶ 9.) Plaintiffs allege as follows: they visited Sokkie Choing ("Choing"), a mortgage broker at Hanson Mortgage Group, in order to secure a mortgage for their "dream house." (Am. Compl. ¶¶ 9, 12.) Plaintiffs told Choing they could afford a monthly mortgage payment between $1,000 and $1,100. (Am. Compl. ¶ 14.)

Choing told Plaintiffs that an adjustable rate mortgage ("ARM") would be the best choice for them. (Am. Compl. ¶ 16.) Plaintiffs allege that Choing told them that their monthly payments for an ARM would be lower than the payment range they had been seeking and that the payments would increase only slightly each year. (Am. Compl. ¶¶ 17, 18.) Choing presented Plaintiffs' information to various prospective lenders. (Am. Compl. ¶ 19.) Countrywide approved Plaintiffs for an Option-ARM ("the loan"). (Am. Compl. ¶ 20.) The loan was executed on October 25, 2006. (Am. Compl. ¶ 8.)

Plaintiffs allege that Choing told them that the loan would have a one-year introductory interest rate of 4% with monthly payments of $900 and that the monthly payments would increase slightly each year. (Am. Compl. ¶¶ 23-25.) However, the first monthly billing statement showed a minimum payment of approximately $1,300 with an interest rate of 8.65%. (Am. Compl. ¶ 29.)

Plaintiffs allege that they did not discover until they received the first billing statement that the loan contained four payment options, one of which contained negative amortization.*fn2

(Am. Compl. ¶¶ 27-28.) Plaintiffs could afford to make only the minimum payment on the loan. (Am. Compl. ¶ 30.) In August 2008, the minimum payment option on the loan expired, and Plaintiffs thus were forced to make interest-only payments of approximately $1,700 per month, which was more than they could afford. (Am. Compl. ¶¶ 32-33.)

Plaintiffs allege that the loan is confusing and that it was impossible for them to determine that it contained negative amortization. (Am. Compl. ¶ 36.) They also allege that Countrywide and Choing failed to explain the "true nature" of the loan even though they knew Plaintiffs could not afford more than the minimum payment. (Am. Compl. ¶¶ 38, 43.)

Plaintiffs bring this suit against Countrywide with a single count alleging violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"). Plaintiffs seek rescission of the loan, termination of security interest in Plaintiffs' property created under the loan, return of all monies Plaintiffs paid to anyone in connection with the loan, statutory damages, forfeiture and return of the loan proceeds, and damages. (Am. Compl. at 8-9.) Countrywide moves to dismiss under Fed. R. Civ. P. 12(b)(6).

II. Standard of Review

In ruling on a Fed. R. Civ. P. 12(b)(6) motion, a court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (internal citations and quotation marks omitted). "A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1940 (2009) (citing Bell Atlantic v. Twombly, 127 S.Ct. 1955, 1965 (2007)). A court need not accept as true "threadbare recitals of a cause of action's elements, supported by mere conclusory statements." Iqbal, 129 S.Ct. at 1940 (citing Twombly, 127 S.Ct. at 1965). "A formulaic recitation of the elements of a cause of action will not do." Phillips, 515 F.3d at 231 (citing Twombly, 12 S.Ct. at 1959).

III. Legal Discussion

The UTPCPL, 73 P.S. § 201-1 et seq., "protects consumers of goods and services from unfair or deceptive trade practices or acts," Gardner v. State Farm Fire & Casualty Co., 544 F.3d 553, 564 (3d Cir. 2008), by providing a private right of action for persons who sustain a loss because they were subject to unfair or deceptive trade practices, Hunt v. U.S. Tobacco Co., 538 F.3d 217, 221 (3d Cir. 2008). The UTPCPL lists twenty specifically prohibited practices in § 201-2(4)(i)-(xx), and also contains a catch-all provision in § 201-2(4)(xxi) which prohibits "[e]ngaging in any other fraudulent or deceptive conduct which creates a likelihood of confusion or of misunderstanding." Hunt, 538 F.3d at 221.

Plaintiffs' UTPCPL claim is essentially twofold.*fn3 First, Plaintiffs allege that Countrywide "engaged in fraudulent or deceptive conduct which created a likelihood of confusion or of misunderstanding," in violation of the catch-all provision of the UTPCPL, 73 P.S. § 201-2(xxi). Second, Plaintiffs allege violations of several other independent statutes-the federal Truth in Lending Act ("TILA"), 15 U.S.C. § 1601 et seq.; the federal Home Ownership and Equality Protection Act ("HOEPA"), 15 U.S.C. § 1639; the federal Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2601 et seq.;*fn4 and the Pennsylvania Fair Credit Extension Uniformity Act ("FCEUA"), 73 P.S. ...

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