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Stoss v. Singer Financial Corp.

February 24, 2010


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


Paul and Linda Stoss secured a mortgage on their farm with Singer Financial Corporation. After defaulting on their payments, they sold the farm to pay off the loan. They now claim that Singer Financial and Paul Singer committed fraud, RICO violations, and wrongful use of civil proceedings in connection with the loan extension and default. Defendants filed a motion to dismiss the Stosses' complaint. For the reasons set forth below, I will grant the motion.


The Stosses owned a dairy farm in Lehighton, Pennsylvania and early in 2006, decided to seek a loan for the purchase of cows which would cost them $60,000. Pls.' FirstAm. Compl. ¶¶ 10--12. The Stosses contacted Singer Financial in July, 2006 in response to an advertisement in a local farming paper and spoke with Paul Singer, President of Singer Financial, about a loan. Id. at ¶¶ 13, 16. Singer advised the Stosses that Singer Financial would lend them the $60,000 they needed for the purchase of the cows if they refinanced their mortgage with Singer Financial. Id. at ¶ 17.

In response to their inquiry, Singer required the Stosses to send Singer Financial certain documents, including tax returns and financial statements, towards underwriting the loan; he also required that they pay a $500 non-refundable loan application fee, a commitment fee of $25,000, and a legal fee of $1,000. Pls.'Am. Compl. at ¶¶ 21, 23, Ex. B. The Stosses allege that Singer promised the loan from Singer Financial would be $400,000 and that they would receive the $60,000 they needed for the purchase of cows. Id. at ¶ 25. After the loan and refinancing were approved and not including the $25,000 commitment, the Stosses received $47,000 in proceeds from the loan, an amount insufficient to cover the cost of the cows. Id. at ¶¶ 29--30.

The Stosses made interest payments on the loan at 12% per month and at some point missed a payment, causing the interest rate to increase to a default rate of 24%. Pls.' FirstAm. Compl. at ¶ 32. The Stosses allege that Singer and Singer Financial knew at the time of approving the loan that it was unaffordable to them and intended, by extending the loan, to collect "unlawful fees and interest and non-incurred costs... via pay-off, or a property and business with significant equity via foreclosure." Id. at ¶ 28.

The Stosses eventually defaulted on the loan and claim now that this was defendants' intention all along. Pls.' FirstAm. Compl. at ¶¶ 33--35. On July 16 and again on August 13, 2007, Singer Financial mailed plaintiffs a payoff demand signed by Paul Singer. Id. at ¶ 36--37, Ex. D, E. On August 17, 2007, the Stosses sold the farm for $600,000 at a closing after which Singer Financial received $591,000 as payoff of the loan. Id. at ¶ 38.

The Stosses claim the payoff amount was inaccurately calculated by Singer Financial and contained unlawful charges including concealed compound interest. Pls.' FirstAm. Compl. at ¶ 39. They also claim that defendants filed a confession of judgment against plaintiffs in state court after receiving the payoff for the loan, doing so only to "retroactively justify its unlawful charges." Id. at ¶ 40. A civil case docket from Carbon County attached to the amended complaint as exhibit F shows that Singer Financial filed a complaint and confession of judgment against Paul and Linda Stoss on August 17, 2007. Plaintiffs' Ex. F. It shows that judgment was entered in favor of Singer Financial Corporation for $598,755.61 and that notice of the judgment and a copy of the judgment were sent to the Stosses on August 17, 2007. Id. The docket report indicates that the judgment was satisfied on September 19, 2007. Id.

The Stosses filed a complaint against Paul Singer, Singer Financial, and John Doe Defendants 1--10 on December 24, 2008. After defendants filed a motion to dismiss, the Stosses filed an amended complaint on June 8, 2009 which contained three counts: civil RICO, fraud, and wrongful use of civil proceedings.

Defendants claim in the current motion to dismiss that plaintiffs' claims are barred by the res judicata effect of the confession of judgment entered in Carbon County Court; that the Rooker-Feldman doctrine divests this court of subject-matter jurisdiction over the dispute; that plaintiffs have failed to state their fraud and RICO claims with sufficient specificity; and that plaintiffs' failure to state a federal claim divests this court of jurisdiction over their pendant state law claims.


A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of a complaint. In ruling on a motion to dismiss, a federal court must construe the complaint liberally, accept all factual allegations in the complaint as true, and draw all reasonable inferences in favor of the plaintiff. D.P. Enters. v. Bucks County Cmty. Coll., 725 F.2d 943, 944 (3d Cir. 1984).

The Federal Rules of Civil Procedure mandate that a plaintiff's complaint contain "a short and plain statement of the claim showing that the pleader is entitled to relief." FED. R. CIV. PRO. 8(a)(2). While detailed factual allegations are not necessary to survive a motion to dismiss, the plaintiff must state the grounds for relief by way of more than "a formulaic recitation of the elements" and must instead plead facts sufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964--65 (internal citations omitted).

In a motion to dismiss, the moving party is permitted to plead and the reviewing court permitted to consider an affirmative defense "if the predicate establishing the defense is apparent from the face of the complaint." Bethel v. Jendoco Constr. Corp., 570 F.2d 1168, 1174 n.10 (3d Cir. 1978). In determining what affirmative defenses arise on the face of a complaint, a court generally must consider only the pleadings themselves and refrain from examining extraneous matters. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (citing Angelastro v. Prudential-Bache Sec. Inc., 764 F.2d 939, 944 (3d Cir. 1985)). However, a court may consider a document that is "integral to or explicitly relied upon in the complaint" without converting the motion to dismiss into one for summary judgment. Id.


A. Plaintiffs' ...

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