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Bibbs v. Security Atlantic Mortgage Co.

September 1, 2010


The opinion of the court was delivered by: O'neill, J.


Plaintiff Mildred V. Bibbs filed a ten count amended complaint on May 3, 2010 seeking equitable relief and damages for alleged violations of, inter alia, the Truth-in-Lending Act, 15 U.S.C. § 1601, et seq. (Count I); violations of the Home Ownership and Equity Protection Act, 15 U.S.C. § 1639, et seq. (Count II); fraud (Count IV); violations of the Unfair Trade Practices and Consumer Protection Law, 73 Pa. Stat. § 201-1, et seq. (Count V); civil conspiracy (Count VI); and concerted tortious conduct (Count VII). Defendants BAC Home Loan Servicing, L.P. and Security Atlantic Mortgage Co., Inc. filed separate partial motions to dismiss. Defendant Diamond Industries has filed its answer. I have before me BAC's and Security Atlantic's motions, plaintiff's responses and defendants' replies.


In June 2008, plaintiff, a 73-year-old woman, saw an advertisement in the newspaper for "Government Insured Loans" and "HUD/FHA Insured Loans" to finance home repairs. She contacted Diamond Industries and on June 21, 2008 Barry Hecht, a representative of Diamond, came to her home. She explained that her roof and plumbing system needed to be repaired. After Hecht surveyed her entire home, he persuaded plaintiff that she needed additional work done and told her that Diamond Industries could make it "like new." Plaintiff told Hecht that she did not think she could afford or qualify for a loan to pay for all of the suggested work because her income was limited. Hecht assured her that Diamond Industries would get her a loan. He prepared a $48,400.00 contract for all of the suggested repairs. Hecht and plaintiff signed the contract that day.

Subsequently, Diamond Industries informed Security Atlantic of the contract. Security Atlantic began the process of securing financing. Rather than preparing a home repair loan form, Security Atlantic used a Federal Housing Authority refinancing form. This was done because plaintiff's outstanding debts and liabilities would prevent her from securing a loan designed for home repairs. Security Atlantic obtained a loan for more than the contract amount. The loan included a substantial obligation to pay fees, costs, debts and liabilities other than the home repairs plaintiff had authorized.

Over a month after her initial meeting with Hecht, a man arrived unannounced at her home one evening and stated he was working with Diamond Industries on plaintiff's loan. He was a settlement agent from JRS Settlement. The agent had been hired by Security Atlantic, Merit Finance and Diamond Industries to conduct the settlement in such a manner that plaintiff would remain unaware of the mortgage being placed on her home, the increased size of the debt she was incurring and the decreased amount of money which had actually been obtained to conduct home repairs.

Ultimately, Diamond Industries began work on the home. However, the workmanship was so poor and plaintiff's home was left in such a state of disrepair she was forced to abandon it. Prior to her interactions with Diamond Industries, plaintiff had owned her home free and clear of any mortgage. Subsequently, a first lien mortgage was placed on her home. BAC was assigned the mortgage in May 2009 and immediately initiated foreclosure proceedings.


Federal Rule of Civil Procedure 12(b)(6) permits a Court to dismiss all or part of an action for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). Typically, "a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations," though plaintiff's obligation to state the grounds of entitlement to relief "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the allegations in the complaint are true (even if doubtful in fact)." Id. (citations omitted). The complaint must state "'enough facts to raise a reasonable expectation that discovery will reveal evidence of' the necessary element." Wilkerson v. New Media Tech. Charter School Inc., 522 F.3d 315, 321 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). The Court of Appeals has recently made clear that after Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct. 1937, 1955, 173 L.Ed. 2d 868 (2009), "conclusory or 'bare-bones' allegations will no longer survive a motion to dismiss: 'threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.' To prevent dismissal, all civil complaints must now set out 'sufficient factual matter' to show that the claim is facially plausible." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (quoting Iqbal, 129 S.Ct. at 1949). The Court of Appeals also set forth a two part-analysis for reviewing motions to dismiss in light of Twombly and Iqbal: "First, the factual and legal elements of a claim should be separated. The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions. Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a 'plausible claim for relief.'" Id. at 210-11 (quoting Iqbal, 129 S.Ct. at 1950). The Court of Appeals explained, "a complaint must do more than allege the plaintiff's entitlement to relief. A complaint has to 'show' such an entitlement with its facts." Id. (citing Phillips v. County of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008)). "Where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged--but it has not 'show[n]'--'that the pleader is entitled to relief.'" Iqbal, 129 S.Ct. at 1949.


I. Truth In Lending Act (Count I)

Congress enacted TILA in 1968 to "assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit." 15 U.S.C. § 1601(a). Plaintiff alleges defendants Security Atlantic and BAC violated certain of those disclosure requirements. Specifically, TILA requires that the creditor accurately disclose to the consumer, inter alia, the finance charge. 15 U.S.C. § 1638(a) (2008). "In a transaction secured by real property or a dwelling, the disclosed finance charge and other disclosures affected by the disclosed finance charge (including the amount financed and the annual percentage rate) shall be treated as accurate if the amount disclosed as the finance charge: (i) [i]s understated by no more than $100; or (ii) [i]s greater than the amount required to be disclosed." Id.

Plaintiff alleges that the finance charge, and consequently the amount financed and the annual percentage rate, were inaccurately reported on the TILA Disclosure Statement. First Am. Compl. ¶¶ 142, 146, 148. Specifically, she alleges the TILA Disclosure Statement computed by Security Atlantic reported a $4,955.21 finance charge. Id. at ¶ 146. However, the alleged actual finance charges as reflected in the HUD-1 Settlement Statement were much higher:

a. Loan Origination Fee to Merit Finance (line 801): $588.70

b. Loan Discount Fee to Merit Finance (line ...

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