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Nathaniel Johnson, Individually and As v. Metlife Bank

September 21, 2011


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


This action arises out of a 2007 reverse mortgage transaction pursuant to which Plaintiff Nathaniel Johnson conveyed his interest in his family home to his mother, Josie Johnson, and then Josie Johnson entered into a reverse mortgage with BNY Mortgage Company, LLC ("BNY"). The Second Amended Complaint asserts claims of unfair and deceptive practices under the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa. Stat. Ann. § 201-1 et seq., against Defendant Met Life Bank, N.A., the successor to BNY, as well as against three assignees of the mortgage: Defendants World Alliance Financial Corp. ("World Alliance"), Reverse Mortgage Solutions, Inc. ("RMS"), and Bank of America Corporation ("BoA") (collectively, the "Assignees"). The Assignees have filed Motions to Dismiss the claims against them, arguing they cannot be held liable for BNY's allegedly unfair and deceptive practices. In response, Plaintiff has filed a Motion for Leave to File a Third Amended Complaint. For the following reasons, we grant the Motion for Leave to File a Third Amended Complaint, and dismiss the Motions to Dismiss as moot.


According to the Second Amended Complaint, Plaintiff and his mother, Josie Johnson ("Mother"), were joint owners of a house at 6528 Theodore Street (the "Property"), where they both lived. (2d Am. Compl. ¶¶ 13, 17, 19.) Although Plaintiff was initially the sole holder of the deed, he arranged in 1996 for Mother's name to be placed on the deed as well, to ensure that Mother would be able to keep the property if Plaintiff passed away. (Id. ¶ 17.)

In 2007, a BNY representative solicited Mother, who was then 81 years old, asking if she needed money for any purpose and suggesting that she could obtain money through a mortgage loan. (Id. ¶¶ 20, 22.) When Mother expressed some interest, another BNY representative visited Mother at the Property. (Id. ¶ 21, 24.) Mother told the BNY representative that she and Plaintiff were interested in a loan for Property repairs, but that they had been turned down for such loans in the past because of Plaintiff's poor credit. (Id. ¶ 28.) The BNY representative visited Mother several additional times at the Property, primarily during work hours when Plaintiff was not there. (Id. ¶¶ 32, 38.) The representative persuaded Mother to apply for and take out a reverse mortgage. (Id. ¶ 41.) The transaction that the representative planned had two components. (Id. ¶ 29.) First, Plaintiff would execute a deed, transferring his interest in the Property to Mother and, then, Mother alone would take out the reverse mortgage. (Id. at ¶ 29) The representative structured the transaction in this way, at least in part, because Plaintiff was not old enough to qualify for a reverse mortgage. (Id. ¶ 36.)

The loan closing took place on October 27, 2007, at the Property. (Id. ¶¶ 42-43.) Mother signed all of the papers that required her signature before Plaintiff returned home. (Id. ¶ 51.) When Plaintiff arrived, he was rushed through the papers that he needed to sign, including the deed transferring his interest in the Property to Mother. (Id. ¶¶ 50-51, 53.) As a result, Plaintiff did not know or understand the papers that he signed. (Id ¶ 51.) According to the Second Amended Complaint, no one explained to Plaintiff that any of the documents he was signing would transfer his interest in the property in any way, much less that one of the documents was a deed that would take title to the property out of his name. (Id. ¶¶ 54-55.)

The reverse mortgage product that the BNY representative sold to Plaintiff and Mother was "entirely unsuitable" for their needs, because (1) Mother was not expected to live much longer; (2) both Plaintiff and Mother desired Plaintiff to retain the home upon Mother's death; (3) a balloon payment would come due upon Mother's death; and (4) Plaintiff was unlikely to qualify for a loan to pay off the balloon payment when it came due. (Id. ¶ 30.) In fact, Mother died on December 10, 2009. (Id. ¶ 3.) Pursuant to the terms of the loan, the full principal balance came due upon Mother's death. (Id. ¶ 57, 78.) On November 15, 2010, BNY assigned the mortgage to Goldman Sachs Mortgage Company, which, in turn, assigned the mortgage to World Alliance the very next day. (Id. ¶ 87.) On December 10, 2010, the mortgage loan servicer demanded payment of $66,609.85, which was the principal balance due on the loan plus interests and fees. (Id. ¶ 79.) Plaintiff was unable to pay the amount demanded. (Id. ¶ 80.) Thereafter, on March 28, 2011, World Alliance assigned the mortgage to RMS for the benefit of BoA. (Id. ¶ 82.)

Plaintiff's Second Amended Complaint asserts claims for damages under the UTPCPL arising out of BNY's "unfair or deceptive practices" in connection with the reverse mortgage. See 73 Pa. Stat. Ann. § 201-2. The Complaint also seeks reformation of the loan. The Assignees have filed motions to dismiss the claims against them, arguing that, as mere assignees of the mortgage, they cannot be liable under the UTPCPL for BNY's misrepresentations. See, e.g., Murphy v. Federal Deposit Ins. Corp., 408 F. App'x 609, 611 (3d Cir. 2010) ("The UTPCPL . . . does not impose liability on assignees.") Plaintiff concedes in his Response to the Assignees' Motions to Dismiss that he cannot obtain damages from the Assignees. He asks, however, both in his response to the Assignees' Motions, and in his Motion for Leave to File a Third Amended Complaint, that he be permitted to file a Third Amended Complaint. The proposed Third Amended Complaint omits any damages claims against the Assignees pursuant to the UTPCPL, but adds two counts asserting claims against all four Defendants for rescission under the UTPCPL (Count II) and to quiet title (Count III). All four Defendants oppose the Motion for Leave to File a Third Amended Complaint, arguing that the amendments Plaintiff proposes are futile.

The factual allegations in the proposed Third Amended Complaint are nearly identical to the factual allegations in the Second Amended Complaint, with only a few additions. Plaintiff adds to the proposed Third Amended Complaint allegations that: (1) on April 20, 2011, RMS, for the benefit of BoA, commenced a foreclosure action against the Property (3d Am. Compl. ¶ 81), (2) BNY did not advise Plaintiff or Mother, at the time of the October 27, 2007 transaction or any time thereafter, of their right to cancel the transaction pursuant to the UTPCPL, 73 Pa. Stat. Ann. § 201-7 (id. ¶¶ 85-87); and (3) Plaintiff sent notices to Defendants on June 29, 2011, stating that he was rescinding the October 27, 2007 transaction, but no Defendant has acknowledged or effectuated the rescission. (Id. ¶¶ 98, 103-04.)


"[A] motion for leave to amend a complaint [is] addressed to the sound discretion of the district court," Cureton v. Nat'l Collegiate Athletic Ass'n, 252 F.3d 267, 272 (3d Cir. 2001), but "the Court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). As a general matter, we may only deny leave to amend for "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment." Foman v. Davis, 371 U.S. 178, 182 (1962). "The first four of these reasons devolve to instances where permitting amendment would be inequitable." Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002). "Thus amendment must be permitted . . . unless it would be inequitable or futile." Id.

Futility in this context "means that the complaint, as amended, would fail to state a claim upon which relief could be granted." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997) (citation omitted). In assessing futility, we apply the same standard of legal sufficiency as applies under Federal Rule of Civil Procedure 12(b)(6). Id. (citations omitted). We therefore take the factual allegations of the proposed amended complaint as true, draw all reasonable inferences in favor of the plaintiff, and only deny the motion to amend if the factual allegations in the complaint do not raise plausible claims and are not sufficient "to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004)); Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (citing Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)).


Defendants argue that we should deny Plaintiff's Motion for Leave to File a Third Amended Complaint, contending that the proposed amendment is futile for two reasons. First, they contend that Plaintiff does not have standing to bring a claim for rescission. Second, they argue that the UTPCPL provision on which the rescission claim in Count II is based, 73 Pa. Stat. Ann. ยง ...

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