Solomon v. Wachovia Mortgage Corporation

Citation: Not availableDocket: Civil Action No. 2009-2210

Court: District Court, District of Columbia; June 15, 2011; Federal District Court

Original Court Document: View Document

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Mary Solomon filed a lawsuit against Anthony Falcone, Wachovia Mortgage Corporation, Wells Fargo Bank, N.A., and Settlement Solutions, Inc., alleging violations of the Truth in Lending Act and the D.C. Consumer Protection Procedures Act, among other claims, related to their failure to adequately disclose information regarding her mortgage refinancing. The court previously dismissed claims against Falcone and Settlement Solutions due to lack of prosecution, leaving only claims against Wells Fargo and Wachovia. Wells Fargo argues that it is the proper defendant because Wachovia merged into it on November 1, 2009. The court intends to treat the arguments against both entities collectively.

The action is characterized by the following background details: Solomon, a 64-year-old retiree, initially obtained her mortgage in 1974. By June 2007, her loan had a 6.5% interest rate and a remaining balance of approximately $207,948.51, with monthly payments of $1,400. Falcone, claiming to work for Countrywide, proposed refinancing the loan at a 3% interest rate, promising reduced payments of $800 per month for ten years. He also assured her that there would be no refinancing fees and that she would receive a $5,000 settlement check. Although Falcone informed her of the right to rescind the loan within three days, Solomon asserts he failed to provide the necessary written notice.

Solomon applied for the loan through World Savings Bank, which later merged into Wachovia, and subsequently into Wells Fargo. Upon reviewing her loan documents after signing on November 21, 2007, she discovered that she had received a Pick-A-Payment loan with an actual fixed interest rate of 8.1%, contrary to Falcone's promise. Additionally, her financial information was inaccurately stated, and the settlement check she received was only $3,602.94 instead of the promised $5,000. The court is currently considering Defendants’ motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The motion will be partially granted and partially denied based on the court's findings.

Plaintiff attempted to rescind a loan within the required three-day period by contacting Mr. Falcone via fax and telephone but was unsuccessful in reaching him. During this time, Plaintiff learned from Countrywide, her former mortgage company, that the loan had been transferred to World Savings Bank upon refinancing. The amended complaint raises questions regarding how Plaintiff applied for a loan with World Savings Bank, given that Falcone was associated with either Countrywide or Westar. The loan offered various monthly payment options, including interest-only and principal-inclusive payments. Plaintiff made payments to both World Savings Bank and Wachovia and later refinanced the Pick-A-Pay loan through another company not involved in the lawsuit.

To survive a Rule 12(b)(6) motion to dismiss, a complaint must contain sufficient factual matter that, when accepted as true, states a plausible claim for relief. The Supreme Court's decisions in Ashcroft v. Iqbal and Bell Atlantic Corp. v. Twombly clarify that courts must accept factual allegations as true but not legal conclusions. A claim is plausible if the factual content allows reasonable inferences of the defendant's liability. Mere possibilities of misconduct are insufficient, and complaints must go beyond labels and conclusions. Courts may only consider the facts alleged in the complaint and related documents when ruling on a motion to dismiss, and the complaint should be construed favorably toward the plaintiff, granting all reasonable inferences. However, unsupported inferences and legal conclusions need not be accepted.

In Browning v. Clinton, the court addresses the misnumbering of counts in the plaintiff's amended complaint, clarifying the causes of action which include violations of the D.C. Consumer Protection Procedures Act (CPPA) against Wachovia and Wells Fargo (Counts I and II), a dismissed CPPA claim against Settlement Solutions (Count IV), a dismissed common law claim for unconscionability against Falcone and Settlement Solutions (Count VI), a dismissed common law breach of fiduciary duty against Settlement Solutions (Count VII-A), violations of the Truth in Lending Act (TILA) against Wachovia, Wells Fargo, and unknown assignees (Count VII-B), and a dismissed claim under the Mortgage Lenders and Brokers Act against Anthony Falcone (Count IX). The court notes the absence of Counts III, V, and VIII.

The remaining claims concern Wells Fargo and Wachovia, specifically for CPPA violations (Counts I and II), common law unconscionability (Count VI), and TILA violations (Count VII-B). The TILA claims are highlighted as the sole federal claims, emphasizing Congress's intent to ensure accurate disclosures in credit transactions, including annual percentage rate, finance charge details, and the right to rescind. The plaintiff asserts she received insufficient disclosures and did not receive the required notice of the right to cancel. 

Defendants argue for dismissal based on the statute of limitations, asserting that the TILA claims for statutory damages are time-barred since the lawsuit was filed two years after the loan settlement on November 21, 2007, exceeding the one-year limit for such claims. The court notes that the plaintiff has not claimed equitable tolling, leading to the dismissal of the statutory damages claim, while the rescission claim is subject to a different limitations period.

A plaintiff must file for rescission within three years of the violation or before selling the home, per 15 U.S.C. 1635(f). In this case, the plaintiff filed before the deadline of November 21, 2010, so her rescission claim under TILA is timely. The defendants argue that as former assignees of the loan, they cannot be held liable for rescission under 15 U.S.C. 1625. However, the Court refutes this, citing 15 U.S.C. 1641(c), which allows any consumer to rescind against any assignee. Previous rulings, such as Miranda v. Universal Financial Group, support that the right to recover payments extends to former assignees. The Court confirms that Wells Fargo and Wachovia were assignees of the loan, allowing the plaintiff to sue them for rescission and recover payments made.

The defendants also claim the allegations are too vague, but the Court finds at least one TILA violation related to the failure to provide two copies of the notice of the right to cancel. While the defendants introduced a document indicating the plaintiff received the notice, the Court cannot consider it at the motion to dismiss stage because it was not incorporated into the complaint. There remains a factual dispute over whether the plaintiff received the notice. The Court concludes that, when viewed in the light most favorable to the plaintiff, there are sufficient grounds for a plausible TILA claim.

Plaintiff alleges that Defendants violated the D.C. Consumer Protection Procedures Act (CPPA) by engaging in unlawful trade practices, specifically unconscionability and misrepresentation, in mortgage transactions. The CPPA aims to protect consumers from unfair practices, and mortgage transactions fall under its purview. Plaintiff claims Defendants provided unconscionable loans with excessive prepayment penalties without considering her ability to pay, and that key terms of the loan were misrepresented, including benefits of refinancing and the nature of the mortgage payments.

At the pleadings stage, these allegations are sufficient to allow for a reasonable inference of liability against the Defendants. However, the court notes that any ultimate determination on the validity of these claims will occur later in the litigation. Additionally, the court addresses a separate common law unconscionability claim made by the plaintiff, which is treated without a statutory basis. The court clarifies that unconscionability can only be used defensively to challenge contract enforcement, leading to the dismissal of this claim.

In conclusion, the court grants Defendants' motion to dismiss the common law unconscionability claim and a statutory damages claim under the Truth in Lending Act (TILA), while denying the motion concerning the CPPA claims and the TILA rescission claim. A separate order will follow.