Smith v. Argent Mortgage Co.

Citations: 237 F.R.D. 436; 2006 U.S. Dist. LEXIS 59803; 2006 WL 2457860Docket: No. CIV.A. 05-CV-02364-R

Court: District Court, D. Colorado; August 23, 2006; Federal District Court

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Defendant Argent Mortgage Company, LLC’s Motion to Dismiss, filed on January 1, 2006, is denied. The case is presided over by District Judge Blackburn, who withdrew the reference to the magistrate judge for handling this motion. The plaintiffs, Thomas and Pam Smith, are representing themselves and the court is required to liberally interpret their pleadings while ensuring compliance with the Federal Rules of Civil Procedure. The standard for ruling on a motion to dismiss under Rule 12(b)(6) mandates that the court accepts the plaintiffs' well-pleaded allegations as true and construes all reasonable inferences in favor of the plaintiffs. The complaint must only be dismissed if it is clear that no set of facts could entitle the plaintiffs to relief.

The plaintiffs filed their Verified Complaint on November 22, 2005, alleging that they own a home in Silverthorne, Colorado, and entered into a mortgage refinance transaction with Argent on February 18, 2005. The transaction involved instructions to send payments to Ameriquest Mortgage Company. Argent is characterized as a "creditor" under the Truth in Lending Act (TILA), having engaged in consumer credit transactions. The plaintiffs claim that Argent failed to provide all required material disclosures under TILA, asserting their right to rescind the transaction within three business days after receiving these disclosures.

Argent's adhesion contract included a prepayment penalty, violating 15 U.S.C. § 1639(c)(1)(A). Argent paid a Yield Spread Premium of $7,164 to a broker for a high-interest loan without any actual services rendered, breaching the anti-kickback provision of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601. HomEq Servicing Corp. claims Wells Fargo Bank is the current creditor related to a Note/Retail Sale Installment Contract and Mortgage/Deed of Trust, allegedly signed by the plaintiffs on February 8, 2005, and recorded on March 7, 2005. None of the defendants provided consideration for these documents. HomEq falsely asserted that the loan was in default and issued a Notice of Default dated September 16, 2005. The plaintiffs sent a timely Notice of Rescission to all defendants on September 6, 2005, satisfying the requirements of 15 U.S.C. § 1635(a), but the defendants did not respond within the required twenty days and failed to release their security interest. A second Notice of Rescission was sent on October 3, 2005. On October 20, 2005, HomEq incorrectly stated that the rescission period had expired, and Argent declined the cancellation request on October 21, 2005. The defendants have not complied with the legal requirements regarding the plaintiffs' loan rescission. 

The Complaint includes four causes of action against Argent: quiet title, violations of the Truth in Lending Act (TILA), violations of RESPA, and a request for declaratory judgment. Argent seeks dismissal of all claims. In the quiet title claim, the plaintiffs argue that the defendants’ claims to the property are unfounded and seek a decree to quiet title. Argent claims it has a valid legal interest in the property, supported by Exhibit A, which was referenced but not attached to the Complaint. However, the plaintiffs counter that Exhibit A lacks the necessary foundation for admissibility, as it does not include an affidavit or other verification, thus preventing the court from considering it in the motion to dismiss analysis.

Assuming the allegations in the plaintiffs' Complaint are true, the court found that the plaintiffs could potentially prove their claims against Argent, resulting in the denial of Argent's motion to dismiss for all claims presented. 

1. **Claim One**: The plaintiffs may establish facts warranting relief against Argent, hence the motion to dismiss is denied.
   
2. **Claim Two**: The plaintiffs allege violations of the Truth in Lending Act (TILA) due to defendants' failure to provide required disclosures and assert timely rescission of the transaction. They seek release of the security interest and a refund. Argent claims compliance with disclosures and that the rescission was untimely, but this was not considered in the dismissal analysis. Consequently, the motion to dismiss is denied.

3. **Claim Three**: The plaintiffs allege a violation of the Real Estate Settlement Procedures Act concerning a Yield Spread Premium allegedly paid by Argent for a high-interest loan, asserting it violated anti-kickback provisions. Argent argues the lack of a federally related mortgage loan, but this claim is also denied based on the assumption that the plaintiffs could prove otherwise.

4. **Claim Five**: Argent seeks dismissal for insufficient identification of relief sought. However, the plaintiffs are interpreted to seek a declaration of no legal relationship with Argent regarding a secured interest in their property. As before, the motion to dismiss is denied.

5. **Lack of Standing for Plaintiff Pam Smith**: Argent argues that Pam Smith was not a borrower and thus lacks standing. This claim is denied as the court assumes she could prove her status as a borrower.

The court concludes by formally denying Argent's motion to dismiss and notes concerns regarding the authenticity of Exhibit A, which cannot be considered in this ruling.