Summary
stating that a defendant cannot be held “derivatively liable” under the UTPCPL for the fraudulent actions of a third party when “plaintiff fails to allege or present any evidence that [the defendant] ever knowingly engaged in misrepresentation”
Summary of this case from Duffy v. Lawyers Title Ins. Co.Opinion
CIVIL ACTION NO. 01-5804.
May 8, 2003
MEMORANDUM and ORDER
This case arises from an allegedly predatory loan transaction related to home repairs. Plaintiff has asserted claims seeking damages and a rescission of a loan under the Truth-in-Lending Act ("TILA"), 15 U.S.C. § 1601 et seq., against the lender (Count I). She has also asserted claims under Pennsylvania consumer protection statutes for damages against the moving defendant as well as the related broker and contractor involved in the transaction (Counts II-V).
The original plaintiff was Mattie D. Canty, who is now deceased. Her daughter, Shalita Canty was appointed as the Administratrix of her estate and has been substituted as party plaintiff. Because all of the acts relevant hereto involve Mattie D. Canty, I will refer to the plaintiff during the course of this memorandum and order as "she" or "Canty."
Presently before the court is defendant Equicredit Corporation of America's motion for partial summary judgment on Counts I, II, IV, and V.
Plaintiff does not contest judgment being entered against her on Counts II and IV.
BACKGROUND
These claims stem from a $13,000 loan to finance repairs to plaintiff's kitchen. On December 22, 1998, plaintiff signed papers which she understood would hire the contractor to repair the kitchen and fund the renovation. According to the plaintiff, the documents plaintiff signed presented the transaction as a money loan rather than as a home improvement installment sales contract even though it only financed the renovations. Moving defendant took a mortgage on her principal dwelling as security. Additionally, plaintiff alleges that the broker's fees and several charges by Equicredit were not discussed.Defendant Ed Rosen performed the repairs unsatisfactorily. As a result, on July 24, 2001, plaintiff forwarded a letter to moving defendant electing to rescind the transaction pursuant to TILA, citing various TILA violations. The letter requested that moving defendant return all monies paid by the plaintiff in connection with the transaction, eliminate any other liabilities she might face, and cancel the security interest on her residence.
The violations cited in plaintiff's July 24, 2001, letter included moving defendant's failure to deliver the disclosure and two copies of the Notice of Right to Rescind required by 15 U.S.C. § 1638 and 15 U.S.C. § 1635(a), respectively, as well as moving defendant's failure to accurately disclose the amount financed, the finance charge, and the annual percentage rate on the loan. Plaintiff also alleged that moving defendant violated 15 U.S.C. § 1639 by charging borrower an extra closing fee and for two separate appraisals.
On August 24, 2001, moving defendant responded by acknowledging that it failed to accurately disclose a $290 Closing/Settlement fee in violation of the TILA. As a result, moving defendant stated that plaintiff would be entitled to rescind the transaction by tendering $9,965.29. Moving defendant calculated this figure by subtracting third party fees and charges totaling $2,114 as well $5,820.71 in payments already tendered from the principal balance of $18,000. However, moving defendant never took any further action to rescind the transaction and plaintiff did not tender the $9,965.29.
Plaintiff filed the instant action on November 20, 2001.
LEGAL STANDARD
In considering a motion for summary judgment, the court must determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986); Arnold Pontiac-GMC, Inc. v. General Motors Corp., 786 F.2d 564, 568 (3d Cir. 1986). Only facts that may affect the outcome of a case are "material." Anderson, 477 U.S. at 248. All reasonable inferences from the record are drawn in favor of the non-movant. See id. at 256.
Although the movant has the initial burden of demonstrating the absence of genuine issues of material fact, the non-movant must then establish the existence of each element on which it bears the burden of proof. See J.F. Feeser, Inc. v. Serv-A-Portion, Inc., 909 F.2d 1524, 1531 (3d Cir. 1990) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)), cert. denied, 499 U.S. 921 (1991). A plaintiff cannot avert summary judgment with speculation or by resting on the allegations in his pleadings, but rather must present competent evidence from which a jury could reasonably find in his favor. Anderson, 479 U.S. at 248; Ridgewood Bd. Of Educ. v. N.E. for M.E., 172 F.3d 238, 252 (3d Cir. 1999); Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir. 1989); Woods v. Bentsen, 889 F. Supp. 179, 184 (E.D. Pa. 1995).
DISCUSSION
1. Count I: TILA Liability and the Statute of Limitations
Defendant moves for summary judgment on plaintiff's claim for damages under TILA, asserting that this claim is time-barred by the appropriate statute of limitations. As clarified in plaintiff's memorandum, plaintiff alleges in Count I that moving defendant violated plaintiff's rights under TILA, 15 U.S.C. § 1635(b) by failing to respond to plaintiff's request to rescind the transaction and seeks appropriate damages and attorneys fees. Compl. ¶ 19.
TILA contains a one-year statute of limitations for damages. 15 U.S.C. § 1640(e). The statute of limitations does not run from the date of the initial transaction, but rather from the "date of the occurrence of the violation." Id.; Oldroyd v. Assoc. Consumer Discount Co., 863 F. Supp. 237, 240 (E.D. Pa. 1994). On July 24, 2001, plaintiff wrote to defendant requesting that it rescind her loan because of numerous other TILA infractions. Plaintiff acknowledged receipt of this request on August 14, 2001, and stated that plaintiff would be entitled to rescind her loan, but allegedly failed to address plaintiff's request. The failure to honor a request for recision constitutes the claim alleged by plaintiff and an independent violation of TILA, giving rise to a separate claim for damages. See Gombosi v. Carteret Mortgage Corp., 894 F. Supp. 176, 182 n. 10 (E.D. Pa. 1995); Aquino v. Pub. Fin. Consumer Disc. Co., 606 F. Supp. 504, 511 (E.D. Pa. 1985); In re McNinch, 250 B.R. 848, 852 (Bankr. W.D. Pa. 2000); see also Dowdy v. First Metro. Mortgage Co., 2002 WL 74851, at *2 (N.D. Ill. Jan. 29, 2002) (statute of limitations for damages on a failure to rescind claim begins running when plaintiff gives defendant proper notice of recision). Plaintiff filed the instant action on November 20, 2001. Accordingly, under the undisputed facts the alleged violation of the TILA occurred within the year-long limitations period and summary judgment on this count would be inappropriate.
Plaintiff cites Bartholomew v. Southampton Nat'l Bank of Easton, 584 F.2d 1288, 1296 (3d Cir. 1978), for the proposition that the one-year statute of limitations for TILA actions begins to run when the agreement is executed. However, the holding in that case is limited to a failure to disclose action under TILA and therefore, not dispositive for the instant case alleging defendant's failure to rescind the loan agreement.
2. Count V: UTPCPL Liability
Defendant also moves for summary judgment on Count V, asserting that the claim fails as a matter of law. In Count V, plaintiff alleges that the moving defendant violated Pennsylvania's Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 P.S. § 201-2, as the lender in a Home Improvement Finance Act ("HIFA"), 73 P.S. § 500 et seq., transaction by writing what was in substance a HIFA transaction as a straight money loan.
Presumably, plaintiff asserts her claims under UTPCPL's catch-all provision which proscribes "[e]ngaging in any other fraudulent conduct which creates a likelihood of confusion or of misunderstanding." 73 Pa. Stat. Ann § 201-2(4)(xxi).
UTPCPL provides that a consumer may sue a seller of goods or services who commits an unfair trade practice. See Williams v. Nat'l Sch. of Health Tech., 836 F. Supp. 273, 283 (E.D. Pa. 1993). To prevail under the catch-all provision of UTPCPL, defendant contends that plaintiff must prove either that "another consumer protection statute has been violated, or establish the . . . elements of common law fraud." Def.'s Mot. Summ. J. at 10. The elements of common law fraud include misrepresentation of a material fact, justifiable reliance, scienter, and damages. See Piper v. American Nat'l Life Ins. Co. of Texas, 228 F. Supp.2d 553, 560 (M.D. Pa. 2002); Giangreco v. United States Life Ins. Co., 168 F. Supp.2d 417, 424 (E.D. Pa. 2001); Fisher v. Aetna Life Ins. Co., 39 F. Supp.2d 508, 511-12 (M.D. Pa. 1998), aff'd without op., 176 F.3d 472 (3d Cir.), cert. denied, 528 U.S. 816 (1999).
Mortgage transactions constitute "trade or commerce" within the scope of the UTPCPL. See In re Smith, 866 F.2d 576, 581-82 (3d Cir. 1989).
The cases cited by moving defendant in support of the instant motion never indicate that a violation of any "consumer protection statute" serves as an automatic violation of the UTPCPL. In fact, one such case appears to reject the contention that violation of a consumer protection statute constitutes statutory fraud that is actionable under the UTPCPL. See Prime Meats, Inc. v. Yochim, 619 A.2d 769, 773-74 (Pa.Super. 1993), appeal denied, 646 A.2d 1180 (1994).
Defendant contends that it cannot be held liable for UTPCPL violations by Steven and Ed Rosen as an assignee of a Home Owners Equity and Protection Act ("HOEPA") contract, as alleged by plaintiff in paragraph 32 of the complaint. Plaintiff concedes that defendant, as the holder of a HOEPA contract, is not derivatively liable for an UTPCPL violation. Moreover, even assuming that common law fraud is present, plaintiff fails to allege in her complaint or establish by evidence or law that defendant would be derivatively liable under UTPCPL. While plaintiff alleges the Rosens engaged in fraudulent behavior, plaintiff never alleges that moving defendant did. Although the moving defendant was the originator of the mortgage at issue, plaintiff fails to allege or present any evidence that it ever knowingly engaged in misrepresentation. Therefore, summary judgment will be granted on Count V.
An appropriate order will be entered.
ORDER
AND NOW, this day of May, 2003, upon consideration of defendant Equicredit Corporation of America's Motion for Partial Summary Judgment (Doc. #8) and plaintiff's response thereto, consistent with the accompanying memorandum, IT IS HEREBY ORDERED that said Motion is GRANTED in part in that judgment is entered in favor of defendant Equicredit Corporation of America only on Counts II, IV, and V. The balance of this motion is DENIED.