Gunn v. First American Financial Corporation
MEMORANDUM OPINION regarding 22 MOTION to Dismiss. Signed by Judge Richard G. Andrews on 5/30/2014. (nms)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
LA MAR GUNN,
Civ. No. 13-174-RGA
FIRST AMERICAN FINANCIAL
La Mar Gunn, Camden Wyoming, Delaware; Pro Se Plaintiff.
Seth Andrew Niederman, Esquire, Fox Rothschild LLP, Wilmington, Delaware; Counsel
Plaintiff La Mar Gunn filed this action alleging violations of the Real Estate
Settlement Procedures Act ("RESPA"), 12 U.S.C. §§ 2601-2617; the Truth in Lending
Act ("TILA"), 15 U.S.C. § 1601, and a claim for breach of contract. (D.I. 3, 20). Gunn
seeks compensatory, statutory, treble, and punitive damages, as well as equitable
relief. He appears pro se and has been granted leave to proceed in forma pauperis
(D.I. 7). The Court now considers the Defendant's Motion to Dismiss (D.I. 22) the
amended complaint. The matter has been fully briefed. (D.I. 23, 24).
This is a lawsuit following the foreclosure of property Gunn purchased that was
encumbered by a first mortgage. (See D.I. 14 n.2). The original complaint named
Douglas A. Shachtman and First American Financial Corporation as defendants. Upon
motion, the Court dismissed all claims against Shachtman and, upon screening of the
Complaint pursuant to 28 U.S.C. § 1915(e)(2)(B), dismissed the remaining claims
(RESPA, TILA, and contract) as frivolous finding them time-barred. Upon appeal, the
dismissal of Shachtman was affirmed. The Third Circuit vacated dismissal of the
remaining claims and remanded for consideration of the issue of equitable tolling upon
Plaintiff's filing of an amended complaint. (See D.I. 18).
Gunn filed an amended complaint on January 29, 2014. (D.I. 20). On February
12, 2014, First American filed a motion to dismiss pursuant to Rule 12(b)(6) on the
grounds that the Amended Complaint names the wrong defendant, fails to state claims
under the RESPA and the TILA, and that all claims are time-barred with no basis for
First American provided Gunn settlement services at the time he purchased real
property in Bear, Delaware. 1 The Amended Complaint alleges that on March 6, 2006,
First American Financial Corporation, doing business as First American Title, through
its agent Lender's First Choice, provided Gunn with a title policy commitment. (D.I. 20,
ml 7, 9).
At closing, First American issued a first lien title insurance policy on the
property. (Id. at 1f 11 ). Gunn alleges that First American represented to him that there
were no liens on the property, that all outstanding liens were satisfied and, based upon
those representations, he incurred a $360,000 mortgage. (Id.). The Amended
Complaint alleges that First American "fraudulently concealed the facts as evidenced by
the subject title policy issued on March 6, 2006." 2 (Id. at 1f 13). It further alleges that a
counterfeit document was prepared and signed by Select Portfolio Servicing employees
Madeline Ramos and Nikole Shelton, none of whom are named defendants in this
action. 3 (Id. at 1f 15). Finally, the Amended Complaint alleges that the closing took
place without an attorney, even though one is required in Delaware. Gunn alleges that
First American told Gunn an attorney was not needed. (Id. at 1f 20).
As set forth in numerous cases, Gunn lost the property through a foreclosure
The Amended Complaint does not indicate the facts First American allegedly
concealed from Gunn, although one might infer it is the counterfeit document prepared
by Select Portfolio Servicing employees.
The Amended Complaint does not identify the alleged counterfeit document.
From the context, one might guess that it is a false first mortgage (see id. at 1f1f 22-23),
but it might be something else.
STANDARDS OF LAW
Under Rule 12(b)(6), a motion to dismiss may be granted only if, accepting the
well-pleaded allegations in the complaint as true and viewing them in the light most
favorable to the plaintiff, a court concludes that those allegations "could not raise a
claim of entitlement to relief." Bell At/. Corp. v. Twombly, 550 U.S. 544, 558 (2007). "In
deciding motions to dismiss pursuant to Rule 12(b)(6), courts generally consider only
the allegations in the complaint, exhibits attached to the complaint, matters of public
record, and documents that form the basis of a claim." Lum v. Bank of Am., 361 F.3d
217, 221 n.3 (3d Cir. 2004).
A well-pleaded complaint must contain more than mere labels and conclusions.
See Ashcroft v. Iqbal, 556 U.S. 662 (2009). The assumption of truth is inapplicable to
legal conclusions or to "[t]hreadbare recitals of the elements of a cause of action
supported by mere conclusory statements." Id. at 678. When determining whether
dismissal is appropriate, the court must take three steps: "(1) identify the elements of
the claim, (2) review the complaint to strike conclusory allegations, and then (3) look
at the well-pleaded components of the complaint and evaluat[e] whether all of the
elements identified in part one of the inquiry are sufficiently alleged." Ma/leus v.
George, 641 F.3d 560, 563 (3d Cir. 2011). Elements are sufficiently alleged when the
facts in the complaint "show" that the plaintiff is entitled to relief. Iqbal, 556 U.S. at 679
(quoting Fed. R. Civ. P. 8(a)(2)). Deciding whether a claim is plausible will be a
"context-specific task that requires the reviewing court to draw on its judicial experience
and common sense." Id. Because Gunn proceeds prose, his pleading is liberally
construed and his Amended Complaint, "however inartfully pleaded, must be held to
less stringent standards than formal pleadings drafted by lawyers." Erickson v. Pardus,
551 U.S. 89, 94 (2007) (internal quotation marks omitted).
Count One (ml 21 - 27) alleges that First American willfully violated RESPA when
it misrepresented to Gunn that he was in first title position and that there were no liens
against the property in violation of 12 U.S.C. §§ 2601 through 2617. The count alleges
that First American, through its agents, performed a title search and was aware of the
counterfeit document clouding title. In addition, it alleges that an agent of First
American reviewed and confirmed the title search performed by Lenders First Choice
on March 3, 2006, and that First American and its agents intentionally misrepresented
the facts surrounding Gunn's title. Count One alleges that Lenders First Choice issued
"bogus title policies" through First American. Gunn alleges that, because he paid for
the title policy, First American is obligated to either attack the counterfeit documents
filed by Select Portfolio Servicing and/or indemnify him against losses arising from the
forged documents that clouded his title. Gunn alleges that because of First American's
fraudulent concealment, he lost his family's home.
First American contends that the RESPA claim is subject to dismissal given that
the count does not indicate which sections of RESPA were allegedly violated, and that
the allegations do not, in any event, fall under the purview of RESPA. Gunn opposes
dismissal of the RESPA claim on the grounds that First American and its agents
performed a title search and represented to him that there were no valid claims or
defects in the chain of title.
RESPA is a consumer protection statute that regulates the real estate settlement
process, including servicing of loans and assignment of those loans, and imposes
duties on lenders and loan servicers. See 12 U.S.C. § 2601. Its purpose is to effect
certain changes in the settlement process for residential real estate resulting in:
(1) more effective advance disclosure to home buyers and sellers of settlement costs;
(2) the elimination of kickbacks or referral fees that tend to increase unnecessarily the
costs of certain settlement services; (3) a reduction in the amounts home buyers are
required to place in escrow accounts established to insure the payment of real estate
taxes and insurance; and (4) significant reform and modernization of local recordkeeping of land title information. See id. at§ 2601 (b)(1) through (4). RESPA regulates
the services lenders provide "in connection with a real estate settlement," which covers
things such as title searches, title insurance, the preparation of documents, the
origination of a federally related mortgage loan, the handling of the closing or
settlement, and other services. Freeman v. Quicken Loans, Inc., _U.S._, 132 S.Ct.
2034, 2038 (2012) (quoting 12 U.S.C. § 2602(3)).
The Amended Complaint does not indicate the section or sections of RESPA
that First American allegedly violated. Moreover, in reading the allegations, it is evident
that the violations of which Gunn complains do not fall under the ambit of RESPA.
Gunn's remedy as to the facts alleged in Count One - that is, that First American
represented that he was taking the property free and clear of any encumbrances, when
it knew he was not, and issued him a title insurance policy, 4 does not lie under RESPA.
Therefore, the Court will grant the motion to dismiss Count One for failure to state a
claim upon which relief may be granted.
(mf 28-40) alleges that First American violated the TILA, 15 U.S.C.
§ 1601, when it misrepresented to Gunn that there were no existing liens that could
compromise his first lien title position. The Amended Complaint alleges that First
American, through its agents, presented Gunn with a fraudulent title insurance policy in
order to conceal or obfuscate its TILA violations. 5 The Amended Complaint alleges that
First American claims "the misrepresentations, nondisclosures and sham title policy
were the result of innocent mistakes" and that it apologized to Gunn on February 1,
2011 after he was evicted from his home.
First American contends that Gunn has no basis to assert a TILA claim as it is
not a creditor subject to the provision of the TILA. Gunn did not respond to First
American's motion to dismiss the TILA claim.
The TILA was enacted "to assure meaningful disclosure of credit terms so that
the consumer will be able to compare more readily the various credit terms available to
him ... and to protect the consumer against inaccurate and unfair" practices. 15
U.S.C. § 1601; Rossman v. Fleet Bank (R.l.) N.A., 280 F.3d 384, 390 (3d Cir. 2002). It
ln other words, Gunn seems to be alleging that First American was trying to put
itself out of business by issuing bad title insurance policies. If this is what he is alleging,
there is a question whether it is a plausible allegation.
is a remedial statute and is to be liberally construed in favor of borrowers. Smith v.
Fidelity Consumer Discount Co., 898 F.2d 896, 899 (3d Cir. 1990) (citing Bizier v. Globe
Fin. Services, 654 F.2d 1, 3 (1st Cir.1981)). The TILA requires strict liability in favor of
the consumers when mandated disclosures have not been made. 15 U.S.C. § 1640(a);
see also Thomka v. A.Z. Chevrolet Inc., 619 F.2d 246, 249-50 (3d Cir. 1980). To
achieve this end, the statute "requires creditors to provide borrowers with clear and
accurate disclosures of terms," Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412 (1998),
and imposes strict liability on creditors who fail this mandate. See 15 U.S.C. § 1640(a).
The Amended Complaint identifies First American as the entity who issued a title
policy commitment and who issued the title insurance policy at the closing of the real
property that Gunn ultimately lost through foreclosure. It does not identify First
American as a creditor as that term is defined by the TILA. 6 The definition of "creditor"
only to a person who both (1) regularly extends, whether in
connection with loans, sales of property or services, or
otherwise, consumer credit which is payable by agreement
in more than four installments or for which the payment of a
finance charge is or may be required, and (2) is the person
to whom the debt arising from the consumer credit
transaction is initially payable on the face of the evidence of
indebtedness or, if there is no such evidence of
indebtedness, by agreement .... Any person who
originates 2 or more mortgages referred to in [15 U.S.C. §
1602(aa) (2006)] in any 12-month period or any person who
originates 1 or more such mortgages through a mortgage
broker shall be considered to be a creditor for purposes of
The TILA was amended in 2008, 2009, and 2010. The Court will use the version
in effect at the time of the alleged violation.
15 U.S.C. § 1602(f) (2006).
"Whether one is a TILA creditor is a bifurcated question, requiring a person both
to be a 'creditor' in general, by extending credit in a certain minimum number of
transactions, and to be the 'creditor' in the specific transaction in dispute." Po/lice v.
National Tax Funding, L.P., 225 F.3d 379, 411 (3d Cir. 2000) (citation omitted).
As set forth in the allegations of the Amended Complaint, First American is the
entity that provided title insurance to the property Gunn purchased in 2006. In no way
do the allegations of the Amended Complaint even hint that First American is a creditor
as that term is defined by the TILA. It follows that the TILA is inapplicable to the claims
raised against First American in Count Two. Therefore, the Court will grant First
American's motion to dismiss Count Two of the Amended Complaint.
BREACH OF CONTRACT AND STATUTE OF LIMITATIONS
Count Three alleges that, because First American was paid to perform a title
search and issue title insurance, it breached its contract with Gunn when it produced a
report that misrepresented the facts as to the actual chain of title. First American
moves for dismissal on the grounds that the claim is time-barred.
Under Delaware law, the statute of limitations for a breach of contract claim is
three years. 10 Del. C. § 8106. The cause of action accrues "at the time of the
wrongful act, even if the plaintiff is ignorant of the cause of action." Wal-Mart Stores,
Inc. v. AIG Life Ins. Co., 860 A.2d 312, 319 (Del. 2004). Gunn alleges that First
American breached its contract with him when, in performing a title search and issuing
title insurance, it produced a report that misrepresented the facts as to the actual chain
of title. According to the Amended Complaint, First American issued the title insurance
on March 6, 2006. On December 12, 2006, Gunn was notified that foreclosure
proceedings had been commenced against the prior owners of the real property at
Delaware law. (See D.I. 14, 15). At the same time, the Court also determined that the
claims under RESPA and TILA were time-barred in light of the fact that the loan at
issue, and on December 4, 2008, Gunn retained counsel to defend against the
foreclosure. (D.I. 3 ,-r,-r 7, 10).
As previously determined by this Court, the February 1, 2013 filing of this action
clearly exceeds the three-year statute of limitations for a breach of contract claim under
issue was consummated on April 17, 2006 and the February 1, 2013 filing of this action
clearly exceeded the statutes of limitations under RESPA and TILA. See, e.g., 12
U.S.C. § 2614 (RESPA claims brought pursuant to 12 U.S.C. § 2605 must be filed
within three years of the violation, and RESPA claims brought pursuant to 12 U.S.C. §§
2607 or 2608 must be filed within one year of the violation); 15 U.S.C. § 1640(e) (TILA
claims for damages must be brought within one year of the date of the occurrence of
the violation); 15 U.S.C. § 1635(a) and 12 C.F.R. § 226.23(a)(1) (a claim for rescission
under the TILA is barred at the end of the three-year limitations period); Williams v.
Wells Fargo Home Mortg., Inc., 410 F. App'x 495, 498 (3d Cir. 2011).
The Amended Complaint, however, attempts to allege fraudulent concealment
as a means to equitably toll the statute of limitations, but it fails to adequately allege
fraudulent concealment, which must be pied with particularity. See Byrnes v. DeBolt
Transfer, Inc., 741 F.2d 620, 626 (3d Cir. 1984); Fed. R. Civ. P. 9(b) ("In alleging fraud
or mistake, a party must state with particularity the circumstances constituting fraud or
mistake."). "The plaintiff must plead or allege the date, time and place of the alleged
fraud or otherwise inject precision or some measure of substantiation into a fraud
allegation." Frederico v. Home Depot, 507 F.3d 188, 200 (3d Cir. 2007). The Amended
Complaint provides nothing of the sort. Instead, it invokes the theory of equitable tolling
through a legal conclusion without supportive facts. Even if the equitable tolling
pleading requirements only had to meet the Iqbal/Twombly standard, the amended
complain would fail, as it alleges no relevant facts. Notably, Gunn previously alleged
facts in the original Complaint that indicate he became aware of an issue with the
priority of his lien by December 2006, and, if that was not notice, by December 2008,
he retained counsel to defend against the foreclosure. (D. I. 3,
1l1l 8-11 ).
of this Court have noted that the property at issue was sold at sheriff's sale on
December 9, 2008 (U.S. Bank v. Gunn, No. 11-1155, D.I. 38 at 2; see also D.I. 1-2 at
16, entry for 1/30/09 ("court is denying motion to set aside sheriff sale held last month
and the sale is confirmed")), that is, more than four years before this suit was filed. It is
hard to imagine the facts Gunn could allege 7 that would explain why the sheriff's sale
did not give him notice that First American had breached its contract, or violated
RESPA or TILA. In light of the foregoing, the Court finds that there is no factual basis
alleged in the Amended Complaint that would make it plausible to conclude that the
statute of limitations was tolled as to the breach of contract, RESPA, or TILA claims
under a fraudulent concealment theory. Therefore, the Court will grant First American's
In his brief, Gunn alleges that he owned the property until February 1, 2011,
citing New Castle County Land Records, but he does not allege that in his amended
motion to dismiss Counts One, Two, and Three as they are time-barred.
Counts One and Two fail to state a claim upon which relief may be granted and
Counts One, Two, and Three are barred by the applicable statute of limitations.
Therefore, the Court will grant First American's motion to dismiss. 8 (D.I. 22). Gunn was
given an opportunity to cure his pleading defects relating to the tolling of the statute of
limitations, and has failed to do so. He is pro se. Thus, although there is little reason to
believe that he can cure any of the pleading defects that are identified in this opinion, I
will give him one more opportunity to correct them. Thus, dismissal will be without
prejudice. He will be granted a reasonable period of time to file an amended pleading.
An appropriate order will be entered.
Because Gunn and Shachtman were both citizens of the State of Delaware,
there was not complete diversity of parties at the time Gunn filed this suit. Shachtman,
though, was dismissed. I believe that would permit diversity jurisdiction if it would
otherwise exist between Gunn and First American. See Grupo Dataflux v. Atlas Global
Group, L.P., 541 U.S. 567, 573 (2004). Both the original Complaint and the Amended
Complaint allege that First American Financial Corporation is a California corporation,
which I accept as true given the posture of the case. Thus, were the breach of contract
claim not time-barred, the amended complaint would state a basis to exercise diversity
jurisdiction over the breach of contract claim. If there were not diversity jurisdiction, I
would be unlikely to exercise supplemental jurisdiction over the breach of contract
claim, for numerous reasons, including the lengthy history of state court litigation
relating to the property in question.
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