FRANKLIN et al v. FINANCIAL FREEDOM ACQUISITION, LLC et al

Filing 68

OPINION. Signed by Judge Robert B. Kugler on 4/1/2014. (drw)

NOT FOR PUBLICATION

(Doc. Nos. 54, 61)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
CAMDEN VICINAGE
___________________________________
:
ALEXANDER FRANKLIN and
:
GLORIA FRANKLIN,
:
:
Plaintiffs,
:
Civil No. 12-7884 (RBK/JS)
:
v.
:
OPINION
:
FINANCIAL FREEDOM ACQUISITION, :
LLC, ACCURATE TITLE GROUP, LLC, :
HOMEAMERICAN CREDIT, INC.,
:
LEND-MOR MORTGAGE BANKERS,
:
CORP., OCWEN LOAN SERVICING,
:
LLC, and DEUTCHE BANK NATIONAL :
TRUST,
:
:
Defendants.
:
___________________________________ :
KUGLER, United States District Judge:
This matter comes before the Court upon the motion of Defendant Accurate Title Group,
LLC (“Accurate Title”) to dismiss the Amended Complaint of Alexander Franklin and Gloria
Franklin (“Plaintiffs”) against it, and upon the motion of Defendant Financial Freedom
Acquisition, LLC (“Financial Freedom”) to dismiss Plaintiff’s Amended Complaint against it.
For the following reasons, Financial Freedom’s motion will be GRANTED IN PART. Count I
and Count VI of the Amended Complaint will be dismissed, and the Court declines to exercise
jurisdiction over Plaintiffs’ remaining state-law claims.
I.

BACKGROUND AND PROCEDURAL HISTORY
This case arises out of several mortgage-related transactions involving the Franklins. In

November 1998, Mr. and Mrs. Franklin purchased a home at 321 Market Street, in Palmyra,

New Jersey. Am. Compl. ¶ 17. In connection with this transaction, the Franklins gave a
mortgage to Defendant HomeAmerican Credit, Inc. (“HomeAmerican”). 1 Id. In connection
with the same transaction, a mortgage was also placed on a vacant piece of land in Westampton,
New Jersey, which the Franklins evidently owned prior to the purchase of their Palmyra home.
Id. The HomeAmerican loan was serviced by Defendant Ocwen Loan Servicing, LLC
(“Ocwen”). Id. ¶ 19. On November 16, 2009, the HomeAmerican mortgage was assigned to
Defendant Deutsche Bank National Trust Company (“Deutsche Bank”). 2 Id. ¶ 17. A notice of
lis pendens was filed against the Franklins’ property in connection with the HomeAmerican loan
on October 26, 2004. 3 Id.
In March 2009, the Franklins entered into a reverse mortgage with Defendant Lend-Mor
Mortgage Bankers, Corp. (“Lend-Mor”). Id. ¶ 18. It is unclear from the Amended Complaint
whether the Lend-Mor mortgage was placed on the Palmyra property, the Westampton property,
or both. The Franklins allege that the mortgage with Lend-Mor was intended to pay off the
HomeAmerican loan that originated in 1998, to extinguish the HomeAmerican mortgages on the
Palmyra and Westampton properties, and to extinguish the lis pendens. Id. The Lend-Mor
mortgage was assigned in June 2009 to Financial Freedom Senior Funding Corporation. Id. In
November 2009, it was then further assigned to Mortgage Electronic Registration Systems, Inc.
(“MERS”) as nominee for Defendant Financial Freedom Acquisition LLC. Id. The Franklins
purchased title insurance in connection with the 2009 reverse mortgage loan through Defendant
Accurate Title. Id. ¶ 19.
Although the Amended Complaint alleges that Financial Freedom was a subsequent

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Also referred to in the Amended Complaint as HomeAmerican Credit, Inc. d/b/a Upland Mortgage.
Incorrectly pled in the Amended Complaint as “Deutche Bank.”
3
The lis pendens procedure is governed by N.J.S.A. 2A:15-6. It is unclear from the Amended Complaint whether
the lis pendens was filed against the Palmyra property, the Westampton property, or both.
2

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assignee of the 2009 reverse mortgage loan, and not the originating lender, the Franklins allege
that Financial Freedom induced them to enter into the reverse mortgage loan though promises
that the loan would pay off existing mortgages and other liens on their properties. Id. ¶ 41. As a
result of the 2009 reverse mortgage loan, the Franklins’ existing mortgages with HomeAmerican
were partially released. Id. ¶ 17. Although the Franklins allege that the loan with
HomeAmerican was “paid in full,” it is unclear whether they allege that it was paid by the
Franklins, by the entities involved in the reverse mortgage transaction, or both. Id.
The Amended Complaint indicates that the Franklins did not receive any funds from the
Financial Freedom loan, although they do not indicate whether they received any funds from the
loan involving Lend-Mor. Id. ¶ 20. They further allege that they were “tricked” into signing the
mortgage with Financial Freedom, and were promised that all existing mortgages and liens
would be paid and released as a result of the Financial Freedom mortgage. 4 Id. The Franklins
charge that Accurate Title and Financial Freedom “orchestrated a fraudulent transaction or had
direct knowledge of the fraud being committed against the Plaintiffs.” Id. ¶ 21. They accuse
Accurate Title and Financial Freedom of creating fraudulent documents, making unauthorized
payments out of the mortgage proceeds, and receiving disbursements from the mortgage. Id.
The Franklins also charge that Accurate Title “represented to the Plaintiffs that they would payoff all mortgages and liens as of the date of the re-finance mortgage from [Financial Freedom].”
Id. ¶ 44. They allege that Accurate Title never paid the liens as promised, and that Plaintiffs paid
4

In describing the facts involved in this case, the Court endeavors to use the same descriptions as Plaintiffs,
although recognizing that certain descriptions appear to be contradictory. For example, Plaintiffs make repeated
references to “the FFAL [Financial Freedom] loan.” See Am. Compl. ¶ 20. However, another portion of the
Amended Complaint describes the involvement of Financial Freedom as the subsequent assignee of a mortgage loan
between Plaintiffs and Lend-Mor. Id. ¶ 18. The Court assumes that one relevant reverse mortgage loan was
originated in 2009 involving Plaintiffs, that Lend-Mor was the lending bank involved in that loan, and that the
mortgage was subsequently assigned to Financial Freedom. The Court further assumes that this is the loan that
Plaintiffs are referring to when referring to “the FFAL loan.” The allegation that Plaintiffs signed a mortgage with
Financial Freedom also appears to be at odds with their earlier claim that they signed a mortgage with Lend-Mor,
which was later reassigned to Financial Freedom. See Am. Compl. ¶¶ 18, 20.

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substantial fees to Accurate Title for title insurance for a mortgage that was never funded. Id.
They indicate that they suffered the loss of their home as a result of the actions of the defendants
in this matter. Id. The Amended Complaint alleges that Financial Freedom and Accurate Title
improperly failed to provide documentation related to the relevant transactions, despite repeated
requests from Plaintiffs for such documents. Id. ¶ 47. They further allege that these two entities
made false representations about the costs of the loan. Id. ¶ 56.
On December 28, 2012, Plaintiffs filed the present action. After motions to dismiss the
complaint were filed by Financial Freedom and Deutsche Bank, Plaintiffs filed a motion seeking
to amend their complaint. After that motion was denied because Plaintiffs did not attach a copy
of a proposed Amended Complaint, Plaintiffs renewed their motion and filed a copy of a
proposed Amended Complaint. Magistrate Judge Schneider heard oral arguments on Plaintiffs’
motion to amend on July 22, 2013. Rather than granting Plaintiffs leave to file their proposed
Amended Complaint, Judge Schneider granted Plaintiffs 30 days to file an amended complaint in
any form they chose. See Transcript of July 22, 2013 Hearing at 17 (Accurate Mot. Dismiss, Ex.
B). On August 21, 2013, Plaintiffs filed their Amended Complaint, which is the current
operative pleading in this matter. The Amended Complaint asserts claims against Financial
Freedom under the Truth-in-Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., and under the Real
Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq. It also asserts state-law
statutory claims under the New Jersey Consumer Fraud Act, and state common law causes of
action for intentional misrepresentation, breach of contract, conversion, breach of fiduciary duty,
and negligence. While the claims under federal law are only asserted against Financial Freedom,
state-law claims are asserted against all of the defendants.
II.

LEGAL STANDARD

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Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss an action for failure
to state a claim upon which relief may be granted. With a motion to dismiss, “courts accept all
factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and
determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled
to relief.” Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir. 2009) (internal quotations
omitted). In other words, a complaint survives a motion to dismiss if it contains sufficient
factual matter, accepted as true, to “state a claim to relief that is plausible on its face.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007).
A claim may be dismissed as untimely under Rule 12(b)(6) if “the time alleged in the
statement of a claim shows that the cause of action has not been brought within the statute of
limitations.” Robinson v. Johnson, 313 F.3d 128, 135 (3d Cir. 2002) (quoting Hanna v. U.S.
Veterans’ Admin. Hosp., 514 F.2d 1092, 1094 (3d Cir. 1975)). The statutory bar must be
“apparent on the face of the complaint” in order to form the basis for a dismissal under Rule
12(b)(6). Bethel v. Jendoco Constr. Corp., 570 F.2d 1168, 1174 (3d Cir. 1978). See also
Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.1 (3d Cir. 1994) (“While
the language of Fed. R. Civ. P. 8(c) indicates that a statute of limitations defense cannot be used
in the context of a Rule 12(b)(6) motion to dismiss, an exception is made where the complaint
facially shows noncompliance with the limitations period and the affirmative defense clearly
appears on the face of the pleading.”).
III.

DISCUSSION
The Court initially declines the invitation of Financial Freedom to dismiss the entire

Amended Complaint against it because it is allegedly only a loan servicer. The Amended
Complaint identifies Financial Freedom as an assignee of the mortgage loan, and not as a

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servicer. Am. Compl. ¶ 18. Liability under certain causes of action asserted by Plaintiffs may be
imposed upon assignees. For example, “TILA imposes liability only on purchasers and
assignees of mortgages,” but “loan servicers cannot be liable under TILA.” Stump v. WMC
Mortg. Corp., Civ. No. 02-326, 2005 WL 645238, at *10 (E.D. Pa. Mar. 16, 2005). As the
Court’s examination must be limited to the four corners of the complaint, the Court must assume
that Financial Freedom is an assignee, as the Amended Complaint alleges, and not a servicer, as
Financial Freedom urges in its moving brief. The Court will begin by analyzing the two federal
law claims in turn, which are asserted only against Financial Freedom.
A.

Truth-in-Lending Act (TILA)

“TILA is a federal consumer protection statute, intended to promote the informed use of
credit by requiring certain uniform disclosures from creditors.” In re Cmty. Bank of N. Va. &
Guar. Nat’l Bank of Tallahassee Second Mortg. Loan Litig., 418 F.3d 277, 303 (3d Cir. 2005). It
is designed to “assure a meaningful disclosure of credit terms so that the consumer will be able
to compare more readily the various credit terms available to him and avoid the uninformed use
of credit.” 15 U.S.C. § 1601(a). To that end, TILA requires creditors to provide borrowers with
certain disclosures regarding things like finance charges, percentage rates of interest, and
borrower’s rights. See 15 U.S.C. §§ 1631, 1632, 1638. A creditor who violates TILA may be
subject to criminal penalties, in addition to statutory and actual damages relating to a creditor’s
failure to make the required disclosures. See 15 U.S.C. §§ 1611, 1640.
In addition to providing a right to damages, TILA also permits a borrower whose loan is
secured with a “principal dwelling” to rescind the loan transaction entirely until “midnight of the
third business day following the consummation of the transaction or the delivery of the
information and rescission forms required under this section together with a statement containing

6

the material disclosures required under this subchapter, whichever is later.” 15 U.S.C. § 1635(a).
If the lender fails to provide or deliver the appropriate forms and disclosures, the obligor’s right
of rescission will extend for three years after consummation of the transaction. 15 U.S.C. §
1635(f).
In the Amended Complaint, Plaintiffs assert a TILA cause of action against Financial
Freedom, alleging that it failed to deliver the appropriate disclosures to Plaintiffs in connection
with the right to rescind. Plaintiffs also allege that Financial Freedom required them to proceed
with the reverse mortgage transaction prior to disclosing the actual financing terms, and that it
refused to rescind the transaction.
It is not necessary to consider whether Plaintiffs have pleaded a sufficient basis for their
TILA claims, because the claims are time-barred. Where a plaintiff seeks money damages, a
one-year statute of limitations applies, from the day on which the underlying loan agreement is
executed. Cmty. Bank of N. Va., 418 F.3d at 304-05, 15 U.S.C. § 1640(e). If the remedy a
plaintiff seeks is rescission, the applicable time limit is three years after consummation of the
loan transaction or the sale of the property, whichever occurs first. 15 U.S.C. § 1635(f). The
time limit for seeking rescission is an absolute bar to a cause of action if the right is not exercised
within the three-year period. See Ramadan v. Chase Manhattan Corp., 156 F.3d 499, 505 (3d
Cir. 1998) (indicating that “the time limit for rescinding a loan transaction under . . . TILA
extinguishes the right itself, as opposed to the right to a remedy, and thus is not a typical statute
of limitations”). The three-year time limit is thus a statute of repose, which is not subject to
equitable tolling. Cmty. Bank of N. Va., 622 F.3d at 301 n.18; see also Jones v. Saxon Mortg.,
Inc., 537 F.3d 320, 327 (4th Cir. 1998) (“Because § 1635(f) is a statute of repose, the time period
stated therein is typically not tolled for any reason”). The United States Supreme Court has held

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that TILA “permits no federal right to rescind . . . after the 3-year period of § 1635(f) has run.”
Beach v. Ocwen Fed. Bank, 523 U.S. 410, 419 (1998).
Here, Plaintiffs allege that they “gave a mortgage to [Lend-Mor] dated March 30, 2009.”
Am. Compl. ¶ 18. This is the mortgage they seek to rescind under TILA. The complaint was
filed on December 28, 2012, which is more than three years the date the loan closed. Plaintiffs
argue that the loan never consummated because the loan was never funded. Thus, it is Plaintiffs’
position that the three-year period during which a borrower can seek rescission has still not yet
commenced. It is clear from the Plaintiffs’ Amended Complaint that some funds were
distributed pursuant to the 2009 reverse mortgage transaction. For example, Plaintiffs allege that
“a Partial Release of the [prior] Mortgage was recorded on August 3, 2009.” Am. Compl. ¶ 17.
It is clear that the loan was not funded to the extent that Plaintiffs allege they were promised.
But this does not result in an open-ended opportunity to pursue a TILA claim without respect to
the statutory time frame. The three-year window during which to bring a rescission claim under
TILA begins on the date of consummation of the loan transaction, which means “the time that a
consumer becomes contractually obligated on a credit transaction.” Guebara v. Saxon Mortg.,
Civ. No. 11-427, 2011 WL 1670762, at *2 (E.D. Cal. May 3, 2011) (quoting 12 C.F.R. §
226(a)(13)). The time frame typically ends “three years after the loan closes or upon sale of the
secured property, whichever date is earlier.” Beach, 523 U.S. at 411. Plaintiffs have cited no
law indicating that TILA’s statutory time window does not begin to run if a loan is not funded
the way that a plaintiff expects it to be. The Amended Complaint describes a loan transaction
and an extension of credit by the lender in connection with that loan, which constitutes a
consummation of the loan. It repeatedly asks for rescission of the 2009 loan transaction, which
would not be necessary if no funds were disbursed and Plaintiffs had no contractual obligation

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arising from the transaction. Thus, Plaintiffs’ TILA claim for rescission brought more than three
years after the closing of the mortgage loan at issue are time-barred.
It is equally clear that Plaintiffs’ claims for money damages under TILA are time-barred.
Claims for actual and statutory damages under TILA may be brought “within one year from the
date of the occurrence of the violation.” 15 U.S.C. § 1640(e); see also Beach, 523 U.S. at 412. It
is apparent from the face of the Amended Complaint that the alleged TILA violations all
occurred in 2009. Plaintiffs advance no argument as to why the one-year statute of limitations
should not apply. As these claims were not asserted within one year of the occurrence of the
alleged violations, they are held to be barred by the statute of limitations.
B.

Real Estate Settlement Procedures Act (RESPA)

Plaintiffs also allege that Financial Freedom violated RESPA when it failed to provide
certain disclosures, closing documents, and notices to Plaintiffs, when it failed to establish an
escrow account for the proceeds of the sale, 5 and when it did not respond to a written request
from Plaintiffs. Am. Compl. ¶ 52. 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., 132 S. Ct. 2034,
2038 (2012) (quoting 12 U.S.C. § 2602(3)).
Plaintiffs’ claims under RESPA are also time-barred. Like their TILA claims, claims
under RESPA are subject to a limitations period of either one year or three years “from the date
of the occurrence of the violation,” depending on the type of violation. 12 U.S.C. § 2614.
Plaintiffs repeat their argument that the claims are not time-barred because the loan never

5

This is another instance where it is difficult to discern what the Amended Complaint is precisely alleging, as it
does not describe the sale of property in conjunction with the loan involving Financial Freedom.

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consummated. However, claims under RESPA are not connected with the consummation of a
loan, unlike TILA rescission claims. They are connected with the date of occurrence of the
violation. Id. Although none of the violations asserted by Plaintiffs in the Amended Complaint
are accompanied by an alleged date, all allegations, save for one, appear to clearly relate to either
the origination or assignment of the loan, or to the transfer of loan servicing, which were all
more than three years prior to the filing of this complaint. 6 Further, Plaintiffs do not argue in
their opposition brief that any alleged RESPA violation took place within three years prior to the
filing of their initial complaint.
The only RESPA allegation that is plausibly unconnected with the origination,
assignment, or transfer of the loan asserts that Financial Freedom failed “to respond to a
qualified written request from the borrower.” Am. Compl. ¶ 52. This allegation appears to relate
to the requirement found in REPSA § 6 that requires loan servicers to respond to certain
borrower inquiries. 12 U.S.C. § 2605(e). That provision requires that “[i]f any servicer of a
federally related mortgage loan receives a qualified written request from the borrower (or an
agent of the borrower) for information relating to the servicing of such loan, the servicer shall
provide a written response acknowledging receipt of the correspondence within 5 days . . . unless
the action requested is taken within such period.” 12 U.S.C. § 2605(e)(1)(A). 7
In addition to not including the date when the qualified written request was allegedly
made, the Amended Complaint fails to allege any facts demonstrating what was included in the
written request, in order to show that Plaintiffs actually made a “qualified written request” as the

6
Plaintiffs allege that the subject loan originated on March 30, 2009, was assigned to Financial Freedom Senior
Funding Corporation on June 9, 2009, and was further assigned to Mortgage Electronic Registration Systems, Inc.,
as nominee for Financial Freedom Acquisition LLC (the Financial Freedom entity that is a defendant in this matter)
on November 17, 2009. Am. Compl. ¶ 18. All of these dates are more than three years prior to the filing of the
initial complaint.
7
The time limit for bringing a claim for a violation of 12 U.S.C. § 2605 is three years. See 12 U.S.C. § 2614.

10

term is defined in the statute. At least one Court in this district has dismissed a RESPA claim
alleging a qualified written request violation, where the pleading contained an almost identical
conclusory pleading that a “qualified written request” was made, because it was “pled in the
conclusory manner Iqbal and Twombly have made clear will not pass muster under Rule 8(a).”
O’Connor v. First Alliance Home Mortg., Civ. No. 12-111, 2012 WL 762351, at *2 (D.N.J. Mar.
6, 2012). Thus, in addition to the three-year time bar, the Court finds that the qualified written
request allegation fails because it is nothing more than a threadbare conclusion that a violation
has occurred. See Iqbal, 556 U.S. at 678. Plaintiffs’ RESPA claim against Financial Freedom
thus fails because all of their allegations are either time barred, fail to meet the applicable
pleading standards, or both.
C.

Leave to Amend

Because the TILA and RESPA claims will be dismissed due to bring brought outside of
the statutory time limits, the Court finds that it would be futile for Plaintiffs to amend these
claims. When amendment would be futile, a court may dismiss a claim with prejudice. See In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). To the extent that
Plaintiffs may wish to amend their pleadings to state a claim under RESPA by describing a
“qualified written request” made within the three years prior to the filing of suit, the Court also
finds that amendment would be futile. A previous court in this district found that amendment of
a RESPA qualified written request claim would be futile where, as here, “[t]he Complaint itself
contains no indication that the claim could be cured by amendment, and Plaintiffs give no
explanation at all as to how the claim might be salvaged.” O’Connor, 2012 WL 762351, at *2.
Further, the Amended Complaint is Plaintiffs’ third attempt at pleading a viable cause of
action under RESPA and TILA. As discussed earlier, after some defendants moved to dismiss

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Plaintiffs’ initial complaint, Plaintiffs moved for leave to file an amended complaint. At the time
they filed the amended complaint, they were on notice of Financial Freedom’s arguments as to
the time limitations under TILA and RESPA. See Mot. Dismiss of Financial Freedom, Mar. 15,
2013 (ECF Doc. No. 17). Further, at the July 22, 2013 hearing before Judge Schneider,
Plaintiffs’ counsel acknowledged that he was aware of the defendants’ objections that are now
the subject of the instant motion, including the defendants’ argument that the claims are timebarred. See Transcript of July 22, 2013 Hearing at 7 (Accurate Mot. Dismiss, Ex. B). Judge
Schneider warned Plaintiffs’ counsel that if he was given another opportunity to amend the
complaint, and it was found deficient, the defendants would have “pretty good grounds to say . . .
now we know it’s futile, because plaintiff has already been on notice on two occasions.” Id. at
11. He further warned Plaintiffs’ counsel that “this probably is going to be your last chance” to
amend the complaint to correct deficiencies. Id. at 18. Now, despite being on notice of the
defendants’ objection to their TILA and RESPA claims as being time-barred and as not meeting
the applicable pleading requirements, and despite Judge Schneider’s efforts to ensure that they
were aware of the alleged deficiencies in their prior pleading attempts, Plaintiffs have not alleged
facts supporting a viable cause of action under TILA or RESPA that is not time-barred. Thus,
these claims will be dismissed with prejudice.
D.

State Law Claims

As all of Plaintiffs’ claims arising under federal law will be dismissed, and Plaintiffs have
pleaded no other basis for jurisdiction, 8 the Court will decline to exercise supplemental
jurisdiction over the remaining state-law claims. 28 U.S.C. § 1367(c)(3).
8

In actuality, Plaintiffs have not properly pled jurisdiction in the Amended Complaint. The jurisdictional statement
indicates that “[t]his Court has subject matter jurisdiction over all causes of action stated in this complaint pursuant
to 28 U.S.C. §§ 1334 and 28 U.S.C. § 157.” Am. Compl. ¶ 6. These statutes relate to jurisdiction over cases arising
under the Bankruptcy laws. However, the Court interprets the Amended Complaint as attempting to assert federal
question jurisdiction under 28 U.S.C. § 1331.

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IV.

CONCLUSION
For the foregoing reasons, Financial Freedom’s motion will be GRANTED IN PART.

Count I and Count VI of Plaintiffs’ Amended Complaint, alleging TILA and RESPA claims,
respectively, will be DISMISSED WITH PREJUDICE. Because the Court will decline to
exercise jurisdiction over Plaintiffs’ state-law claims, Accurate Title’s motion will be
DISMISSED AS MOOT. An accompanying Order shall issue.

Dated: 4/1/2014

/s/ Robert B. Kugler
ROBERT B. KUGLER
United States District Judge

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