Cantrell et al v. New Penn Financial LLC et al
OPINION AND ORDER granting in part and denying in part 23 Motion for Judgment on the Pleadings as set out. Signed by Honorable Donald C Coggins, Jr on 9/17/2018.(abuc)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
Kevin Cantrell and AnnaMarie Cantrell, )
New Penn Financial, LLC, Avenue 365 )
Lender Services, Jake Brown, Shell
C/A No. 7:17-cv-01078-DCC
OPINION AND ORDER
This matter comes before the Court on Defendants’ Partial Motion for Judgment
on the Pleadings. ECF No. 23. Plaintiffs filed a Response in Opposition, ECF No. 30,
and Defendants’ filed a Reply, ECF No. 31. Accordingly, the Motion is ripe for review.
Plaintiffs filed their initial Complaint in the Court of Common Pleas for Spartanburg
County, South Carolina on October 31, 2016, asserting five state law causes of action.
ECF No. 1-1 at 3–11. Defendants filed an Answer and Motion to Dismiss on January 6,
2017. Id. at 12–64. On February 9, 2017, Plaintiffs filed a Motion to Amend Complaint,
and the state court entered a Consent Order to Amend Complaint on April 4, 2017. Id. at
65–68. Thereafter, on April 10, 2017, Plaintiffs filed an Amended Complaint, which
asserted two new causes of action—violation of the “Mortgage Broker Fee Agreement”
and violation of the Real Estate Settlement Procedures Act (“RESPA”).1 Id. at 69–78.
12 U.S.C. § 2601 et seq.
Defendants removed this action on April 25, 2017, based on federal question
jurisdiction in light of the newly added RESPA claim and supplemental jurisdiction
pursuant to 28 U.S.C. § 1367(a). ECF No. 1. That same day, Defendants filed an Answer
and a Motion to Dismiss. ECF Nos. 4, 5. Plaintiffs filed a Response in Opposition on
May 9, 2017, and Defendants filed a Reply on May 16, 2017. ECF Nos. 10, 13.
On June 20, 2017, the Court issued an Order granting in part, denying in part, and
denying without prejudice to refile in part. ECF No. 20. Specifically, the Court: (1) denied
Defendants’ Motion as to Plaintiffs’ claim under the South Carolina Unfair Trade Practices
Act (“SCUTPA”); (2) granted Defendants’ Motion as to Plaintiffs’ claims for violations of
Sections 37-10-105 and 37-22-110 of the South Carolina Consumer Protection Code
(“CPC”); and (3) denied the remainder of Defendants’ Motion, giving Plaintiffs leave to file
a Second Amended Complaint to cure “various pleading deficiencies.” Id. at 5–9.
On June 27, 2017, Plaintiffs filed a Second Amended Complaint, which is the
operative Complaint in the Motion currently before the Court. ECF No. 21. Plaintiffs’
Second Amended Complaint alleges that Defendant New Penn Financial (“New Penn”)
solicited Plaintiff Kevin Cantrell to refinance his Veteran’s Administration Home Mortgage
at a lower rate. ECF No. 21 at 2. In February of 2016, Plaintiffs contacted Defendant
New Penn and chose to refinance their home. Id. Defendant New Penn provided
Plaintiffs with numerous documents outlining the terms of the loan. Id. at 3. Defendant
New Penn also required Plaintiffs to execute a variety of documents including a South
Carolina Attorney and Insurance Preference Disclosure. Id. Plaintiffs chose attorney
Whit Bishop as their closing attorney. Id.
Defendant New Penn also provided Plaintiffs with documents that indicated that
an affiliated company, Defendant Avenue 365 Lender Services (“Avenue 365”), could be
used as the closing company, although Defendant Avenue 365’s exact role was not
explained. Id. Plaintiffs’ closing was delayed and some of the terms were changed by
During the process of obtaining the loan, Plaintiffs worked with
Defendant Jake Brown, a mortgage consultant affiliated with the other Defendants. Id.
Defendant Jake Brown “repeatedly assured [Plaintiffs] that everything was taken care of,
the [Plaintiffs] would be protected, and the loan and its terms were good for them.” Id.
However, Defendant Jake Brown “never told [Plaintiffs] that they had their choice of their
own closing company or Title Company or explained what that meant.” Id. No one
working for Defendants asked Plaintiffs about their choice of attorney or Title Company
even though Plaintiffs had chosen attorney Whit Bishop. Id. at 4.
correspondence and documents from Defendant Avenue 365. Id. On the date of the
closing, Plaintiffs were visited at their home by attorney Ryan Breckenridge, who was sent
by and on behalf of Defendants, to handle the closing. Id. at 4. Mr. Breckenridge did not
identify himself as an attorney, instead introducing himself as a notary. Id. Plaintiffs later
learned that Defendant Avenue 365 hired Mr. Breckenridge2 through a third party attorney
placement firm. Id. at 5. Therefore, Plaintiffs assumed the closing documents had been
sent to attorney Whit Bishop. Id. Plaintiffs later learned that the documents were never
Mr. Breckenridge has been publicly reprimanded by the Supreme Court of South
Carolina for similar behavior.
sent to attorney Whit Bishop, and Defendants required Plaintiffs, who were
unrepresented, to sign a new mortgage loan application, a new good faith estimate, a
description of the property, a borrower compliance agreement, and an agreement to
reimburse Defendant Avenue 365 for any and all attorneys’ fees and costs. Id. After the
closing, Plaintiffs were directed to make their mortgage payments to Defendant Shell
Point,3 which they have continued to do. Id. at 4.
As a result of this conduct, Plaintiffs’ Second Amended Complaint asserts the
following causes of action: (1) fraud in the inducement, fraud, and constructive fraud; (2)
violation of the SCUTPA; (3) negligence; (4) violation of the South Carolina CPC; (5)
breach of fiduciary duty; (6) violation of RESPA; and (7) violation of the “Licensing of
Mortgage Broker Act.”4 On July 11, 2017, Defendants filed an Answer. ECF No. 22. On
August 2, 2017, Defendants filed a Partial Motion for Judgment on the Pleadings, which
is the Motion currently before the Court. ECF No. 23. Plaintiffs filed a Response in
Opposition on September 7, 2017, and Defendants filed a Reply on September 14, 2017.
ECF Nos. 30, 31. Accordingly, the Motion is ripe for review.
Rule 12(c) provides that “[a]fter the pleadings are closed—but early enough not to
delay trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c). “[A]
Defendants contend that Defendant Shell Point is a subdivision of Defendant
New Penn. At this procedural posture, the Court accepts Plaintiffs’ Second Amended
Complaint as true. If Defendant Shell Point is not an appropriate party, Defendants may
file an appropriate motion.
S.C. Code Ann. § 40-58-10 et seq.
motion for judgment on the pleadings is decided under the same standard as a motion to
dismiss under Rule 12(b)(6).” Deutsche Bank Nat'l Trust Co. v. IRS, 361 F. App’x. 527,
529 (4th Cir. 2010) (citing Independence News, Inc. v. City of Charlotte, 568 F.3d 148,
154 (4th Cir. 2009)); see also Massey v. Ojaniit, 759 F.3d 343, 353 (4th Cir. 2014) (citing
Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999)). The key difference
between a Rule 12(b)(6) motion and a Rule 12(c) motion is that on a 12(c) motion, the
court “consider[s] the answer as well as the complaint” and “documents incorporated by
reference in the pleadings.” Fitchett v. Cty. of Horry, S.C., C/A No. 4:10-cv-1648-TLWTER, 2011 WL 4435756, at *3 (D.S.C. Aug. 10, 2011) (citations omitted).
To that end, Rule 12(b)(6) of the Federal Rules of Civil Procedure permits the
dismissal of an action if the complaint fails “to state a claim upon which relief can be
granted.” Such a motion tests the legal sufficiency of the complaint and “does not resolve
contests surrounding the facts, the merits of the claim, or the applicability of defenses . .
. . Our inquiry then is limited to whether the allegations constitute ‘a short and plain
statement of the claim showing that the pleader is entitled to relief.’” Republican Party of
N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (internal quotation marks and citation
omitted). In a Rule 12(b)(6) motion, the court is obligated to “assume the truth of all facts
alleged in the complaint and the existence of any fact that can be proved, consistent with
the complaint's allegations.” E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d
175, 180 (4th Cir. 2000). However, while the Court must accept the facts in a light most
favorable to the nonmoving party, it “need not accept as true unwarranted inferences,
unreasonable conclusions, or arguments.” Id.
Therefore, to survive a motion to dismiss, the complaint must state “enough facts
to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570(2007). Although the requirement of plausibility does not impose a probability
requirement at this stage, the complaint must show more than a “sheer possibility that a
defendant has acted unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint
has “facial plausibility” where the pleading “allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id.
Fraud, Constructive Fraud, and Fraud in the Inducement
Defendants seek judgment on the pleadings as to Plaintiffs’ claims for Fraud,
Constructive Fraud, and Fraud in the Inducement. To prevail on a cause of action for
fraud, Plaintiffs “must prove by clear, cogent, and convincing evidence the following
elements: ‘(1) a representation; (2) its falsity; (3) its materiality; (4) either knowledge of its
falsity or a reckless disregard of its truth or falsity; (5) intent that the representation be
acted upon; (6) the hearer’s ignorance of its falsity; (7) the hearer’s reliance on its truth;
(8) the hearer’s right to rely thereon; and (9) the hearer’s consequent and proximate
injury.’” Moseley v. All Things Possible, Inc., 694 S.E.2d 43, 45 (S.C. Ct. App. 2010)
(quoting Regions Bank v. Schmauch, 582 S.E.2d 432, 444–45 (S.C. Ct. App. 2003)). “To
establish constructive fraud[,] all elements of actual fraud except the element of intent
must be established.” O’Quinn v. Beach Assocs., 249 S.E.2d 734, 738 (S.C. 1978).
However, to establish a claim for fraud in the inducement, Plaintiffs “must prove the nine
elements of fraud as well as the following three elements: ‘(1) that the alleged fraudfeasor
made a false representation relating to a present or preexisting fact; (2) that the alleged
fraudfeasor intended to deceive [them]; and (3) that [they] had a right to rely on the
representation made to [them].’”
Moseley, 694 S.E.2d at 45 (quoting Darby v.
Waterboggan of Myrtle Beach, Inc., 344 S.E.2d 153, 155 (S.C. Ct. App. 1986)).
Additionally, because Plaintiffs are asserting fraud claims in federal court, their Second
Amended Complaint must “state with particularity the circumstances constituting fraud”;
however “[m]alice, intent, knowledge, and other conditions of a person’s mind may be
alleged generally.” Fed. R. Civ. P. 9(b).
Defendants contend Plaintiffs have failed to plead representations, materiality,
ignorance, reliance, and proximate injury with the particularity that Federal Rule of Civil
Procedure 9 requires.
Defendants further allege Plaintiffs have failed to allege the
circumstances constituting fraud with particularity and have failed to properly allege any
cause of action for fraud against Defendant Jake Brown. Plaintiffs respond that the
Second Amended Complaint sets forth, in detail, the fraudulent conduct that Defendants
engaged in to induce Plaintiffs to refinance their home loan.
After reviewing the pleadings and arguments of the parties, the Court finds that
Plaintiffs have sufficiently pled causes of action for fraud, constructive fraud, and fraud in
the inducement. Plaintiffs’ Second Amended Complaint alleges a coordinated scheme
whereby Defendants induced Plaintiffs to refinance their home loan based on a series of
promises and representations that Plaintiffs allege are false. Taking Plaintiffs’ allegations
as true, as the Court must at this stage of the proceedings, the Second Amended
Complaint satisfies all of the elements of fraud, constructive fraud, and fraud in the
inducement. See ECF No. 21 at 8–10. Defendants arguments to the contrary ignore the
factual allegations pled throughout the Second Amended Complaint.
correctly note, the Second Amended Complaint “spells out allegations that the
Defendants are working in contravention of South Carolina law to attract borrowers while
using a legally questionable business model, partnerships, and closing process which
deceives [their] customers and, in this specific case, prevented the customer from utilizing
their own personal attorney.” ECF No. 30 at 9. Whether these allegations are true is a
matter to be decided by the factfinder after the parties have had an opportunity to conduct
Federal Rule of Civil Procedure 9 “imposes a heightened pleading requirement for
allegations of fraud in order to give notice to defendants of the plaintiffs’ claim, to protect
defendants whose reputation may be harmed by meritless claims of fraud, to discourage
strike suits, and to prevent the filing of suits that simply hope to uncover relevant
information during discovery.” Doyle v. Hasbro, Inc., 103 F.3d 186, 194 (1st Cir. 1996)
(internal quotations omitted) (citation omitted). As the Fourth Circuit has noted, “[a] court
should hesitate to dismiss a complaint under Rule 9(b) if the court is satisfied (1) that the
defendant has been made aware of the particular circumstances for which she will have
to prepare a defense at trial, and (2) that plaintiff has substantial prediscovery evidence
of those facts.” Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 784 (4th
Cir. 1999). That standard is met in this case, and Defendants’ Motion is denied as to
Plaintiffs’ claims for fraud, constructive fraud, and fraud in the inducement.
Licensing of Mortgage Brokers Act
Defendants seek judgment on the pleadings as to Plaintiffs’ claim for violation of
the Licensing of Mortgage Brokers Act (“Mortgage Brokers Act”). Defendants contend
that Plaintiffs’ claims fail as a matter of law because that Act does not apply to mortgage
lenders or originators, like Defendants New Penn or Jake Brown, or to title service
companies like Defendant Avenue 365. Plaintiffs respond that Defendants’ arguments
are factual in nature and ask the Court to deny Defendants’ Motion in this regard.
Plaintiffs’ Second Amended Complaint alleges that Defendants’ violation of their
duties of care, honesty, loyalty, and disclosure violates the Mortgage Brokers Act,
specifically, but not limited to Sections 40-58-70 and 40-58-78 of the South Carolina
Code. The Mortgage Broker Act in Title 40, Chapter 58 of the South Carolina Code,
applies to mortgage loan brokers. See S.C. Code Ann. § 40-58-30. The Mortgage
Brokers Act states:
“Act as a mortgage broker” means to act, for compensation or gain, or in
the expectation of compensation or gain, either directly or indirectly, by: (i)
soliciting, processing, placing, or negotiating a mortgage loan for a borrower
from a mortgage lender or depository institution or offering to process,
place, or negotiate a mortgage loan for a borrower from a mortgage lender
or depository institution, (ii) engaging in tablefunding of a mortgage loan, or
(iii) acting as a loan correspondent whether those acts are done by
telephone, by electronic means, by mail, or in person with the borrowers or
potential borrowers. “Act as a mortgage broker” also includes bringing a
borrower and lender together to obtain a mortgage loan or rendering a
settlement service as described in 12 U.S.C. 2602(3) and 24 C.F.R. Part
S.C. Code Ann. § 40-58-20(1).
The Court has reviewed Plaintiffs’ Second Amended Complaint, and finds that
Plaintiffs characterization of each of the Defendants leads to a conclusion that they are
not mortgage brokers as contemplated by the Mortgage Brokers Act. Plaintiffs tacitly
acknowledge this in their Response in Opposition by stating, “Defendants themselves
admit the business model is such that all of the companies working to loan borrower’s
(sic) money are either owned by the same company or sister companies.” ECF No. 30
at 18. Indeed, Plaintiffs’ allegations characterize Defendants as mortgage lenders rather
than mortgage brokers. See S.C. Code Ann. § 37-22-110(2) (“‘Act as a mortgage lender’
means to engage in the business of making or servicing a mortgage loan for
compensation or gain, or in the expectation of compensation or gain, either directly or
indirectly, including soliciting, processing, placing, or negotiating a mortgage loan.”).
Therefore, Plaintiffs causes of action under the Mortgage Brokers Act fail as a matter of
law because none of the Defendants are mortgage brokers.5 Accordingly, Defendants’
Motion is granted as to Plaintiffs’ claims under the Mortgage Brokers Act.
South Carolina Unfair Trade Practices Act
Defendants seek judgment on the pleadings as to Plaintiffs’ claim for violation of
the SCUTPA. The SCUTPA “declares ‘unfair or deceptive acts or practices in the conduct
of any trade or commerce . . . unlawful.’” Maybank v. BB&T Corp., 787 S.E.2d 498, 512
(S.C. 2016) (quoting S.C. Code Ann. § 39-5-20(a)). “‘To recover in an action under
[SCUTPA], the plaintiff must show: (1) the defendant engaged in an unfair or deceptive
act in the conduct of trade or commerce; (2) the unfair or deceptive act affected public
interest; and (3) the plaintiff suffered monetary or property loss as a result of the
defendant’s unfair or deceptive act(s).’” Id. (quoting RFT Mgmt. Co. v. Tinsley & Adams
L.L.P., 732 S.E.2d 166, 174 (2012)).
Defendants contend that Plaintiffs have not alleged an unfair or deceptive act or
any damages. The Court finds that Plaintiffs’ factual allegations are sufficient to plausibly
allege an unfair or deceptive act. For example, Plaintiffs allege improper supervision, the
unauthorized practice of law, and Defendants’ failure to disclose their business
While Section 40-58-70 arguably applies more broadly to any “person in the
course of a mortgage loan transaction,” that subsection lists prohibited activities that may
lead to administrative penalties; it does not create a private cause of action.
relationships. However, Plaintiffs’ allegations as to damages are insufficient even at the
pleading stage. Plaintiffs merely allege they have suffered “an unfair loan and Title
Insurance policy, execution of documents in which they give up, assign, or pledge legal
rights and remedies, and loss of the right to representation, oversight, and supervision of
their loan.” ECF No. 21 at 11–12. These allegations do not plausibly allege a “monetary
or property loss” as is required by SCUTPA. Accordingly, the Court grants Defendants’
Motion as to Plaintiffs’ SCUTPA claim and affords Plaintiffs ten (10) days to amend their
pleadings to plausibly plead a claim for damages.
Defendants seek judgment on the pleadings as to Plaintiffs’ claim for negligence.
“To prevail on a negligence claim, a plaintiff must establish duty, breach, causation, and
Lord v. D & J Enters., Inc., 757 S.E.2d 695, 702 (S.C. 2014).
Defendants contend only that they owed no duty to Plaintiffs. The existence of a legal
duty is a question of law for the court to determine. Cole v. Boy Scouts of Am., 725 S.E.2d
476, 478 (S.C. 2011). “An affirmative legal duty to act exists only if created by statute,
contract, relationship, status, property interest, or some other special circumstance.”
Charleston Dry Cleaners & Laundry, Inc. v. Zurich Am. Ins. Co., 586 S.E.2d 586, 588
In their Second Amended Complaint, Plaintiffs allege that “Defendants owed a duty
to provide clients and customers with correct information to comply with their contracts,
obligations, requirements, statutes, and regulations and owed a duty to act in good faith,
perform due diligence, provide honest and accurate information, and investigate the
status of [their] subcontractors and information provided by said subcontractors during
and before closings.” ECF No. 21 at 12. Defendants point out, however, that South
Carolina law does not recognize a duty between a creditor and a debtor, between a
mortgage servicer and debtor, or between “third parties whose relationship arises through
the lender” and a debtor. ECF No. 23 at 17–18.
In response, Plaintiffs contend that Defendants voluntarily assumed a duty by
virtue of their actions and that Defendants owed Plaintiffs a duty arising from the attorney
choice statute.6 In reply, Defendants deny voluntarily assuming a duty and allege that
Plaintiffs’ claim for negligence per se is being raised for the first time and is improper
because it would permit a double recovery.
See ECF No. 31 at 6 (“The attorney
preference statute, however, already provides a private cause of action allowing for a
consumer to recover actual damages and statutory fees from a creditor who violates the
statute.” (citing S.C. Code Ann. § 37-10-105(A))).
As an initial matter, the Court finds that Plaintiffs’ Second Amended Complaint
contemplates a negligence per se action by alleging a duty pursuant to statute. ECF No.
21 at 12. The Court further notes that Defendants’ position on whether S.C. Code Ann.
§ 37-10-105(A) applies appears to have changed in this litigation.
asserted a cause of action pursuant to that statute in their Amended Complaint,
Defendants moved to dismiss, claiming “Plaintiffs attempt to assert a claim under section
37-10-105 fails and should be dismissed as to all Defendants because the provision does
not create an independent cause of action for which relief can be granted.” ECF No. 4 at
See S.C. Code Ann. § 37-10-102(a) (“The creditor must ascertain prior to closing
the preference of the borrower as to the legal counsel that is employed to represent the
debtor in all matters of the transaction relating to the closing of the transaction . . . and
comply with such preference.”).
14 (emphasis added). Now, Defendants claim that a negligence per se action should fail
because that statute does create a cause of action. ECF 31 at 6.
Notwithstanding Defendants’ change in position, the Court needs not reach the
negligence per se issue, as the Court finds that Defendants chose closing counsel for
Plaintiffs and therefore assumed a duty to use due care in that selection and operation.
“At common law, when there is no duty to act but an act is voluntarily undertaken, the
actor assumes a duty to use due care.” Sherer v. James, 351 S.E.2d 148, 150 (S.C.
1986) (citation omitted). Accordingly, Defendants’ Motion is granted in part and denied
in part, and Plaintiffs’ negligence claim may proceed as to whether Defendants were
negligent in their assumption of the duty to properly choose and supervise closing
South Carolina Consumer Protection Code
Defendants seek judgment on the pleadings as to Plaintiffs’ claim for violation of
the South Carolina CPC. Plaintiffs’ Second Amended Complaint alleges that Defendants
violated Sections 37-10-102 (“Section 102”) and 37-5-108 (“Section 108”) of the South
Carolina Code. Section 37-10-102 sets forth a requirement that a creditor must comply
with a debtor’s attorney preference during the closing of a transaction. Section 37-5-108
provides consumers with a private cause of action as to a creditor’s unconscionable
Turning first to Section 102, Defendants ask the Court for judgment on the
pleadings as to Defendant Jake Brown and Defendant Avenue 365, contending that
neither is a “creditor” as defined in the CPC.
Plaintiffs respond that each of the
Defendants are alter egos and, therefore, those Defendants could be considered
“creditors” at the pleading stage. The CPC defines a “creditor” as “the person who grants
credit in a credit transaction or, except as otherwise provided, an assignee of a creditor’s
right to payment.”
S.C. Code Ann. § 37-1-301(13).
Plaintiffs’ Second Amended
Complaint describes Defendant Jake Brown as a mortgage consultant and Defendant
Avenue 365 as a title insurance and settlement services provider. ECF No. 21 at 3–4.
Neither of these descriptions would qualify as a creditor under the CPC. However,
Plaintiffs specifically pled that Defendants “New Penn Financial, Avenue 365, and Shell
Point are alter egos of each other.” ECF No. 21 at 7. Accordingly, Plaintiffs have stated
a plausible claim for violation of Section 102 as to all Defendants except Defendant Jake
Brown. Therefore, Defendant’s Motion is granted on this claim as to Defendant Jake
Brown and denied as to the remaining Defendants.
As to Plaintiffs’ claim under Section 108, Defendants contend Plaintiffs failed to
allege unconscionability. The Court disagrees. Plaintiffs have pled sufficient factual
allegations to state a plausible claim for violation of Section 108. Defendants’ arguments
are better suited for a motion for summary judgment after the parties have had the
opportunity to conduct discovery. Therefore, Defendants’ Motion is denied as to Plaintiffs’
Section 108 claims.
Breach of Fiduciary Duty
Defendants seek judgment on the pleadings as to Plaintiffs’ claim for breach of
fiduciary duty. To establish a claim for breach of fiduciary duty, Plaintiffs must prove: (1)
the existence of a fiduciary duty, (2) a breach of that duty owed to the plaintiff by the
defendant, and (3) damages proximately resulting from the wrongful conduct of the
defendant.” RFT Mgmt. Co., L.L.C. v. Tinsley & Adams L.L.P., 732 S.E.2d 166, 173 (S.C.
2012) (citations omitted).
“A confidential or fiduciary relationship exists when one
imposes a special confidence in another, so that the latter, in equity and good conscience
is bound to act in good faith and with due regard to the interests of the one imposing the
confidence.” Davis v. Greenwood Sch. Dist. 50, 620 S.E.2d 65, 68 (S.C. 2005) (citation
omitted). “The determination of whether a fiduciary relationship exists is an equitable
issue to be determined by the court.” Cowburn v. Leventis, 619 S.E.2d 437 (S.C. Ct. App.
2005) (citation omitted).
Defendants contend that there is no statutory fiduciary duty applicable to any of
the Defendants because the Mortgage Brokers Act is inapplicable. ECF No. 23 at 19–
20. Furthermore, Defendants contend that Defendant New Penn cannot have a fiduciary
duty with Plaintiffs as South Carolina has not recognized a fiduciary duty between a lender
and a borrower, absent certain circumstances. Id. at 20. The Court disagrees.
Plaintiffs’ Second Amended Complaint contains detailed factual allegations that
Defendants, working in concert, invited a fiduciary obligation through their business model
and promises to guide and counsel borrowers through the loan process.
sufficiently allege that Defendants did not disclose their relationships with each other and
concealed material facts while Plaintiffs were going through the loan refinancing process.
As Plaintiffs note in their Response in Opposition, “the Defendants, collectively, stood in
the shoes of at least four separate and distinct entities, one being [Plaintiffs’] attorney,
and asked or invited [Plaintiffs] to put their trust entirely with one collection of related
entities with no outside or independent audit or oversight.”
ECF No. 30 at 11.
Furthermore, Defendants’ argument about lender-borrower relationships is inapplicable
in this case. See Regions Bank v. Schmauch, 582 S.E.2d 432, 444 (S.C. Ct. App. 2003)
(“However, a bank may be held to a fiduciary duty if it undertakes to advise a depositor
as part of services the bank offers. Such a relationship charges the bank with a duty to
disclose material facts that may affect its customer’s interests.” (internal citation omitted)).
Accordingly, Defendant’s Motion is denied as to this claim.
For the foregoing reasons, the Defendants’ Motion, ECF No. 23, is GRANTED IN
PART and DENIED IN PART as set forth above. Specifically, Defendants’ Motion is
DENIED as to Plaintiffs’ claims for fraud, constructive fraud, and fraud in the inducement;
GRANTED as to Plaintiffs’ claims under the Mortgage Brokers Act; GRANTED as to
Plaintiffs’ SCUTPA claims, with leave for Plaintiffs to amend their allegation of damages
within ten days; GRANTED IN PART and DENIED IN PART as to Plaintiffs’ negligence
claims as set forth above; GRANTED IN PART and DENIED IN PART as to Plaintiffs’
CPC claims as set forth above; and DENIED as to Plaintiffs’ breach of fiduciary duty
IT IS SO ORDERED.
s/Donald C. Coggins, Jr.
United States District Judge
September 17, 2018
Spartanburg, South Carolina
At the end of their Motion, Defendants request the Court dismiss all claims
against Defendant Jake Brown. ECF No. 23 at 26–27. Unless otherwise noted in the
Order, that request is denied.
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