Lenhart et al v. Bank of America, N.A. et al

Filing 69

MEMORANDUM OPINION AND ORDER granting in part and denying in part 15 MOTION to Dismiss; granting as set forth herein and denied in all other respects; granting in part and denying in part 17 MOTION to Dismiss; granting as set forth herein and denied in all other respects; directing that Count II is dismissed as to claims for damages under § 1640 as to EverBank; that Count III is dismissd as to EverBank; that Count IV is dismissed as to Bank of America; and that Count V is dismissed as to Bank of America. Signed by Judge John T. Copenhaver, Jr. on 4/29/2013. (Attachments: # 1 SOS Receipt Information) (cc: attys; any unrepresented parties) (tmh)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF WEST VIRGINIA
AT CHARLESTON
JOLLEE LENHART, on her own behalf
and as power of attorney for
TAMARA OUSLEY,
Plaintiffs,
v.

Civil Action No. 2:12-cv-4184

BANK OF AMERICA, N.A. and
EVERHOME MORTGAGE COMPANY and
JOHN DOE HOLDER,
Defendants.

MEMORANDUM OPINION & ORDER

Pending is the motion to dismiss by defendant Bank of
America, N.A. (“Bank of America”), filed September 17, 2012.

Also

pending is the motion to dismiss by EverBank, as successor by
merger to defendant EverHome Mortgage Company (“EverBank”), filed
the same day.

As an initial matter, Bank of America asserts that its
dismissal is required because the plaintiffs did not sufficiently
serve process.

See Fed. R. Civ. P. 12(b)(5).

It explains that

the plaintiffs incorrectly provided the Secretary of State with a
mailing address for a Bank of America training center in Florida
rather than Bank of America’s headquarters in Charlotte, North
Carolina.

The plaintiffs respond that they perfected service when

they served the first amended complaint.

The website for the

Secretary of State confirms that Bank of America received service
on September 18, 2012, at 10:52 a.m., with Eleanor McCoy as the
recipient.

The Clerk is directed to file the Secretary of State

receipting information transmitted to her today.

I. Background
This case arises from an allegedly predatory loan by
Bank of America to plaintiffs Jollee Lenhart and Tamara Ousley.
The following allegations of fact are taken from the plaintiffs’
first amended complaint.
Ms. Lenhart is a single woman.

Compl. ¶ 2.

She served

in the United States Navy and was an auto mechanic until she
became disabled from post-traumatic stress disorder in 2006.

Id.

She lives on VA disability benefits at her home in Union, West
Virginia, within Monroe County.

Id.

which is the subject of this action.

The home secures the loan
Id.

Ms. Ousley is Ms.

Lenhart’s sister and lives in the same home.

Id.

Like Ms.

Lenhart, Ms. Ousley is single and disabled, although the record
does not specify the nature of her disability.

Id.

The

plaintiffs are co-owners of the home and co-borrowers on the loan.
Bank of America is a national bank, which does business
in the Southern District of West Virginia and has a principal
place of business in Charlotte, North Carolina.
2

Id. ¶ 3.

EverBank is a Florida company, which does business in the Southern
District of West Virginia and has a principal place of business in
Jacksonville, Florida.

Id. ¶ 4.

Bank of America was the

originator of the plaintiffs’ loan, and EverBank is the current
servicer.

Id. ¶¶ 3-4.

the loan.

John Doe Holder is the unknown holder of

Id. ¶ 5.
The plaintiffs purchased their home in or around 2000,

taking out a mortgage from an unnamed lender.

Id. ¶ 6.

In 2009,

the plaintiffs contacted Bank of America about refinancing the
home.

Id. ¶ 7.

On or around September 5, 2009, Bank of America

provided plaintiffs with a good faith estimate, a “Lock-inAgreement,” and other disclosures indicating that Bank of America
would originate a thirty-year fixed rate loan with monthly
payments of $909.78.

Id. ¶ 8.

Bank of America represented to the

plaintiffs that there would be no out-of-pocket closing costs.
Id. ¶ 9.
On or around January 8, 2010, Bank of America sent an
attorney to the plaintiffs’ home to close the loan.

Id. ¶ 10.

The plaintiffs contend that the closing was rushed and that the
closing agent insufficiently explained the documents.

Id. ¶ 11.

The closing agent informed the plaintiffs that they would have to
tender $3,002.75 to close the loan.

Id. ¶ 12.

The complaint does

not state whether the plaintiffs paid this amount.

3

The closing

agent refused the plaintiffs’ request for a copy of the loan
documents.

Id. ¶ 13.

He explained that providing the documents

before Bank of America signed and notarized them would be
unlawful.

Id.
On an unspecified date after the closing, Bank of

America contacted the plaintiffs to notify them they would need to
tender an “additional” approximately $3,000 to “close” the loan.
Id. ¶ 16.

The plaintiffs paid the funds without receiving an

explanation of their purpose.

Id.

They made payments on the loan

through automatic deductions from their bank account and
discovered that the monthly payment was $1,284.25, rather than the
previously disclosed $909.78.

Id. ¶ 17.

They repeatedly

contacted Bank of America about the increased payment and
requested copies of the loan documentation, but Bank of America
never provided an explanation or the documentation.

Id. ¶ 18.

The plaintiffs assert that the higher-than-expected payment
resulted from a “wildly inflated” hazard insurance policy on the
home, which Bank of America insisted that the plaintiffs maintain.
Id. ¶ 19.
Around April 5, 2012, Bank of America transferred the
servicing of the loan to EverBank.1

Id. ¶ 20.

In letters dated

April 19, 2012, the plaintiffs requested from Bank of America and
1

EverBank provides documentation indicating that Bank of America
did not transfer servicing until April 26, 2012. See EverBank’s
Reply Supp. Mot. Dismiss Ex. 10.
4

EverBank a payment history and the name of the holder of their
loan.

Id. ¶ 21.

The letters also instructed that all future

communications should be directed to counsel.
received the letters on April 25, 2010.

Id.

Id.

The defendants

EverBank, however,

continued to contact the plaintiffs directly in attempting to
collect a debt.

Id. ¶ 22.

By letters dated May 24, 2012, the plaintiffs requested
rescission of the loan transaction and directed that
communications regarding such arrangements be made to their
counsel.

Id. ¶ 23.

Bank of America received the letter on May

30, 2012, and EverBank received the letter on May 29, 2012.

Id.

The defendants acknowledged receipt of the letters, but offered no
substantive response to the rescission request.
On June 29, 2012, the plaintiffs filed this action in
the Circuit Court of Kanawha County, West Virginia.

On August 8,

2012, EverBank removed the action to federal court.
In their first amended complaint, filed September 2,
2012, the plaintiffs “reaffirm their cancellation,” by which they
appear to assert their right to rescission.

Id. ¶ 24.

They state

that they are prepared to tender “should Defendants effect
rescission of the transaction consistent with the Court’s
equitable powers to modify the rescission process.”

Id. ¶ 26.

The plaintiffs also assert that, to date, they have never received
5

material disclosures or notice of a three-day rescission period.
Id. ¶ 25.

The plaintiffs represent that they “have suffered fear

of loss of home, damages to credit and annoyance and
inconvenience.”

Id. ¶ 27.

The first amended complaint alleges five counts: Count
I, violation of the Truth in Lending Act (“TILA”), 15 U.S.C.
§ 1635, by failing to properly respond to plaintiffs’ notice of
cancellation; Count II, violation of TILA and Regulation Z, 12
C.F.R. § 226.23(b), by failing to provide required disclosures and
notice of the right to rescind; Count III, unconscionable
inducement; Count IV, illegal debt collection in violation of the
West Virginia Consumer Credit Protection Act (“WVCCPA”), W. Va.
Code § 46A-2-128(e); and Count V, violation of TILA, 15 U.S.C.
§ 1641(f)(2), by failing to provide the name, address, and contact
information for the holder of plaintiffs’ loan when requested.
On September 17, 2012, the defendants filed the pending
motions, asserting the various grounds for dismissal that are set
forth below.

II. The Governing Standard
Under Federal Rule of Civil Procedure 8(a)(2), a
complaint must contain “a short and plain statement of the claim
showing that the pleader is entitled to relief.”

Rule 12(b)(6)

correspondingly permits a defendant to challenge a complaint when
6

it “fail[s] to state a claim upon which relief can be granted.”
Fed. R. Civ. P. 12(b)(6).
The required “short and plain statement” must provide
“‘fair notice of what the . . . claim is and the grounds upon
which it rests.’”

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545

(2007) (alternation in original) (quoting Conley v. Gibson, 355
U.S. 41, 47 (1957)); see also Anderson v. Sara Lee Corp., 508 F.3d
181, 188 (4th Cir. 2007).

“To survive a motion to dismiss, a

complaint must contain 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) (quoting Twombly, 550
U.S. at 570); see also Monroe v. City of Charlottesville, 579 F.3d
380, 386 (4th Cir. 2009).

Facial plausibility exists when the

court is able “to draw the reasonable inference that the defendant
is liable for the misconduct alleged.”
(quoting Twombly, 550 U.S. at 556).

Iqbal, 566 U.S. at 678

The plausibility standard “is

not akin to a ‘probability requirement,’” but it requires more
than a “sheer possibility that a defendant has acted unlawfully.”
Id. (quoting Twombly, 550 U.S. at 556).
In assessing plausibility, the court must accept as true
the factual allegations contained in the complaint, but not the
legal conclusions.

Id.

“Threadbare recitals of the elements of a

cause of action, supported by mere conclusory statements, do not

7

suffice.”

Id.

The determination is “context-specific” and

requires “the reviewing court to draw on its judicial experience
and common sense.”

Id. at 679.

III. Discussion
Under TILA, borrowers have three business days to
rescind a consumer loan in which the lender has acquired a
security interest in the borrower’s principal dwelling.
§ 1635(a).

15 U.S.C.

The period is timed from the consummation of the

transaction or the lender’s delivery of the required forms,
information, and material disclosures, whichever is later.

Id.

The disclosures must include two copies of a separate document
that gives the borrower notice of the right to rescind.
§ 226.23(b)(1-2).

12 C.F.R.

If the disclosure forms are never delivered,

the right to rescind expires three years after the date of
consummation or upon the sale of the property.
1635(f).

15 U.S.C. §

Section 1635(b) states that “[w]ithin 20 days after

receipt of a notice of rescission, the creditor shall return to
the obligor any money or property given as earnest money,
downpayment, or otherwise, and shall take any action necessary or
appropriate to reflect the termination of any security interest
created under the transaction.”

Id. § 1635(b).

Section 1640(a) of TILA provides for actual and
statutory damages against “any creditor who fails to comply with
8

any requirement imposed under this part [relating to credit
transactions], including any requirement under section 1635.”

For

credit transactions that are “secured by real property or a
dwelling,” statutory damages range from $400 to $4,000.

Id.

§ 1640(a)(2)(A)(iv).

A.

The Statute of Limitations for Civil Damages Under TILA
The defendants assert that TILA’s statute of limitations

bars the plaintiffs’ claims for statutory damages in TILA Counts
I, II, and V.

Bank of Am.’s Mem. Supp. Mot. Dismiss 4-5;

EverBank’s Mem. Supp. Mot. Dismiss 7-8.

An action for civil

damages under TILA “may be brought . . . within one year from the
date of the occurrence of the violation.”

15 U.S.C. § 1640(e).

Since the plaintiffs closed their loan on January 8, 2010 and did
not file the present action until June 29, 2012, the defendants
argue that the limitations period has expired.
The plaintiffs do not dispute that the limitations
period has elapsed, but they argue that they may nonetheless
assert the time-barred penalties and damages as a set-off.
Opp’n Mot. Dismiss 12-13.

Pl.’s

Section 1640(e) provides that the

limitations period “does not bar a person from asserting a
violation . . . in an action to collect the debt . . . as a matter
of defense by recoupment or set-off in such action.”
§ 1640(e).

15 U.S.C.

By its plain language, this provision exempts a set9

off claim from the statute of limitations only when the claim is
raised as a defense or counterclaim to a creditor’s debtcollection action.
634 (5th Cir. 1986).

See Moor v. Travelers Ins. Co., 784 F.2d 632,
The plaintiffs, nevertheless, argue that

because West Virginia is a non-judicial foreclosure state, they
“would have no opportunity to assert the set-off without filing an
affirmative action” and should be entitled to the set-off.
Opp’n Mot. Dismiss 12-13.

Pl.’s

Whether the plaintiffs will have an

opportunity in this action to assert set-off remains to be seen.
The issue is not one that needs to be resolved at the motion to
dismiss stage.

B.

Disclosures and the Right to Rescission
Count II of the first amended complaint asserts that the

defendants violated TILA and Regulation Z by failing to provide
the plaintiffs with proper written notice of their right to
rescind.

See 15 U.S.C. § 1635; 12 C.F.R. § 226.23(b)(1) (“In a

transaction subject to rescission, a creditor shall deliver two
copies of the notice of the right to rescind to each consumer
entitled to rescind . . . .”).

The plaintiffs allege further

violations arising from the defendants’ failure to provide
disclosures in a form that the plaintiffs could keep and the
defendants’ failure to delay performance of the loan transaction
until the expiration of the rescission period.

10

See 12 C.F.R. §

226.23(c) (“Delay of creditor’s performance.

Unless a consumer

waives the right of rescission . . . , no money shall be disbursed
other than in escrow, no services shall be performed and no
materials delivered until the rescission period has expired and
the creditor is reasonably satisfied that the consumer has not
rescinded.”).

The plaintiffs request rescission, actual and

statutory damages for the disclosure violations, and attorney
fees, litigation expenses, and costs.

They assert that they have

timely exercised their right to rescind because, without proper
disclosure, the rescission period continues for three years.

See

15 U.S.C. § 1635(a); 12 C.F.R. § 226.23(a)(3).
1.
EverBank first argues for Count II’s dismissal because
its foundation -- that the plaintiffs did not receive TILA
disclosures or notice of the right to rescission -- is
contradicted by an acknowledgement of receipt.
Supp. Mot Dismiss 5.

EverBank’s Mem.

Both Ms. Lenhart and Ms. Ousley signed a

form stating that they “acknowledge receipt of two copies of
NOTICE of RIGHT TO CANCEL and one copy of the Federal Truth in
Lending Disclosure Statement.”

EverBank Mot. Dismiss Ex. 2.

The

plaintiffs respond that the allegations in their complaint
constitute adequate evidence to support the claim, notwithstanding
the acknowledgement.

11

The plaintiffs are correct.

A borrower’s written

acknowledgement of receipt of disclosures or documents mandated by
TILA creates a rebuttable presumption that delivery was made.
15 U.S.C. § 1635.

See

Only a minimal evidentiary showing is necessary

to overcome the presumption at the pleadings stage.

Balderas v.

Countrywide Bank, N.A., 664 F3d 787, 790 (9th Cir. 2011) (“This
presumption will no doubt be very valuable to Countrywide when the
trier of fact is called on to decide whether the Balderases did or
did not get proper TILA notice.

But evidentiary presumptions ‘are

inappropriate for evaluation at the pleadings stage.’” (quoting 5B
Charles Alan Wright & Arthur R. Miller, Federal Practice &
Procedure § 1357 (Supp. 2011))).

The plaintiffs’ allegations

adequately counter the presumption at this stage, and the
acknowledgement form does not mandate dismissal.

See id.

(“The

Balderases allege in their complaint that they did not, in fact,
get a properly prepared notice.

If they testify to that effect at

trial, the trier of fact could believe them, despite their signed
statement to the contrary.”).
2.
EverBank next contends that rescission is inappropriate
because the plaintiffs have failed to allege facts showing their
ability to tender the loan proceeds.
Dismiss 5.

EverBank’s Mem. Supp. Mot.

The plaintiffs have alleged that they “are prepared to

12

tender should Defendants effect rescission of the transaction
consistent with the Court’s equitable powers to modify the
rescission process.”

Compl. ¶ 26; see also id. ¶¶ 31, 36

(“Plaintiffs are prepared to tender but seek equitable
modification of their tender obligation.”).
EverBank asserts that the plaintiffs are attempting to
rest their ability to tender “on how much the court equitably
modifies [their] tender obligation.”
Dismiss 6.

EverBank’s Mem. Supp. Mot.

While EverBank acknowledges that the court can modify

procedural requirements respecting tender, it argues that the
court has no power to modify the amount to be tendered and,
further, that such a modification would defeat the purpose of
rescission and be inequitable.

Id. (citing 15 U.S.C. § 1635(b)

(“The procedures prescribed by this section shall apply except
when otherwise ordered by a court.”)).

EverBank also argues that

the plaintiffs have “alleged no facts, let alone plausible facts”
demonstrating their ability to tender.

Id. at 7.

It particularly

highlights the lack of allegations regarding household income or
assets.

EverBank’s Reply Supp. Mot. Dismiss 6.
Our court of appeals has held that “when rescission is

attempted under circumstances which would deprive the lender of
its legal due, the attempted rescission will not be judicially
enforced unless it is so conditioned that the lender will be

13

assured of receiving its legal due.”

Am. Mortg. Network, Inc. v.

Shelton, 486 F.3d 815, 820 (4th Cir. 2007) (quoting Power v. Sims
and Levin, 542 F.2d 1216, 1222 (4th Cir. 1976)); see also Sherzer
v. Homestar Mortg. Servs., 707 F.3d 255, 265 n.7 (3d Cir. 2013)
(“[A] notice of rescission is not effective if the obligor lacks
either the intention or the ability to perform, i.e., repay the
loan.”).
The question presented here is whether the plaintiffs,
who have alleged intention to tender, must also allege ability to
tender as a pleading prerequisite.

The court is of the view that

ability to tender should be treated as a matter for consideration
in the court's exercise of its equitable powers respecting
rescission rather than as a pleading requirement.

See Sanders v.

Mountain Am. Fed. Credit Union, 689 F.3d 1138, 1144 (10th Cir.
2012) (“Although the rescinding consumer need not plead an ability
to repay the proceeds of the loan, the district court may
nevertheless, in an appropriate case, use its equitable powers to
protect a creditor’s interests during the TILA rescission
process.”); Moore v. Wells Fargo Bank, N.A., 597 F. Supp. 2d 612,
616-17 (E.D. Va. 2009) (“[Defendant] failed to cite any authority
indicating that a Plaintiff seeking TILA recision is required to
conclusively establish her ability to tender through her Complaint
and it is unlikely that any such case law exists as such a

14

requirement appears in conflict with Federal Rule of Civil
Procedure 8(a) and Bell Atlantic.”).2
Inasmuch as it is not clear at this stage that the
plaintiffs -- who allege intention to tender and who still own and
retain the value of their home that is subject to the mortgage -lack the ability to tender, it is inappropriate at this juncture
to dismiss their rescission claim for want of allegations
respecting ability to tender.

The court can, subsequent to the

pleadings stage, exercise its equitable powers to deny enforcement
of an otherwise warranted rescission if the plaintiffs then appear
unable to tender.

EverBank's motion to dismiss Count II on this

ground is denied.

Bank of America's motion to dismiss Count II is

also denied.
3.
Regarding damages for failing to provide disclosures,
EverBank argues that it cannot be liable because, as the
plaintiffs’ complaint acknowledges, it was not the original
2

EverBank cites the Parham case in which the district court, in
dictum, first expressed its opinion that the plaintiff was
obligated to “demonstrate[] a ‘plausible’ ability to tender” at
the pleadings stage, and then not only found that the plaintiff
"had put forth a sufficient offer of tender to survive a motion to
dismiss," but granted the motion to dismiss on other grounds.
Parham v. HSBC Mortg. Corp., 826 F. Supp. 2d 906, 911 (E.D. Va.
2011), aff’d, Parham v. HSBC Mortg. Corp. (USA), 2012 WL 1655391
(4th Cir. May 11, 2012) (per curiam) (unpublished). The oneparagraph affirmance by the court of appeals lends no support to
EverBank's contention.
15

creditor and only later gained an interest in the loan.
EverBank’s Mem. Supp. Mot Dismiss 7.

It then argues that it

cannot be liable as an assignee where the violations were not
apparent on the face of the mortgage loan documents.

See 15

U.S.C. § 1641(a) (permitting assignee liability for civil damages
“only if the violation . . . is apparent on the face of the
disclosure statement” or “the assignment was involuntary”).
EverBank asserts that because the plaintiffs signed a form
acknowledging receipt of the required notice and disclosures, any
alleged violations do not appear on the face of the documents.
While, at the pleadings stage, the signed acknowledgement form
alone does not suffice to relieve EverBank of responsibility, the
plaintiffs have failed to allege any defects apparent on the face
of the loan documents.

The court thus dismisses the plaintiffs’

claims for statutory damages against EverBank arising from the
alleged nondisclosure.3

C.

Statutory Damages for the Refusal to Rescind

Count I seeks actual and statutory damages, as well as
attorney fees and costs, for the defendants’ failure to comply
with the plaintiffs’ May 24, 2012 notice of cancellation.
3

Damages

The court notes that EverBank’s status as an assignee does not
affect the plaintiffs’ right to rescission. See 15 U.S.C. §
1641(c) (“Any consumer who has the right to rescind a transaction
under section 1635 of this title may rescind the transaction as
against any assignee of the obligation.”).
16

may be awarded where a creditor “fails to comply with any
requirement imposed under . . . section 1635.”
§ 1640(a).

15 U.S.C.

The court thus must consider whether it was a

“requirement” of § 1635 that the defendants execute rescission in
response to the plaintiffs’ notice.
matter of law, that it was not.

EverBank contends, as a

It argues that there can be no

TILA violation because the notice of cancellation did not
automatically trigger an obligation to rescind.
Supp. Mot. Dismiss 4.

EverBank’s Mem.

EverBank asserts that any obligation to

“unwind the transaction” vests only after the plaintiffs’ right to
rescission has been adjudicated.

Id. (citing Bradford v. HSBC

Mortg. Corp., 838 F. Supp. 2d 424, 429 (E.D. Va. 2012) (“[O]nly
after a court recognizes that the borrower is entitled to
rescission does § 1635(b) impose any affirmative obligation on a
lender.”)).
EverBank is correct that a “unilateral notification of
cancellation” may not “automatically void the loan contract.”
Shelton, 486 F.3d at 821.

If that were not the case, “a borrower

could get out from under a secured loan simply by claiming TILA
violations, whether or not the lender had actually committed any.”
Id. at 821 (quoting Yamamoto v. Bank of N.Y., 329 F.3d 1167, 1172
(9th Cir. 2003)).

17

Nevertheless, the absence of an automatic avoidance
requirement does not mean that a creditor is entitled to refuse
rescission until so ordered by a court.

A borrower may properly

exercise the right to rescind by letter without first obtaining a
court order.

See Gilbert v. Residential Funding LLC, 678 F.3d

271, 277-78 (4th Cir. 2012) (“Simply stated, neither 15 U.S.C.
§ 1635(f) nor Regulation Z says anything about the filing of a
lawsuit, and we refuse to graft such a requirement upon them.”).
The creditor can then be liable for damages and penalties under
§ 1640 if a court finds that the creditor improperly refused
rescission.

See id. at 274, 278-79 (considering and affirming as

timely a statutory damages claim stemming from the creditor’s
refusal to honor a right to rescind, where the creditor received
notice of rescission nearly three years after the loan’s
origination); Belini v. Wash. Mut. Bank, FA, 412 F.3d 17, 25 & n.3
(1st Cir. 2005) (“[R]escission is not automatic when a notice of
rescission is sent, but a creditor can still be held liable for
wrongfully refusing to rescind when asked to do so by a debtor.”).
Bank of America argues that the plaintiffs did not
appropriately exercise their right to rescind the loan because the
May 24, 2012 rescission letter failed to allege tender or make
reasonable assurances thereof.
Dismiss 5-6.

Bank of Am.’s Mem. Supp. Mot.

As discussed above in the context of Count II’s

claim for rescission, the plaintiffs under the circumstances of
18

this case are not obligated to allege their ability to tender.
The court likewise concludes that the plaintiffs need not allege
their ability to tender in the context of a § 1640 claim for
damages.
The plaintiffs have alleged the proper exercise of their
right to rescind as well as the improper denial of that right by
the defendants.

At this stage, that is enough.

See Gilbert, 678

F.3d at 277 (“At [the pleadings] stage of the litigation, we are
not concerned with whether the contract has been effectively
voided.”).

If it is subsequently shown that the plaintiffs failed

to make reasonable assurances of tender, then pursuant to Shelton
Bank of America’s denial of rescission may be deemed justified
and, accordingly, damages under § 1640 will be unavailable.
Shelton, 486 F.3d at 817, 820-21 (concluding, at the summary
judgment stage, that the lender was not obligated to rescind the
loan transaction where the borrower appeared unable to tender).
The motions to dismiss of EverBank and Bank of America are denied
as to Count I.

D.

Disclosure of Loan Holder Information
Count V alleges that the defendants violated TILA by not

responding to the plaintiffs’ April 19, 2012 letters requesting
the name, address, and contact information of the holder of the
loan.

See 15 U.S.C. § 1641(f)(2).
19

TILA provides that “[u]pon

written request by the obligor, the servicer shall provide the
obligor . . . with the name, address, and telephone number of the
owner of the obligation or the master servicer of the obligation.”
Id. (emphasis added).

TILA defines “servicer” by reference as

“the person responsible for servicing of a loan (including the
person who makes or holds a loan if such a person also services
the loan).”

12 U.S.C. § 2605(i)(2), cited in 15 U.S.C.

§ 1641(f)(3).
Bank of America seeks dismissal on the ground that it
was not the loan servicer at the time it received the plaintiffs’
letter and was not required to respond to plaintiffs’ request.
Bank of Am.’s Mem. Supp. Mot. Dismiss 6.

As Bank of America

points out, the plaintiffs admit in their complaint that EverBank
was the servicer of the loan as of April 5, 2012.

Compl. ¶ 20.

In their response, the plaintiffs agree and consequently withdraw
their Count V claim against Bank of America.

Pl.’s Opp’n Mot.

Dismiss 18 n.4.
EverBank seeks dismissal of Count V arguing that the
plaintiffs addressed the April 19, 2012 letter only to Bank of
America.

Mem. Supp. Mot. Dismiss 10; id. Ex. 4.

The plaintiffs’

complaint, however, alleges that separate letters were sent to the
two defendants.

Compl. ¶ 21.

In their response, the plaintiffs

attach a copy of, and receipt confirmation for, an April 19, 2012

20

letter addressed to EverBank Mortgage.
Ex. B.

Pl.’s Opp’n Mot. Dismiss

Count V thus adequately states a claim against EverBank.
EverBank makes two additional arguments in its reply:

that it was not the servicer when it received the letter on April
25, 2012 and that it nonetheless complied with the plaintiffs’
request.

EverBank’s Reply Supp. Mot. Dismiss 16.

Respecting

whether it was the servicer, EverBank attaches two documents to
its reply: (1) a notice from Bank of America to the plaintiffs
dated April 3, 2012 stating that “[b]eginning April 26, 2012, your
new servicer will be [EverBank] Mortgage” and (2) regarding its
provision of the requested information, a “Notice of Assignment,
Sale or Transfer of Mortgage Loan” sent to the plaintiffs and
dated May 4, 2012.

Id. Ex. 10, 11.

The court finds that these two documents are not
properly before it at this time.

“[A]s a general rule extrinsic

evidence should not be considered at the 12(b)(6) stage . . . .”
Am. Chiropractic Ass’n v. Trigon Healthcare, Inc., 367 F.3d 212,
234 (4th Cir. 2004).

A court may make an exception where the

document “was integral to and explicitly relied on in the
complaint and [if] the plaintiffs do not challenge its
authenticity.”

Id. (alternation in original) (quoting Phillips v.

LCI Int’l Inc., 190 F.3d 609, 618 (4th Cir. 1999)).

Under those

circumstances, the “primary problem raised by looking at documents

21

outside the complaint -- lack of notice to the plaintiffs -- is
dissipated.’”

Id. (quoting In re Burlington Coat Factory Sec.

Litig., 114 F.3d 1410, 1426 (3d Cir. 1997)).
EverBank fairly asserts that these documents are central
to the claim because the plaintiffs must prove that EverBank had
“some interest in the mortgage loan at the time she sent her
letter.”

EverBank’s Reply Supp. Mot. Dismiss 17.

EverBank,

however, has first attached these two documents not to its motion
to dismiss but rather to its reply to which plaintiffs are not
expected to respond absent permission by the court.

EverBank’s

dismissal as to Count V is thus unwarranted at this juncture.

E.

Unconscionable Inducement
Count III alleges that the loan is unconscionable in its

terms, was induced by unconscionable conduct, and is therefore not
enforceable.4

The plaintiffs assert that the loan was

unconscionable because they are unsophisticated consumers and did
not understand the details of the transaction.

Compl. ¶ 39.

Respecting improper conduct, they emphasize the hurried closing of
the loan, with inadequate discussion, Bank of America’s failure to
provide loan documentation, and misrepresentations about the
4

EverBank asserts that Count III states no claim against it.
Since the plaintiffs’ unconscionable inducement allegations
concern the loan’s origination and do not mention EverBank or any
conduct to which EverBank was party, the court agrees. Count III
is accordingly dismissed as to EverBank.
22

monthly payment and out-of-pocket costs.

Id. ¶ 40.

The

plaintiffs offer the monthly payment and closing costs as examples
of “several substantively unfair terms” contained in the loan.
Id. ¶ 41.
Section 46A–2–121 of the WVCCPA provides the following
instructions respecting unconscionability:5
(1) With respect to a transaction which is or gives rise
to a consumer credit sale or consumer loan, if the court
as a matter of law finds:
(a) The agreement or transaction to have been
unconscionable at the time it was made, or to have
been induced by unconscionable conduct, the court
may refuse to enforce the agreement, or
(b) Any term or part of the agreement or
transaction to have been unconscionable at the time
it was made, the court may refuse to enforce the
agreement, or may enforce the remainder of the
agreement without the unconscionable term or part,
or may so limit the application of any
unconscionable term or part as to avoid any
unconscionable result.
(2) If it is claimed or appears to the court that the
agreement or transaction or any term or part thereof may
be unconscionable, the parties shall be afforded a
reasonable opportunity to present evidence as to its
setting, purpose and effect to aid the court in making
the determination.
W. Va. Code § 46A–2–121.

5

The plaintiffs assert that West Virginia common law also
provides a claim for unconscionable inducement. Pl.’s Opp’n Mot.
Dismiss 13. Count III cites § 46A-2-121 with respect to a request
for civil penalties but does not otherwise specify whether
unconscionability is asserted under the WVCCPA or the common law.
23

The principle of unconscionability is “the prevention of
oppression and unfair surprise and not the disturbance of
reasonable allocation of risks or reasonable advantage because of
superior bargaining power or position.”

Orlando v. Fin. One of W.

Va., Inc., 179 W. Va. 447, 369 S.E.2d 882, 885 (1988) (citation
omitted).

The test for unconscionability is

whether, in the light of the background and setting of
the market, the needs of the particular trade or case,
and the condition of the particular parties to the
conduct or contract, the conduct involved is, or the
contract or clauses involved are so one sided as to be
unconscionable under the circumstances existing at the
time the conduct occurs or is threatened or at the time
of the making of the contract.
Arnold v. United Cos. Lending. Corp., 204 W. Va. 229, 235, 511
S.E.2d 854, 860 (1998) (quoting Orlando, 179 W. Va. at 450, 369
S.E.2d at 885).
In making that assessment, “‘[t]he particular facts
involved in each case are of utmost importance since certain
conduct, contracts or contractual provisions may be unconscionable
in some situations but not in others.’”

Id. at 235, 511 S.E.2d at

860 (quoting Orlando, 179 W. Va. at 450, 369 S.E.2d at 885).
Accordingly the WVCCPA emphasizes the need for discovery in
assessing unconscionability claims: “If it is claimed or appears
to the court that the agreement or transaction or any term or part
thereof may be unconscionable, the parties shall be afforded a
reasonable opportunity to present evidence as to its setting,

24

purpose and effect to aid the court in making the determination.”
W. Va. Code § 46A-2-121.
Bank of America first seeks to dismiss the plaintiffs’
unconscionable inducement claim as time-barred by the WVCCPA
statute of limitations, codified at § 46A-5-101.
Mem. Supp. Mot. Dismiss 8.

Bank of Am.’s

Section 46A-5-101, however, provides

that violations arising from consumer loans have a one-year
limitations period running from the “due date of the last
scheduled payment of the agreement.”

The West Virginia Supreme

Court of Appeals applies the statute liberally and consistently
with that language.

See Dunlap v. Friedman’s Inc., 213 W. Va.

394, 399, 582 S.E.2d 841, 846 (2003).

As there is no indication

that the plaintiffs’ last scheduled payment occurred more than a
year prior to their filing suit, the claim is timely.
Bank of America next contends that the plaintiffs have
insufficiently pled a claim for unconscionable inducement.
of Am.’s Mem. Supp. Mot Dismiss 8.

Bank

It notes the absence of

allegations that the plaintiffs needed immediate financial
assistance or that they lacked meaningful alternatives.

It argues

that debtors “unsophisticated in financial matters” are
characteristic of any mortgage loan transaction.

Bank of America

thus asserts that the plaintiffs have failed to plead any

25

inequality in bargaining power beyond what is ordinarily present
in mortgage loan situations.
The court finds plaintiffs’ allegations to be
sufficient.

Allegations concerning the plaintiffs’ disability and

lack of sophistication, the closing agent’s misconduct and
misrepresentations, and unfair terms as to the monthly payment and
closing costs adequately indicate circumstances that “may be
unconscionable.”

That is all that § 46A-2-121 requires before the

parties “shall be afforded a reasonable opportunity to present
evidence.”

The court thus cannot conclude that those allegations

are insufficient without first allowing the parties to assemble
that evidence.
Bank of America further argues that the plaintiffs,
having signed loan documents, cannot claim unconscionability based
on alleged misrepresentations that contradict the signed
documents.

Bank of Am.’s Mem. Supp. Mot Dismiss 9-10.

Yet, where

there is fraud or other wrongful conduct, a signing party will not
necessarily be bound by the written instrument’s terms.

See Hager

v. Am. Gen. Fin., Inc., 37 F. Supp. 2d 778, 788 (S.D. W. Va. 1999)
(citing Acme Food Co. v. Older, 61 S.E. 235, 244 (W. Va. 1908)).
As with the signed disclosure acknowledgement form, the
plaintiffs’ signatures on the loan documents may prove to be
valuable evidence for Bank of America when the issue is presented

26

to the trier of fact.

The plaintiffs have adequately alleged

their unconscionability claim.

F.

Illegal Debt Collection
Count IV alleges that EverBank violated WVCCPA § 46A-2-

128(e) by attempting to collect payment by communicating directly
with the plaintiffs despite knowing that plaintiffs were
represented by counsel.6

Specifically, EverBank made four phone

calls to the plaintiffs in late May and early June of 2012, and it
sent a collection agent to the plaintiffs’ home on June 21, 2012.
Compl. ¶ 45.
EverBank argues that the WVCCPA debt collection claims
are preempted by the federal Home Owners’ Loan Act of 1933
(“HOLA”) as well as by a regulation of the Office of Thrift
Supervision (“OTS”).

See 12 U.S.C. § 1461; 12 C.F.R. § 560.2

(“OTS hereby occupies the entire field of lending regulation for
federal savings associations.”).

In response, the plaintiffs

argue that the Dodd-Frank Act precludes a preemption finding.

See

12 U.S.C. § 25b(b)(1)(A) (“State consumer financial laws are
preempted, only if application of a State consumer financial law
would have a discriminatory effect on national banks, in
6

Bank of America seeks to dismiss this count on the ground that
the plaintiffs have made no allegations against Bank of America
regarding debt collection. As the plaintiffs do not contest this
assertion, dismissal of Count IV as to Bank of America is
warranted.
27

comparison with the effect of the law on a bank chartered by that
State.”).
In McCauley v. Home Loan Inv. Bank, F.S.B., 710 F.3d 551
(4th Cir. 2013), our court of appeals addressed HOLA preemption in
the context of a mortgage contract, like that at issue here, which
was entered into prior to the effective date of the Dodd-Frank
Act.

It observed that the applicable HOLA regulation governing

preemption was that which was in effect when the loan contract was
entered into.

The same is thus true here.

The applicable regulation is 12 C.F.R. section 560.2.
Subparagraph (b) of that provision sets forth, “without
limitation,” those aspects of loans that states are preempted from
regulating generally by subparagraph (a).

The nature of the

WVCCPA claim here does not fit within any of the preempted
exemplars found in subsection (b).

Moreover, a claim under the

WVCCPA is akin to a statutory tort claim.

As noted in McCauley

respecting the tort of fraud in the fair-lending setting,
allowing for fraud actions in the vein of McCauley's
“would not change the regulatory landscape; rather, it
would merely provide a means of redress for an alleged
misdeed in this particular case.” As OTS concluded
regarding a state deceptive practices statute,
[w]hile [it] may affect lending relationships,
the impact on lending appears to be only
incidental to [its] primary purpose.... There
is no indication that the law is aimed at any
state objective in conflict with the safe and
sound regulation of federal savings
28

associations, the best practices of thrift
institutions in the United States, or any
other federal objective identified in §
560.2(a). In fact, because federal thrifts are
presumed to interact with their borrowers in a
truthful manner[, the] general prohibition on
deception should have no measurable impact on
their lending operations.
OTS Op. Letter, Preemption of State Laws Applicable to
Credit Card Transactions, 1996 WL 767462, at *6 (Dec.
24, 1996).
We thus conclude that because McCauley's state tort
claim for fraud only incidentally affects lending, it is
not preempted by HOLA or its implementing regulation.
McCauley, 710 F.3d at 558 (citation omitted); see id. ("McCauley's
complaint alleges an affirmative deception by the issuer of her
mortgage, an act outside the scope of § 560.2(b). See OTS Op.
Letter, Preemption of State Laws Applicable to Credit Card
Transactions, 1996 WL 767462, at *5 (Dec. 24, 1996) ('State laws
prohibiting deceptive acts and practices in the course of commerce
are not included in the illustrative list of preempted
laws in § 560.2(b).'").
The same must be said respecting the plaintiffs' WVCCPA
claim.

It is not found in the subsection (b) nonexclusive

listing, it resides outside the preemptive scope of section
560.2(a) generally, and, moreover, it only incidentally -- if at
all -- affects lending.

It is, accordingly, ORDERED that

EverBank’s motion to dismiss as to Count IV be, and hereby is,
denied.

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IV.
Based upon the foregoing discussion, it is, accordingly,
ORDERED as follows:
1.

that Bank of America’s motion to dismiss, filed
September 17, 2012, be, and it hereby is, granted as set
forth herein and denied in all other respects;

2.

that EverBank’s motion to dismiss, filed September 17,
2012, be, and hereby is, granted as set forth herein and
denied in all other respects;

3.

that Count II be, and hereby is, dismissed as to claims
for damages under § 1640 as to EverBank;

4.

that Count III be, and hereby is, dismissed as to
EverBank;

5.

that Count IV be, and hereby is, dismissed as to Bank of
America; and

6.

that Count V be, and hereby is, dismissed as to Bank of
America.
The Clerk is directed to transmit copies of this order

to all counsel of record and any unrepresented parties.
ENTER:

April 29, 2013

John T. Copenhaver, Jr.
United States District Judge

30