The opinion of the court was delivered by: John Gleeson, United States District Judge
ELECTRONIC PUBLICATION ONLY
In May 2009, Alavita Williams filed her complaint in this action, alleging violations of federal and state laws. The claims arise out of a series of events in which, Williams alleges the defendants induced her to refinance the mortgage on her home at an inflated loan amount in May 2006 and again in March 2007. In her complaint, Williams names, among others, Wall Street Mortgage Bankers Ltd. ("WSMB") and DLJ Mortgage Capital, Inc. ("DLJ") as defendants. Specifically, Williams alleges that WSMB violated the Federal Truth-in-Lending Act and the Real Estate Settlement Procedures Act, that its actions were fraudulent and unconscionable and that it was involved in a civil conspiracy with the other named defendants to commit fraud. Williams alleges that DLJ, as an assignee of her home's mortgage and note, is liable for all claims brought against WSMB.
On October 9, 2009, WSMB and DLJ each moved to dismiss all of the claims against them. WSMB moves pursuant to Fed. R. Civ. P. 12(c), and DLJ moves pursuant to Fed. R. Civ. P. 12(b)(6). I heard oral argument on the motions on November 13, 2009. For the reasons stated below, the motions to dismiss are granted in part and denied in part.
The following facts, taken from the plaintiff's complaint, are assumed to be true for the purposes of this motion.
In July 2001, Williams purchased a home for the first time. In April 2004, due to litigation costs and costs associated with repairs to the home, Williams began falling behind on her mortgage payments. Five months later, Washington Mutual, the holder of Williams's first mortgage, began a foreclosure action against Williams. The present action arises out of mortgages and deed transfers executed on May 2, 2006 and March 21, 2007 following the initiation of the foreclosure action by Washington Mutual.
A. The May 2, 2006 Refinancing
In late April 2006, Ronnie Ebrani, a Berkshire Financial Group, Inc. ("Berkshire") loan officer, called Williams and informed her that he could assist her in avoiding foreclosure by refinancing her mortgage loan. A few days later, Ebrani visited Williams's home and convinced her that the only way to avoid losing her home was to refinance. Ebrani also informed Williams that she would have to refinance again the following year, which was necessary and customary with those types of transactions. Ebrani dissuaded Williams from retaining her own attorney to represent her at the closing, assuring her that he would take care of everything.
In May 2006, Williams met Ebrani at Berkshire's Staten Island offices for the closing of the mortgage with Aries Financial, LLC. Albert O. London (a managing member of Aries Financial), David Appleman (who purportedly represented Indigo Management) and Douglas Kahan (the settlement agent) also attended the closing. At the closing, Ebrani again told Williams that she did not need an attorney. He instructed her to sign many documents, and rushed her through the paperwork without explaining any of the documents.
Unbeknownst to Williams, one of the documents she executed at the closing was a subordinate mortgage of $6,610*fn1 with Indigo Management, a company she had never heard of before. Appleman, who was present at both the 2006 and 2007 closings, was Chairman and CEO of Indigo Management. In addition, Williams unknowingly signed a document transferring the deed to her home to 113-38 Springfield Blvd., LLC. Williams was named as the sole manager of the LLC. The loan amount was $250,800 and the interest rate was 15%. The monthly mortgage payments amounted to $3,135.
Ebrani told Williams she would not need to make mortgage payments for a year, because those payments would be paid from monies held in escrow. Aries Financial placed $37,620 of the mortgage proceeds into an escrow account, from which it paid itself interest-only payments on the mortgage for a year.
In October 2006, the roof of Williams's home caved in. Ebrani informed her that she would have to fix the roof before she could refinance her mortgage again. Williams paid out-of-pocket to fix the roof.
B. The March 21, 2007 Refinancing
In early 2007, Ebrani contacted Williams to arrange the second refinancing of her mortgage loan. He told her the loan would be refinanced with WSMB. On March 21, 2007, Williams attended the closing at the offices of Carone & Associates in Brooklyn, New York. Also in attendance was David Appleman, who was now a WSMB representative, and another individual purportedly from Berkshire. Ebrani again told Williams that she need not have an attorney present to represent her at the closing.
The WSMB refinancing loan was for $282,750, with an initial interest rate of 10.5% and monthly payments of $2,895.63. At the closing, Williams signed many papers, including two different sets of the Uniform Residential Loan Application, the Good Faith Estimate, the Mortgage, the Itemization of Amount Financed and the TILA Disclosure Statement. One set of documents disclosed the loan amount as $275,000, while the other showed the amount to be $282,750. The two TILA Disclosure Statements disclosed different APR and finance charges. Also on March 21, 2007, the deed to Williams's home was transferred back from 113-38 Springfield Blvd., LLC (to which Williams had unknowingly deeded the property a year earlier) to Williams. Williams was again unaware of this deed transfer. Williams was able to make three monthly payments on the 2007 mortgage loan, but then fell behind.
Motions to dismiss pursuant to Rule 12(b)(6) test the legal, not the factual, sufficiency of a complaint. See, e.g., Sims v. Artuz, 230 F.3d 14, 20 (2d Cir. 2000) ("At the Rule 12(b)(6) stage, 'the issue is not whether a plaintiff is likely to prevail ultimately, but whether the claimant is entitled to offer evidence to support the claims.'" (quoting Chance v. Armstrong, 143 F.3d 698, 701 (2d Cir. 1998))). Accordingly, I must accept the factual allegations in the complaint as true, Erickson v. Pardus, 551 U.S. 89, 93-94 (2007) (per curiam), and draw all reasonable inferences in favor of the plaintiff. Bolt Elec., Inc. v. City of New York, 53 F.3d 465, 469 (2d Cir. 1995). However, "the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). "A motion to dismiss under Rule 12(c) is governed by the same standard as a motion under Rule 12(b)(6)." Ades & Berg Group Investors v. Breeden, 550 F.3d 240, 243 n. 4 (2d Cir. 2008).
In its recent decision in Iqbal, the Supreme Court offered district courts additional guidance regarding the consideration of motions to dismiss under Rule 12(b)(6). Citing its earlier decision in Twombly, 550 U.S. 544, the Court explained:
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. A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. 129 S.Ct. at 1949 (citations and internal quotation marks omitted).
B. DLJ as a Holder in Due Course
As an assignee of the WSMB mortgage, DLJ is liable for all claims that Williams can bring against WSMB. N.Y. U.C.C. § 3-306 ("Unless he has the rights of a holder in a due course any person takes the instrument subject to all valid claims to it on the part of any person."). If, however, DLJ is a holder in due course, Williams cannot assert any of her claims against it, see United States v. Autorino, 381 F.3d 48, 55 (2d Cir. 2004), except for her claim for rescission under TILA, see infra § C.
The parties agree that the New York Uniform Commercial Code ("UCC") governs this transaction. UCC § 3-305 establishes the rights of a holder in due course. The provision dictates that, except in certain situations that are not invoked by Williams here, a holder in due course takes an instrument free from "all claims to it on the part of any person." N.Y. U.C.C. § 3-305. In order to be a holder in due course, DLJ must have taken a negotiable instrument "(a) for value; and (b) in good faith; and (c) without ...