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McLean-Laprade v. Hsbc

United States District Court, Second Circuit

July 30, 2013

HSBC, [1] Defendant.


LAWRENCE E. KAHN, District Judge.


Presently before the Court is Defendant HSBC's ("Defendant") Motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Dkt. No. 8 ("Motion") at 1.[2] Plaintiffs Sue McLean-Laprade and Danny Laprade (collectively, "Plaintiffs") bring claims under the Truth in Lending Act ("TILA"), New York State General Business Law ("GBL"), the Real Estate Settlement Procedures Act ("RESPA"), New York Banking Law, the Fair Credit Reporting Act ("FCRA"), and the Fair Debt Collection Practices Act ("FDCPA"). See generally Dkt. No. 1-1 at 4-16 ("Complaint").[3] Defendant seeks dismissal of the Complaint in its entirety, with prejudice. Mot. at 1. For the following reasons, Defendant's Motion is granted.[4]


Plaintiffs brought the present action in the Supreme Court of the State of New York, County of St. Lawrence, where Plaintiffs reside. Compl. ¶ 1, at 4.[5] On December 3, 2013, the matter was removed to the U.S. District Court for the Northern District of New York pursuant to 28 U.S.C. §§ 1331, 1332, 1441, and 1446. Dkt. No. 1-1 at 1. The Complaint, dated October 17, 2012, alleges that Plaintiffs refinanced their home in 2005 with Home Funds Direct, Defendant's predecessor in interest, having executed a note and mortgage to secure the debt in the amount of $99, 000.00. Compl. ¶ 4, at 4. Plaintiffs also allege that it is unclear when Defendant acquired the subject loan, and that, while Defendant claims to be entitled to receive payment from Plaintiffs, the note is unendorsed and Defendant, having admitted that the mortgage was never assigned from the original lender, is therefore not so entitled. Id . ¶¶ 6-8, at 4-5. Plaintiffs further contend that the loan payment history reflects that Defendant, in its capacity as servicer of the subject loan, has misapplied funds received from Plaintiffs, engaged in deceptive acts and practices, and failed to notify Plaintiffs of the transfer of servicing rights of their loan. Id . ¶ 9, at 5; id. ¶¶ 2-5, at 11. Plaintiffs also allege that Defendant made or arranged a high-cost home loan without regard for Plaintiffs' ability to repay, "reported false, negative information on Plaintiffs' credit report, " and failed to "validate the subject debt." Id . ¶ 12, at 14; id. ¶ 15, at 15.

Plaintiffs' causes of action include claims for breach of contract and violations of TILA under Regulation Z ("Reg Z"), predatory lending and deceptive trade practices under GBL § 349, and failure to notify of transfer/assignment under RESPA (specifically, 12 U.S.C. § 2605). See generally id. Plaintiffs also bring claims for violations of New York Banking Law § 6-L, title 3 § 41.3(B) of the Compilation of Codes, Rules, and Regulations of the State of New York, and violations of the FCRA and FDCPA. See id. Finally, Plaintiffs bring an additional claim for violations of TILA pursuant to 15 U.S.C. § 1641(g). See id.


Rule 8(a) of the Federal Rules of Civil Procedure provides that
[a] pleading that states a claim for relief must contain: (1) a short and plain statement of the grounds for the court's jurisdiction, unless the court already has jurisdiction and the claim needs no new jurisdictional support; (2) a short and plain statement of the claim showing that the pleader is entitled to relief; and (3) a demand for the relief sought, which may include relief in the alternative or different types of relief.

Moreover, Rule 12(b) sets forth defenses that a party may assert by motion. FED. R. CIV. P. 12(b). A party may move a court pursuant to Rule 12(b)(6) to dismiss an action for "failure to state a claim upon which relief can be granted." Id . R. 12(b)(6).

"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." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570); see also FED. R. CIV. P. 12(b)(6). "[A] court must accept all well-pleaded factual allegations made by the non-moving party as true and draw all inferences in... the non-moving party's favor, '" Brown v. Kopek, No. 11-CV-0016, 2011 WL 3737921, at *3 (N.D.N.Y. Aug. 24, 2011) (Kahn, J.) (quoting In re NYSE Specialists Sec. Litig. , 503 F.3d 89, 95 (2d Cir. 2007) (Sotomayor, J.)), but "[a]ny legal conclusions, deductions, or opinions couched as factual allegations are not accorded a presumption of truthfulness." Id.


A. First Cause of Action: Breach of Contract and Violations of TILA and REG Z

The line between Plaintiffs' TILA and breach-of-contract claims is quite blurred, and these claims, while perhaps not mutually exclusive, [6] must be separated in this case. Plaintiffs' first cause of action, then, must be read as two causes of action: one for breach of contract and another for TILA violations. For the following reasons, the TILA claims within Plaintiffs' first and seventh causes of action (and any related Reg Z claims) are untimely or fail state a claim and accordingly are dismissed with prejudice. Pls.' Mem. at 11.

1. Plaintiffs' TILA Claims Are Time-Barred

According to Plaintiffs, "Defendant contends that Plaintiff is barred from bringing a cause of action for breach of contract because the Statute of Limitations under TILA is only one year, " whereas "the Statute of Limitations for breach of contract is six years." Id . This misinterpretation of Defendant's contention is easily corrected. Defendant does not argue that Plaintiffs' breach-ofcontract claim is barred according to TILA's one-year statute of limitations; rather, Defendant asserts that Plaintiffs' TILA claims are barred by the one-year statute of limitations imposed by TILA. See Def.'s Mem. at 5-7. The Court agrees.

"Congress enacted the Truth in Lending Act (TILA), 82 Stat. 146, in order to promote the informed use of credit' by consumers." Household Credit Servs. Inc. v. Pfennig , 541 U.S. 232, 235 (2004); see also 15 U.S.C. § 1601(a). Moreover, "TILA is a remedial act... and, as such, its provisions are to be construed liberally in favor of consumers." Belmont v. Assoc. Nat'l Bank (Del.) , 119 F.Supp.2d 149, 159 (E.D.N.Y. 2000) (citation omitted) (citing 15 U.S.C. § 1601(a)).

Nevertheless, private actions for damages based on TILA violations are subject to a one-year statute of limitations. Grimes v. Fremont General Corp. , 785 F.Supp.2d 269, 285 (S.D.N.Y. 2011) (citing 15 U.S.C. § 1640(e); Johnson v. Scala, No. 05-CV-5529 , 2007 WL 2852758, at *3 (S.D.N.Y. Oct. 1, 2007)). Moreover, "[i]t is well-settled law that in closed-end credit transactions, like the one at issue, the date of the occurrence of violation is no later than the date the plaintiff enters the loan agreement or, possibly, when defendant performs by transmitting the funds to plaintiffs." Cardiello v. Money Store, Inc., No. 00-CIV-7332 , 2001 WL 604007, at *3 (S.D.N.Y. June 1, 2001) (internal quotation marks omitted). The statute of limitations for TILA claims therefore began to run in October 2005 when the loan originated and funds were transmitted. See Compl. ¶¶ 4-5, at 4; Dkt. No. 1-1 at 31. The alleged misapplications of payments in violation of TILA occurred between October 3, 2006, and September 30, 2008. Compl. ¶ 18, at 7-8. The Complaint was not filed until October 25, 2012. See Dkt. No. 1-1 at 1. Thus, the most recent of the alleged TILA violations occurred more than three years prior to the filing of the Complaint, and is well outside of the one-year statutory period.

In an effort to save the first and seventh causes of action from being time-barred by invoking the doctrine of equitable tolling, Plaintiffs note that "those acts perpetrated by Defendant not only constitute breach of contract but also fraud... and the statute of limitations for fraud is two years after discovery of the harmful acts (which in this case is June 06, 2012.)." Pls.' Mem. at 12. While "[c]ourts have held that equitable tolling is appropriate under TILA if there are allegations of concealment and fraud, " McAnaney v. Astoria Fin. Corp. , 357 F.Supp.2d 578, 587 (E.D.N.Y. 2005) (citing Weil v. Long Island Sav. Bank, FSB , 77 F.Supp.2d 313, 322 (E.D.N.Y. 1999)), courts have also held that "in a TILA or RESPA case, equitable tolling will not be applied unless the plaintiff alleges affirmative acts of concealment by the defendant over and above any alleged non-disclosure that forms the basis of her claims." Futterman v. Wash. Mut. Bank, FA, No. 10-CV-01002, 2010 WL 5067650, at *2 (N.D.N.Y. Dec. 6, 2010) (Kahn, J.) (citing Zamito v. Patrick Pontiac, Inc., No. 07-CV-6241, 2008 WL 3930502, at *4 (W.D.N.Y. Aug. 21, 2008)). The Court cannot discern any such allegations within the pleadings. Thus, Plaintiff's TILA claims are untimely, and accordingly are dismissed with prejudice.

Plaintiffs also allege that Defendant violated 12 C.F.R. § 226.36(c). Compl. ¶ 16, at 7. "[T]he provisions of Part 226 of Title 12 of the C.F.R. are commonly known as Regulation Z." Murphy v. Empire of Am, FSA , 746 F.2d 931, 933 (2d Cir. 1984). "Regulation Z... is issued by the Board of Governors of the Federal Reserve System to implement the federal Truth in Lending Act." 12 C.F.R. § 226.1 (2013). Any Reg Z claims therefore must be subject to the TILA statute of limitations. Thus, any such claims are also untimely.

2. Plaintiffs Do Not State a Claim for Breach of Contract

Plaintiffs' TILA claims are cloaked in breach-of-contract garb, yet these are two separate and distinct causes of action. As such, the breach-of-contract claim must be analyzed in isolation from the TILA claims. The first issue is whether Plaintiffs have set forth a legally feasible claim for breach of contract. It is well settled that

[i]n order to recover from a defendant for breach of contract, a plaintiff must prove, by a preponderance of the evidence, (1) the existence of a contract between itself and that defendant; (2) performance of the plaintiff's obligations under the contract; (3) breach of the contract by that defendant; and (4) damages to the plaintiff caused by that defendant's breach.

Diesel Props S.R.L. v. Greystone Bus. Credit II LLC , 631 F.3d 42, 52 (2d Cir. 2011) (citing Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co. of N.Y. , 375 F.3d 168, 177 (2d Cir. 2004); Harsco Corp. v. Segui , 91 F.3d 337, 348 (2d Cir. 1996)). In New York, "[t]he damages must flow directly and naturally from the breach of the contract, and they must be certain, both in their nature and in respect of the cause from which they proceeded." ...

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