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Escano v. Freemont Investment & Loan

United States District Court, Second Circuit

December 6, 2013

CHARLES ESCANO et al., Plaintiffs,
FREEMONT INVESTMENT & LOAN et al., Defendants.



Defendants Arlington Financial Corporation s/h/a Arlington Financial ("Arlington") and Mortgage Electronic Registration Systems, Inc. ("MERS") (collectively, "Defendants") each move to dismiss the Verified Complaint (the "Complaint") filed by Plaintiffs Charles Escano, Yomaira Escano and Daneiry Asis (collectively, "Plaintiffs"), pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that the Complaint is untimely and fails to state a claim upon which relief may be granted. No opposition to the motions has been filed.[1] This case was originally filed in the Supreme Court for the State of New York, Bronx County, by Plaintiffs on or about January 30, 2013. See Charles Escano, Yomaira Escano and Daneiry Asis v. Freemont Investment & Loan, Arlington Financial, Mortgage Electronic Registration Systems Inc., Index No. 300679/2013. It was removed to this Court on March 8, 2013. Plaintiffs assert that Defendants collectively violated the Truth in Lending Act, 15 U.S.C. § 1638 ("TILA"); the Real Estate Settlement Procedure Act, 12 U.S.C. § 2607 ("RESPA"); and bring eight additional state law causes of action against the Defendants in connection with Plaintiffs' May 25, 2006, purchase of two mortgages. On March 8, 2013, MERS removed the action to this Court on the basis of federal question jurisdiction, pursuant to 28 U.S.C. § 1331. The Court has considered carefully the Plaintiffs' Complaint and the Defendants' motions to dismiss and for the following reasons, Defendants' motions are granted in their entirety.


In their Complaint, Plaintiffs allege that on or about May 25, 2006, they closed upon two loans, secured by a mortgage on their home at Baisley Avenue in the Bronx (the "Baisley Avenue Home"). (Compl. ¶ 6.) These loans were originated and processed by Defendant Arlington and approved by Defendant Freemont. (Id. ¶ 7.) The two loans totaled $835, 000.00 with a loan-to-value ratio of one hundred percent, which Plaintiffs allege was based upon an inflated appraisal. (Id.) The first loan was a forty-year adjustable rate mortgage in the amount of $668, 000.00, with an initial payment of $4, 297.51 and an initial interest rate of 7.300% and the second loan was a thirty-year mortgage with an initial payment of $1, 437.86 and a fixed interest rate of 9.775%. (Id.) Plaintiffs allege that, after the closing of the loans, their financial position deteriorated, and as a result of what Plaintiffs refer to as the "predatory" loans, Plaintiffs' net worth was "significantly impaired, if not, wiped out altogether." (Id. ¶¶ 7-8, 19.)

In or around January 30, 2013, six and a half years later, Plaintiffs filed their Complaint in New York State Supreme Court, alleging that Defendants failed to fulfill various legal obligations during Plaintiffs' purchase of the loans by, inter alia, selling Plaintiffs overpriced loans with an excessive debt-to-income ratio, having underwriting that was well below the required guidelines and charging Plaintiffs excessive fees at the closing. (Compl. ¶¶ 9-11, 17.) Plaintiffs allege that the Defendants failed to adequately disclose their interest and legal obligations in violation of TILA and charged "excessive fees" in violation of RESPA, and further assert state law claims for quiet title, breach of implied covenant of good faith and fair dealing, breach of fiduciary duty, unjust enrichment, breach of contract, fraud, unconscionability and violation of New York General Business Law § 349. (Id. ¶¶ 20-58.)


In order to survive a motion to dismiss, a plaintiff must plead sufficient facts "to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007). A claim is plausible "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). A complaint that offers only "labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555. In considering a Rule 12(b)(6) motion, all non-conclusory factual allegations are accepted as true and all reasonable inferences are drawn in favor of the plaintiff. See, e.g., In re Elevator Antitrust Litig. , 502 F.3d 47, 50 (2d Cir. 2007). However, an unopposed Rule 12(b)(6) motion is still subject to review on the merits. McCall v. Pataki , 232 F.3d 321, 322 (2d Cir. 2000) ("although a party is of course to be given a reasonable opportunity to respond to an opponent's motion, the sufficiency of a complaint is a matter of law that the court is capable of determining based on its own reading of the pleading and knowledge of the law"). Therefore, when presented with an unopposed motion, the Court must still review the record and determine whether the motion should be granted. See, e.g., Kinlaw v. Walsh, 10 Civ. 07539(RMB)(JLC), 2012 WL 2548437, at *1 (S.D.N.Y. June 29, 2012).

Timeliness of Plaintiffs' Claims

Defendants first argue that many of Plaintiffs' federal and state law claims are time-barred by the applicable statute of limitations. "A statute of limitations provides an affirmative defense, and the burden is on the defendant to establish when a federal claim accrues." Gonzalez v. Hasty , 651 F.3d 318, 322 (2d Cir. 2011). Therefore, "the Court may only dismiss an action based on the statute of limitations if, on the face of the complaint, it is clear that the claim is untimely." FTA Mkt. Inc. v. Vevi, Inc., No. 11 Civ. 4789, 2012 WL 383945, at *3 (S.D.N.Y. Feb. 1, 2012) (citing Harris v. City of N.Y. , 186 F.3d 243, 250 (2d Cir. 1999)).

TILA and RESPA Claims[2]

"Congress provided a one year statute of limitations for private actions based on violations of TILA... [and] 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. The Money Store, Inc., No. 00 Civ. 7332(NRB) , 2001 WL 604007, at *3 (S.D.N.Y. June 1, 2001), aff'd. 29 F.App'x 780 (2d Cir. 2002), cert. denied 537 U.S. 1046 (2002). See also 15 U.S.C. § 1640(e) ("any action under this section may be brought... within one year from the date of the occurrence of the violation"). Thus, at the latest, Plaintiffs' TILA claims accrued when Plaintiffs closed on the mortgages and the funds were released in May 2006. As the Complaint was not filed until January 2013, any claims that Plaintiffs seek to bring pursuant to TILA are untimely. See, e.g., Grimes v. Fremont General Corp. , 785 F.Supp.2d 269, 285 (S.D.N.Y. 2011) (the "plain language of Section 1640(e) and the cases interpreting that statute indicate that, where a damages claim under TILA is time-barred, the Court is prohibited from even reaching the question of whether the defendant has violated TILA") (internal quotation marks and citation omitted).

Similarly, "[u]nder RESPA, any action for violation of § 2605 must be brought within three years, and any actions for violations of 12 U.S.C. § 2607 or § 2608 must be brought within one year." Lee v. E*Trade Financial Corp., No. 12 Civ. 6543(PAE), 2013 WL 4016220, at *4 (S.D.N.Y. Aug. 6, 2013) (citing 12 U.S.C. § 2614). The latest a RESPA action could have been brought here was May 25, 2009. Because Plaintiffs' TILA and RESPA claims were made outside of the statute of limitations period, they are dismissed in all respects as time-barred. See, e.g., Deans v. Bank of America, No. 10 Civ. 9582(RJH), 2011 WL 5103343, at *3 (S.D.N.Y. Oct. 27, 2011) (summarily dismissing TILA and RESPA claims as time-barred).

Breach of Good Faith and Fair Dealing, Breach of Fiduciary Duty, Unjust Enrichment, Breach of Contract and Unconscionability Claims

In Counts II, III, IV, V, and VII of the Complaint, Plaintiff asserts claims for breach of the covenant of good faith and fair dealing; breach of fiduciary duty; unjust enrichment; breach of contract; and unconscionability. Each of these five claims is subject to a six-year statute of limitations. See N.Y. C.P.L.R. § 213; see also Flight Sciences, Inc. v. Cathay Pacific Airways Ltd. , 647 F.Supp.2d 285, 288 (S.D.N.Y. 2009) ("[c]laims for breach of the covenant of good faith and fair dealing and for unjust enrichment are... subject to a six-year statute of limitations") (collecting cases); Kermanshah v. Kermanshah , 580 F.Supp.2d 247, 262 (S.D.N.Y. 2008) ("New York's statute of limitations for breach of fiduciary duty is six years when a plaintiff seeks equitable relief and three years when a plaintiff seeks only money damages, " unless the fiduciary duty claims are based on allegations of fraud, in which case they "are subject to a six year statute of limitations regardless of the substantive remedy sought"); Ackoff-Ortega v. Windswept Pacific Entertainment Co. (Inc.) , 120 F.Supp.2d 273, 284 (S.D.N.Y. 2000) ("[u]nder New York Law, unconscionability claims are governed by a six-year statute of limitations"). Under New York law, the statute of limitations for a breach of contract claim is also six years. See N.Y. C.P.L.R. ...

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