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Rouse v. Farmer

United States District Court, Eastern District of Kentucky, Central Division, Lexington

March 12, 2015

STEVEN J. ROUSE and JULIE HOBBS, Plaintiffs,
v.
KIM FARMER and COMMUNITY VENTURES CORPORATION, Defendants.

OPINION AND ORDER

KAREN K. CALDWELL, CHIEF JUDGE

This matter is before the Court on the motion to dismiss (DE 3) filed by the defendants. For the following reasons, the motion will be granted as to the plaintiffs’ federal claims and the state law claims will be remanded to state court.

I.

The plaintiffs allege that over the course of several weeks in June and July of 2013, they worked with defendant Community Ventures Corporation to obtain a loan to purchase their first home. (DE 1-1, Complaint at 2.) They allege that they took an online video training course offered by Community Ventures that was designed to educate individuals about purchasing a home. (DE 1-1, Complaint at 2.) They then met with Kim Farmer, a senior mortgage loan officer for Community Ventures, on June 12, 2013 and July 11, 2013 and had discussions with her “about how the mortgage loan process worked.” (DE 1-1, Complaint at 3.)

No party has made clear to the Court precisely what Community Ventures is or does. The Court gathers from the pleadings that it assists individuals in obtaining loans for the purchase of a home. It appears that, at times, Community Ventures actually loans money itself. In the case of the plaintiffs, however, the plaintiffs state that Community Ventures represented that their loan was “ultimately to come from a bank in Tennessee called Franklin American Mortgage.” (DE 6, Response at 4.)

The plaintiffs allege that Farmer represented to them that, when Community Ventures “locked in” a particular interest rate for the plaintiffs, “that rate was guaranteed to the [plaintiffs] for a period of 30 days.” (DE 1-1, Complaint at 4.) The plaintiffs allege that, at the meeting on July 11, 2013, Farmer agreed to lock in the plaintiffs’ mortgage rate for 30 days at 4.75 percent. (DE 1-1, Complaint at 4.) The plaintiffs allege that that, at the same meeting, Farmer gave them a document titled “Closing Cost Worksheet” that set forth the 4.75 percent interest rate and represented that the plaintiffs would get $1342.08 in cash at the closing. (DE 1-1, Complaint at 4-5.)

The plaintiffs allege that Farmer called them later that same day to state that the plaintiffs’ interest rate would actually be higher than the 4.75 percent rate in the closing cost worksheet. (DE 1-1, Complaint at 6.) Thus, the plaintiffs were under the false impression for a matter of hours that they would be able to obtain a home loan at 4.75%. This is the basis for the claims as set forth in their Complaint.

The plaintiffs assert that Community Ventures violated the Truth in Lending Act (TILA), 15 U.S.C. § 1601, et seq. and the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601, et seq. The plaintiffs assert state law claims against Community Ventures for fraud, breach of contract, and tortious interference with a contract and with a business advantage. They also assert that Community Ventures violated the Kentucky Consumer Protection Act, KRS § 367.170(1).

The defendants move to dismiss all claims against them. Alternatively, the defendants move to require the plaintiffs to make a more definite statement of their claims. The plaintiffs recognize deficiencies in their complaint and request that their response to the motion to dismiss be treated as the more definite statement. Accordingly, in ruling on the motion to dismiss, the Court will consider the allegations in the plaintiffs’ response.

II.

Community Ventures asserts that the plaintiffs’ TILA claim must be dismissed because the act permits a private right of action only against “creditors” and Community Ventures is not one. 15 U.S.C. § 1640(a). A creditor is defined as a person who “both 1) regularly extends . . . consumer credit. . .” and 2) is the person to whom the debt arising from the consumer credit transaction is initially payable on the face of the evidence of indebtedness or, if there is no such evidence of indebtedness, by agreement.” 15 U.S.C. § 1602(g).

The parties dispute whether Community Ventures regularly extends consumer credit and the Court cannot resolve that issue on a motion to dismiss. As to the second requirement, however, the plaintiffs do not allege in their complaint that they owe any debt payable to Community Ventures or that they would have owed Community Ventures any debt under the proposed transaction. In their response, they assert only “on information and belief” that Community Ventures would have been the entity to whom their debt would have been initially payable. (DE 6, Response at 3.) But later in their response, the plaintiffs state that their proposed loan was to come from “a bank in Tennessee called Franklin American Mortgage.” (DE 6, Response at 4.) In fact, the entire basis for the plaintiffs’ RESPA claim, as finally explained in their response to the motion to dismiss, is that Community Ventures urged the plaintiffs to borrow from Franklin American and no other entity. (DE 6, Response at 4.)

Because the plaintiffs have not sufficiently alleged that Community Ventures is a creditor as that term is defined under TILA, the TILA claim must be dismissed.

Moreover, even if Community Ventures were a creditor, the plaintiffs have failed to state a TILA claim against it. TILA was enacted “to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.” 15 U.S.C. § 1601(a). The act requires creditors to make “clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower's rights.” Beach v. Ocwen Fed. Bank, 523 U.S. 410, 412, (1998). If the creditor fails to do so, it can be held liable for criminal penalties and statutory and actual damages. ...


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