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Kirschbaum v. Wells Fargo, N.A.

United States District Court, E.D. Kentucky, Lexington

March 30, 2017

LEN KIRSCHBAUM AND KIM KIRSCHBAUM, Plaintiffs,
v.
WELLS FARGO, N.A., A/K/A WELLS FARGO HOME MORTGAGE INC. Defendant.

          MEMORANDUM OPINION & ORDER

          Joseph M. Hood Senior U.S. District Judge

         This matter is before the Court upon the Motion to Dismiss filed by Defendant, Wells Fargo, N.A., a/k/a Wells Fargo Home Mortgage Inc. (“Wells Fargo”) [DE 8]. Plaintiffs Len Kirschbaum and Kim Kirschbaum (“Plaintiffs”) have filed a Response [DE 10] and Wells Fargo has filed a Reply in further support of its Motion [DE 11]. Thus, the matter is fully briefed and ripe for review.

         I. Factual and Procedural Background

         Although the allegations of the pro se Complaint filed by Plaintiffs are vague, the Complaint generally alleges that Wells Fargo wrongfully foreclosed on real estate belonging to Plaintiffs and violated various provisions of the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq., the underlying Regulation Z, 12 C.F.R. § 226.1, et seq., and the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601, et seq. Plaintiffs request rescission of the Mortgage and Note at issue, clear title to the property, damages for emotional distress as a result of “countless telephone calls ascertaining the delinquency of the bill and or mortgage, ” statutory damages for violations of TILA, RESPA, and “the Unfair and Deceptive Acts and Practices, ” treble damages for “usurious interest, ” return of Plaintiffs' down payment, installments, late payments, and other payments, as well as interest on the entire amount of the loan, and costs of the litigation. Plaintiffs also seek injunctive relief enjoining the foreclosure action and all other activities complained of “preliminarily and permanently, ” as well as an injunction enjoining Wells Fargo from “keeping relevant documents such as, complete loan package but not limited there to and to forward all foreclosure documents” to Plaintiffs. [DE 1-1 at ¶¶ 110-25].

         Although Plaintiffs' Complaint does not provide specific details regarding the foreclosure action referenced therein, copies of the docket sheet, Foreclosure Complaint, and the Judgment from Wells Fargo Bank, N.A. v. Kirschbaum, Case No. 15-CI-326, filed in the Jessamine Circuit Court in Jessamine County, Kentucky, are attached to Wells Fargo's Motion to Dismiss [DE 8-2, State Court Record].[1] According to these documents, Plaintiffs obtained a mortgage loan from Central Bank on December 1, 2005 (the “Loan”) [DE 8-2]. In connection with the Loan, Plaintiffs executed a promissory note (the “Note”) and a mortgage (the “Mortgage”) pledging their property located at 152 Cherrybrook Drive, Nicholasville, Kentucky as collateral for the Loan [Id.]. The Mortgage was filed on December 7, 2005 in Mortgage Book 802, Page 391 of the Jessamine County Clerk's Office and was subsequently assigned to Wells Fargo [Id.]. After Plaintiffs' defaulted in the payment of the Note and Mortgage, Wells Fargo filed the foreclosure action on or around May 26, 2015 [Id.].[2] A Judgment and Order of Sale was entered by the Jessamine Circuit Court on March 7, 2016, finding in Wells Fargo's favor and referring the matter to the Master Commissioner for judicial sale. [Id.]. Plaintiffs filed the Complaint in this case in the Jessamine Circuit Court on April 8, 2016 [DE 1-1]. This case was removed to this Court on May 5, 2016 [DE 1]. Plaintiffs also filed a voluntary Chapter 13 bankruptcy petition in the Eastern District of Kentucky on April 14, 2016, and Wells Fargo filed a notice of automatic stay in the foreclosure action on April 21, 2016, staying the foreclosure sale [DE 8-2].[3]

         II. Standard of Review

         Wells Fargo seeks dismissal of Plaintiffs' Complaint pursuant to Fed.R.Civ.P. 12(b)(1) and 12(b)(6). Specifically, Wells Fargo argues that Plaintiffs' claims seeking rescission of the foreclosure action pursuant to TILA should be dismissed pursuant to Rule 12(b)(1) and that the remainder of Plaintiffs' claims should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim.

         A Rule 12(b)(1) motion can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exists. See RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1133-35 (6th Cir. 1996); United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994); Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir.1990). Here, Defendants have put forth a “factual attack” on the Court's jurisdiction to hear this case; thus, the Court need not presume the facts in the Complaint as true. RMI Titanium Co., 78 F.3d at 1134.

         Conversely, a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) tests the sufficiency of Plaintiffs' complaint. In ruling on a Rule 12(b)(6) motion to dismiss, the court “must construe the complaint in the light most favorable to the plaintiff and accept all allegations as true.” Keys v. Humana, Inc., 684 F.3d 605, 608 (6th Cir. 2012)(citation omitted). 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) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). 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. Id.

         Generally, matters outside the pleadings may not be considered by the Court in ruling on a motion to dismiss pursuant to Rule 12(b)(6) without converting the motion to a motion for summary judgment. See Fed. R. Civ. Pro. 12(d). However, “[i]n addition to the allegations in the complaint, the court may consider other materials that are integral to the complaint, are public records, or are otherwise appropriate for the taking of judicial notice.” Wyser-Pratte Management Co., Inc. v. Telxon Corp., 413 F.3d 553, 560 (6th Cir. 2005)(citations omitted). The Foreclosure Complaint and Judgment from the Jessamine Circuit Court are referred to in the Complaint and are, indeed, integral to Plaintiffs' allegations of wrongful foreclosure. Moreover, these documents are public records and are appropriate for the taking of judicial notice, as they can be accurately and readily determined from the Jessamine Circuit Court records, a source whose accuracy cannot reasonably be questioned. Fed. R. 201(c). For all of these reasons, the Court may consider these materials in ruling on Wells Fargo's motion without converting the motion to a motion for summary judgment.

         III. Analysis

         A. Plaintiffs' TILA Claims

         In their Complaint, Plaintiffs allege various violations of the lender's disclosure obligations arising under TILA, 15 U.S.C. § 1601, et seq., and seek money damages, as well as rescission of the entire loan transaction [DE 1-1]. TILA “was enacted to promote the informed use of credit by consumers by requiring meaningful disclosure of credit terms.” Barrett v. JP Morgan Chase Bank, N.A., 445 F.3d 874, 875 (6th Cir. 2006)(quoting Begala v. PNC Bank, Ohio, N.A., 163 F.3d 948, 950 (6th Cir. 1998)). Accordingly, TILA “requires creditors to provide borrowers with 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 Federal Bank, 523 U.S. 410, 412 (1998)(citations omitted).

         In addition to being subject to statutory and actual damages traceable to a lender's failure to make the required disclosures, “the Act also authorizes a borrower whose loan is secured with his ‘principal dwelling, ' and who has been denied the requisite disclosures, to rescind the loan transaction entirely.” Id. In these circumstances, the borrower has the right to rescind the loan agreement for up to three business days after the transaction. See 15 U.S.C. § 1635(a). Moreover, “[w]hen the lender ‘fails to deliver certain forms or to disclose important terms accurately' to the borrower, the Act extends the borrower's right to rescind the transaction to three years.” Barrett, 445 F.3d at 875-876 (quoting Beach, 523 U.S. at 411).

         1. This Court has Subject-Matter Jurisdiction Over Plaintiff's Claim for Rescission

         To the extent that Plaintiffs' Complaint seeks rescission of the Loan due to an alleged failure to provide the disclosures required under TILA, Wells Fargo argues that this Court does not have subject-matter jurisdiction over this claim, as this claim is barred by the Rooker-Feldman doctrine. The Rooker-Feldman doctrine precludes this Court “from exercising appellate jurisdiction over final state-court judgments.” Lance v. Dennis, 546 U.S. 459, 463 (2006). In Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (2005), the United States Supreme Court explained:

[t]he Rooker-Feldman doctrine...is confined to cases of the kind from which the doctrine acquired its name: cases brought by state-court losers complaining of injuries caused by state-court judgments rendered before the district court proceedings commenced and inviting district court review and rejection of those judgments. Rooker-Feldman does not otherwise override or supplant preclusion doctrine or augment the circumscribed doctrines that allow federal courts to stay or dismiss proceedings in deference to state-court actions.

Id. at 284.

         The Court further explained that “[i]f a federal plaintiff ‘present[s] some independent claim, albeit one that denies a legal conclusion that a state court has reached in a case to which he was a party..., then there is jurisdiction and state law determines whether the defendant prevails under principles of preclusion.'” Id. at 293 (quoting GASH Assocs. v. Rosemont, 995 F.2d 726, 728 (7th Cir. 1993)(alterations in original)). The Sixth Circuit Court of Appeals has noted that the scope of Rooker-Feldman has been tightened post-Exxon Mobile Corp., and distinguishes “between plaintiffs who bring an impermissible attack on a state court judgment - situations in which Rooker-Feldman applies - and plaintiffs who assert independent claims before the district court - situations in which Rooker-Feldman does not apply.” Kovacic v. Cuyahoga County Dep't of Children and Family Services, 606 F.3d 301, 309 (6th Cir. 2010)(citations omitted). Accordingly, “the pertinent inquiry after Exxon is whether the ‘source of the injury' upon which plaintiff bases his federal claim is the state court judgment, not simply whether the injury complained of is ‘inextricably intertwined' with the state-court judgment.” Id. (citing McCormick v. Braverman, 451 F.3d 382, 394-95 (6th Cir. 2006).

         Here, with respect to Plaintiffs' TILA claim seeking rescission, Plaintiffs are not complaining of an injury caused by the state court foreclosure judgment. Rather, the source of Plaintiffs' alleged injury is the alleged failure of the lender in their loan transaction to make the disclosures required under TILA. Therefore, Plaintiffs' Complaint presents an independent claim and Rooker-Feldman does not apply. See Veasley v. Federal Nat. Mortg. Ass'n (FNMA), 623 Fed.App'x. 290 (6th Cir. 2015)(where plaintiff sued a mortgage assignee and purchaser at a foreclosure sale, alleging that the foreclosure sale was invalid based on improper chain of title, Rooker-Feldman did not preclude jurisdiction over the plaintiff's case because the source of plaintiff's injury was an alleged faulty mortgage assignment, thus plaintiff raised a claim independent from the state court judgment of foreclosure); Brown v. First Nationwide Mortg. Corp., 206 Fed. App'x 436, 440 (6th Cir. 2006)(plaintiff's complaint alleging fraud in connection with state court foreclosure proceedings not barred by Rooker-Feldman because it did not claim the source of plaintiff's injury was the foreclosure decree itself, but rather concerned the actions of defendants that preceded the decree). Accordingly, this Court has jurisdiction over Plaintiffs' rescission claim.[4]

         2. Plaintiffs' TILA Claims are Time-Barred

         Although Plaintiffs' TILA claims survive Rooker-Feldman, they must still be dismissed, as they are time-barred. The statute of limitations for a TILA claim for damages is governed by ...


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