SUBSEQUENT HISTORY: Affirmed by Register v. Flagstar Bank, 2006 U.S. App. LEXIS 25468 (4th Cir. N.C., Oct. 12, 2006)
COUNSEL: [*1] For Paul L. Register, Patricia Register, Plaintiff: William L. Davis, III, Lumberton, NC.
For Flagstar Bank, FSB, Defendant: Michael T. Medford, Maiming, Fulton & Skinner, Raleigh, NC.
For Equiplus, Inc., Defendant: Brenton D. Adams, Brent Adams & Associates, Dunn, NC.
For Flagstar Bank, FSB, Cross Claimant: Michael T. Medford, Maiming, Fulton & Skinner, Raleigh, NC.
For Equiplus, Inc., Cross Defendant: Brenton D. Adams, Brent Adams & Associates, Dunn, NC.
JUDGES: LOUISE W. FLANAGAN, Chief United States District Judge.
OPINION BY: LOUISE W. FLANAGAN
OPINION:
ORDER
This matter is before the court on motion to dismiss by defendant Flagstar Bank, FSB, pursuant to Rules 12(b)(7) and 19 of the Federal Rules of Civil Procedure (DE # 19), motion to dismiss by defendant Equiplus, Inc., (DE # 31), and motions for summary judgment by defendants Flagstar and Equiplus (DE #'s 28 & 33). Plaintiffs timely responded in opposition to these motions. In this posture, this matter is ripe for ruling.
STATEMENT OF THE CASE
Plaintiffs commenced this action in state court on February 17, 2004, asserting claims under the federal Truth in Lending Act (TILA) and [*2] other state laws, arising out of their purchase and financing of a manufactured home. On March 7, 2005, defendants removed on the basis of federal question jurisdiction.
On April 12, 2004, plaintiffs filed a notice of voluntarily dismissal as to all claims against defendant Option One Mortgage Corporation. On June 7, 2004, the parties filed a stipulation of voluntary dismissal as to all claims against defendant North Sun Housing and Development, Inc., a.k.a. GNP Investments, Inc. (herein "North Sun")
On November 15, 2004, the court entered a case management order setting forth deadlines for discovery, preliminary and dispositive motions, and trial in this case. The court also addressed the dismissal of two defendants listed in the caption of the complaint:
The parties acknowledged that two of the original defendants in this case, Option One Mortgage Corporation and North Sun Housing and Development, Inc. a/k/a GNP Investments, Inc., have been voluntarily dismissed from the action [DE # 5, 13, 14]. Additionally, the parties agreed that upon information and belief, Lumberton North Sun Housing and Development, Inc., (a corporation totally separate from and unaffiliated with [*3] North Sun Housing and Development, Inc.) was a proper and indeed necessary party to the action, and that a motion to amend the complaint to add the proper party would be forthcoming shortly.
(DE # 17, p.2)(emphasis added).
No motion to amend the complaint in this action ever was filed by plaintiffs. Instead, plaintiffs filed a new complaint in state court, alleging similar facts and claims, against North Sun. (See Pl's Mem. in Resp. to Mot. to Dismiss, p. 2; Flagstar Reply, p. 2, Exs. 1 & 2). Accordingly, the instant action has proceeded forward solely against defendants Flagstar Bank, FSB (herein "Flagstar"), and Equiplus, Inc. (herein "Equiplus"). On March 7, 2005, defendant Flagstar filed a motion to dismiss for failure to join Lumberton North Sun Housing as a necessary party. (DE # 19). On May 19, 2005, defendant Flagstar filed a motion for summary judgment, (DE # 28), and defendant Equiplus filed a motion to dismiss and a motion for summary judgment. (DE #'s 31, 33).
FACTUAL SUMMARY
Viewed in the light most favorable to plaintiffs, the facts pertinent to the court's decision may be summarized as follows. In August 2000, plaintiffs entered onto the premises of North [*4] Sun seeking to acquire a manufactured home to be placed on a foundation on real property owned by plaintiff Paul Register.
At that time, plaintiffs negotiated the purchase of a manufactured home with a North Sun representative, Ken Stevenson, and gave North Sun a $ 500.00 deposit for a manufactured home. Stevenson made several representations to plaintiffs about the type of home and financing that they would receive.
In September 2000, plaintiffs returned to North Sun and spoke with a different North Sun representative, Corey Bratcher, who made additional representations to plaintiffs about the type of home and financing that they would receive. In December, 2000, Plaintiffs ordered a manufactured home, expecting specifications based upon the representations by Bratcher, and gave North Sun an additional deposit of $ 19,500.
In late December 2000, plaintiffs returned to North Sun and spoke with a different North Sun representative, Tommy Rice, who informed plaintiffs that they would be getting a home with different specifications than what they were expecting. Rice also told plaintiffs that to get financing, plaintiffs would need to include their land as a part of the package. Finally, [*5] Rice told plaintiffs that they could not cancel the home purchase without losing their $ 20,000 deposit. Rice referred plaintiffs to Amy Smith, a loan officer employed by defendant Equiplus, to arrange for financing.
Soon thereafter, North Sun delivered a manufactured house and placed it onto plaintiffs' land. Plaintiffs complained to North Sun that the home did not contain the saddle roof and porch and other things that they had been promised as part of the transaction. Rice told plaintiffs that North Sun would take care of that later, but that they needed to get the loan closed out first.
Plaintiffs returned to North Sun on February 15, 2001, to meet Ms. Smith and arrange for financing through defendant Equiplus. Ms. Smith informed plaintiffs that financing was available. Ms. Smith prepared a promissory note, a deed of trust, financing disclosure statements, and an itemization of the amount financed for the home delivered by North Sun. Because Mr. Register and Mrs. Register had different credit ratings, Ms. Smith prepared a promissory note for signature only by Mr. Register.
Then, Mr. Register signed the promissory note, the financing disclosure statement, and the itemization [*6] of the amount financed, pertaining to the acquisition of the home delivered to plaintiffs. Mrs. Register did not hold title to the land, but both she and Mr. Register entered into the deed of trust pledging this property.
The loan proceeds were disbursed to pay North Sun the balance of the purchase price of plaintiffs' home as well as other fees and expenses associated with the loan. Soon after the time of the loan transaction, defendant Equiplus assigned its interest in the promissory note to defendant Flagstar. Plaintiffs have resided in the manufactured home at all times since early 2001, and it continues to be their primary residence. After moving into the home, plaintiffs discovered substantial defects with the set up and installation of the manufactured home on their property. North Sun has not repaired and refuses to cure the defects in the home.
In their complaint, plaintiffs assert several claims for relief. First, plaintiffs assert a breach of warranty claim, alleging that plaintiffs relied upon the inducements of North Sun in their purchase of the manufactured home. Second, plaintiffs assert a claim for fraud, alleging that North Sun made false representations about the [*7] home to induce plaintiffs to purchase it, and that defendant Equiplus handled the financing documents in a manner contrary to TILA to induce plaintiffs to accept financing.
Third, plaintiffs assert a claim for negligent misrepresentation on grounds that North Sun made false representations about the home and ability to cancel the purchase of the home, in order to induce plaintiffs to purchase it. Fourth, plaintiffs assert a claim for conversion, on grounds that defendants converted the Plaintiffs' $ 20,000 deposit on the contract to their own use and benefit.
Fifth, plaintiffs assert a claim under the North Carolina Unfair Deceptive Trade Practices Act, on grounds that North Sun and defendant Equiplus violated the North Carolina Retail Installment Act and TILA. Finally, plaintiffs seek recovery on the common law equitable theory of restitution or unjust enrichment, and for punitive damages.
DISCUSSION
I. Motion to Dismiss for Failure to Join
In its motion to dismiss, defendant Flagstar argues that this action should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(7) for failure to join Lumberton North Suri Housing. [*8] Specifically, Flagstar points out that plaintiffs had ample opportunity to add Lumberton North Sun Housing to this case following the court's case management order which expressly mentioned the possibility of amending the complaint to add such party. In response, plaintiffs admit that they instituted a separate action against Lumberton North Sun Housing in state court following entry of the case management order. Plaintiffs argue that this lawsuit should proceed against defendants Equiplus and Flagstar, and that the court may limit the scope of judgment to those claims and methods of recovery that pertain to defendants Equiplus and Flagstar.
Federal Rule of Civil Procedure 12(b)(7) provides that a defendant may bring a motion to dismiss an action on grounds of "failure to join a party under Rule 19." Fed. R. Civ. P. 12(b)(7). In turn, Rule 19(a) provides in pertinent part:
(a) Persons to be Joined if Feasible. A person who is subject to service of process and whose joinder will not deprive the court of jurisdiction over the subject matter of the action shall be joined as a party in the action [*9] if (1) in the person's absence complete relief cannot be accorded among those already parties, or (2) the person claims an interest relating to the subject of the action and is so situated that the disposition of the action in the person's absence may (i) as a practical matter impair or impede the person's ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of the claimed interest. If the person has not been so joined, the court shall order that the person be made a party . . . .
Fed. R. Civ. P. 19(a). Rule 19(b) provides:
(b) Determination by Court Whenever Joinder not Feasible. If a person as described in subdivision (a)(1)-(2) hereof cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it. or should be dismissed, the absent person being thus regarded as indispensable. The factors to be considered by the court include: first, to what extent a judgment rendered in the person's absence might [*10] be prejudicial to the person or those already parties; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder.
Fed. R. Civ. P. 19(b)(emphasis added). "Rule 19 creates a two-step inquiry: first, whether a party is necessary to a proceeding because of its relationship to the matter under consideration; and second, if a necessary party is unavailable, whether the proceeding can continue in that party's absence. If it cannot, the party is indispensable and the action should be dismissed." Teamsters Local Union No. 171 v. Keal Driveaway Co., 173 F.3d 915, 917-918 (4th Cir. 1999)(emphasis added).
In other words, only after determining that the "absent party cannot be joined," will the court be able to "determine, by analyzing the factors described in Rule 19(b), whether to proceed without the absent party or to dismiss the action." RPR & Assocs. v. O'Brien/Atkins Assocs., P.A., 921 F. Supp. 1457, 1463 (M.D.N.C. 1995) [*11] (citing 7 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1609 (1986)). "In general, federal courts are extremely reluctant to grant motions to dismiss based on nonjoinder, and dismissal will be ordered only when the defect cannot be cured and serious prejudice or inefficiency will result." Id. (citing Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 118, 88 S. Ct. 733, 19 L. Ed. 2d 936 (1968)).
In this case, defendant Flagstar's motion to dismiss based upon Rule 19 is misplaced. Although defendant presents a compelling argument that Lumberton North Sun Housing is a necessary party to the action, defendant Flagstar has made no showing concerning the question of whether Lumberton North Sun Housing is unavailable or cannot be joined. Indeed, defendant Flagstar argues that plaintiffs could have joined Lumberton North Sun Housing in this case, and plaintiffs do not argue otherwise.
As a result, where defendant Flagstar seeks dismissal of the action, rather than an order compelling Lumberton North Sun Housing to join, the court must deny defendant Flagstar's motion to dismiss pursuant to Rule 19. Dismissal is inappropriate here where there has been no showing [*12] that Lumberton North Sun Housing is unavailable.
In support of its motion, defendant Flagstar cites to only one case, Siemens Building Technologies, Inc., v. Jefferson Parish, No. 03-2272, 2004 U.S. Dist. LEXIS 16153 (unpublished)(E.D.La. Aug. 12, 2004). Siemens, however, only proves the court's point here that, in the circumstances presented by defendant's motion, outright dismissal is not appropriate on the basis of Rule 19. In Siemens, the court found that a corporation not a party to the action, that was signatory to a contract in that case, was an indispensable party under Rule 19(a). See 2004 U.S. Dist. LEXIS 16153 at *16. Noting the two-step process for Rule 19 determinations, however, the court held that it would not "dismiss plaintiff's claims under Rule 12(b)(7) unless [the absent defendant] is shown not to be amenable to joinder." Id.
In this case, as in Siemens, absent a showing that Lumberton North Sun Housing is not amenable to joinder, defendant Flagstar's motion to dismiss is misplaced. Therefore, defendant Flagstar's motion to dismiss for failure to join, pursuant to Rule 12(b)(7), is DENIED.
II. Motions [*13] Based upon Failure of Claims as Matter of Law
Defendants Flagstar and Equiplus move to dismiss this action on grounds that plaintiffs' claims fail as a matter of law as to said defendants, under either a motion to dismiss or motion for summary judgment standard of review. In opposition, plaintiffs argue that certain aspects of their claims against defendants, under the TILA and the North Carolina Unfair Deceptive Trade Practices Act, survive summary judgment. Other claims and theories of relief enumerated in the complaint appear to be abandoned.
A. Standard of Review
The court may dismiss a complaint for failure to state a claim only if "it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41,45-46, 78 S. Ct. 99, 2 L. Ed. 2d 80(1957). In considering a motion to dismiss, the court assumes the truth of all facts alleged in the complaint and the existence of any fact that can be proved, consistent with the complaint's allegations. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 81 L. Ed. 2d 59(1984); Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993). If, [*14] on a motion to dismiss for failure to state a claim, "matters outside the pleading are presented to and not excluded by the court," as is the case here, "the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56." Fed. R. Civ. P. 12(b).
Summary judgment is appropriate, under Rule 56(c)), "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c)). A party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the [record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). The moving party can meet this burden "by showing that there is an absence of evidence to support the nonmoving party's case." Honor v. Booz-Allen & Hamilton, Inc., 383 F.3d 180, 185 (4th Cir. 2004). [*15] "[A] complete failure of proof concerning an essential element of [a plaintiff's] case necessarily renders all other facts immaterial." Celotex, 477 U.S. at 323. Once the moving party has met its burden, the non-moving party must then "set forth specific facts showing that there is a genuine issue for trial." Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986)(quoting Fed. R. Civ. P. 56(e)).
In making a determination on a summary judgment motion, the court views the evidence in the light most favorable to the non-moving party, according that party the benefit of all reasonable inferences. Bailey v. Blue Cross & Blue Shield of Virginia, 67 F.3d 53, 56 (4th Cir. 1995). Nevertheless, judges are not "required to submit a question to a jury merely because some evidence has been introduced by the party having the burden of proof, unless the evidence be of such a character that it would warrant the jury in finding a verdict in favor of that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)(citations omitted). "[C]onclusory statements, [*16] without specific evidentiary support," are insufficient to create a genuine issue of fact. Causey v. Balog, 162 F.3d 795, 802 (4th Cir.1998); see Thompson v. Potomac Elec. Power Co., 312 F.3d 645, 649 (4th Cir. 2002)("Conclusory or speculative allegations do not suffice"); Beale v. Hardy, 769 F.2d 213, 214 (4th Cir. 1985)("[M]ere speculation or the building of one inference upon another" is not sufficient); see also Stewart v. Prince George's County, 75 Fed. Appx. 198, 203 (unpublished)(4th Cir. 2003)("[T]he non-moving party may not rely on mere conclusory allegations nor speculation, but instead must offer some hard evidence showing that its version of the events is not wholly fanciful.")(quoting D'Amico v. City of New York, 132 F.3d 145, 149 (2d Cir.1998)).
In view of the issues raised, and the materials before this court, the court proceeds pursuant to Rule 56 and makes its remaining determinations in the case on summary judgment motion.
B. Analysis
As an initial matter, where defendant North Sun has been dismissed, plaintiffs' breach of warranty claim, asserted only against North Sun, [*17] is no longer at issue. Plaintiffs also assert a claim for conversion, on grounds that "defendants converted the Plaintiffs' $ 20,000 deposit on the contract to their own use and benefit." Although plaintiffs do not designate which defendant is responsible for the alleged conversion, the evidence presented, not rebutted by plaintiffs, shows that plaintiffs delivered their down payment to North Sun. (Rice Dep. 26; Mrs. Register Dep. 70). In their opposition to defendants' motions for summary judgment, plaintiffs present no argument in furtherance of the maintenance in this litigation of their conversion claim. Accordingly, the court finds that plaintiffs have abandoned their conversion claim, where they have failed to show a genuine issue of material fact. Therefore, judgment in favor of defendants on plaintiffs' conversion claim is ALLOWED and that claim is DISMISSED.
Plaintiffs also seek recovery in their complaint on the common law equitable theory of restitution or unjust enrichment, and for punitive damages. Plaintiffs present no argument in the opposition brief concerning their restitution or punitive damages claims as to the defendants remaining in this case. Accordingly, the [*18] court finds that plaintiffs have abandoned their restitution and punitive damages claims, and that plaintiffs have failed to show a genuine issue of material fact as to this claim. Therefore, judgment in favor of defendants on plaintiffs' restitution and punitive damages claims is ALLOWED and these claims are DISMISSED.
Plaintiffs also assert claims for fraud and negligent misrepresentation. The majority of the allegations in the complaint concern representations made by representatives of North Sun concerning the type of home that plaintiffs could receive. (See e.g., Compl., P 46 ("North Sun Housing, through its agents/employees made false representations and/or concealed material facts . . . to induce them to purchase the house," concerning "a saddle roof and porch," "$ 3000 worth of furniture," and their deposit); P 66 (similar allegations as to negligent misrepresentation). Plaintiffs do not rely upon these allegations in support of their fraud and negligent misrepresentation claims at this stage of the case.
Rather, turning to the heart of their claims against the existing defendants, plaintiffs assert that defendants Equiplus and Flagstar, through their agent Amy Smith, [*19] committed fraud or negligent misrepresentation by failing to provide plaintiffs notice of their right to "rescind or cancel the transaction that occurred on February 15, 2001." (See Pls' Mem. in Resp. to S.J., pp. 6, 7, 9, 13). Plaintiffs also allege that defendants failed to include certain information on the financing disclosure statement, pertaining to additional costs of the loan transaction. (Id. pp. 11-12). Plaintiffs contend that this failure to disclose violates the TILA and the North Carolina Retail Installment Act, and, in turn, violates the North Carolina Unfair and Deceptive Trade Practices Act. (See id.).
Defendants contend, inter alia, that plaintiffs' remaining claims fail as a matter of law because there is no underlying violation of TILA or state finance laws. The court will address these arguments in turn.
A. TILA Notice of Rescission
As to the alleged TILA violation for failure to notice rescission rights, defendants assert that plaintiffs' transaction is expressly exempt from notice of rescission requirements. Pursuant to TILA, 15 U.S.C. § 1635, a creditor is obligated to give notice of an obligor's right of rescission [*20] as to certain transactions. Specifically,
Except as otherwise provided in this section, in the case of any consumer credit transaction (including opening or increasing the credit limit for an open end credit plan) in which a security interest, including any such interest arising by operation of law, is or will be retained or acquired in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind the transaction until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this title [15 USCS § § 1601 et seq.], whichever is later, by notifying the creditor, in accordance with regulations of the Board, of his intention to do so. The creditor shall clearly and conspicuously disclose, in accordance with regulations of the Board, to any obligor in a transaction subject to this section the rights of the obligor under this section. The creditor shall also provide, in accordance with regulations [*21] of the Board, appropriate forms for the obligor to exercise his right to rescind any transaction subject to this section.
15 U.S.C. § 1635(a)(emphasis added).
Section 1635(e), however, expressly provides that these rescission disclosure requirements do not apply to "a residential mortgage transaction as defined in section 103(w) [15 U.S.C. § 1602(w)]." In turn, section 1602(w) provides:
The term "residential mortgage transaction" means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained against the consumer's dwelling to finance the acquisition or initial construction of such dwelling.
15 U.S.C. § 1602(w)(emphasis added). The term "dwelling" is further defined as "a residential structure or mobile home which contains one to four family housing units, or individual units of condominiums or cooperatives." 15 U.S.C. § 1602(v).
In this case, the February 15, 2001 loan transaction was executed for the purpose of financing [*22] the acquisition of the manufactured home from North Sun. (See Compl., P 29 (stating that the loan documents signed in February 2001 were "for the purchase of the home" for plaintiffs); Mr. Register Dep., p. 210 (stating that the loan was for the purchase price of the residence); Mrs. Register Dep., p. (stating that plaintiffs continue to live in the manufactured home provided by North Sun)). Therefore, the February 15, 2001 loan transaction was a "residential mortgage transaction" as that term is defined by the TILA, and was exempt from rescission disclosure requirements. See Heuer v. Forest Hill State Bank, 728 F. Supp. 1199, 1200 (D. Md. 1989)(finding loan transaction for purpose of financing acquisition of mobile home exempt from rescission disclosure requirements, pursuant to 15 U.S.C. § 1635(e)).
In their brief, plaintiffs do not dispute that the February 15, 2001 loan transaction was executed for the purpose of acquisition of the manufactured home from North Sun. They contend, however, that the February 15, 2001 loan was a loan "given to refinance a loan that was made by North Sun Housing to the Plaintiff in December 2000 for the [*23] purchase of a mobile home." (Pls' Mem. in Resp. to S.J., p. 10). As such, plaintiffs argue that the February 15, 2001 loan does not fall within the "residential mortgage transaction" exception. (See id.). In support of this claim, plaintiffs cite to exhibits attached to their response, which plaintiffs contend show a prior "construction loan" with North Sun. (id., p. 11).
Plaintiffs have attached to their brief a copy of a document appearing to be a contract between plaintiffs and North Sun. The contract, dated August 2000, appears to show an agreed-upon purchase of a manufactured home from North Sun by "cash deal" for $ 80,627. (Pls' Art. to DE # 42, p. 3). Plaintiffs also attach a document appearing to be a "Department of Housing & Urban Development Settlement Statement," dated February 15, 2001, signed by Mr. Register, showing a mortgage loan in the amount of $ 77,000 and indicating a "First Mortgage Payoff to Lumberton North Sun" in the amount of $ 73,400. (Id., p. 4). Finally, plaintiffs attach a document entitled "Residential Loan Application," dated January 12, 2001, bearing lender name "Equiplus" and indicating a loan in the amount of $ 77,000, including a "refinance" [*24] of $ 73,400.
As an initial matter, although plaintiffs contend that these documents show a prior construction loan with North Sun, plaintiffs' factual allegation asserted in their brief misrepresents the evidence of record. Specifically, none of the documents described above indicate that North Sun was the "lender" pertaining to the purchase or construction of the manufactured home. (see id., pp. 3-4, 8-10). Indeed, plaintiffs admit in their interrogatory responses that, although the loan documents indicate a "First Mortgage Payoff," "this was a false and incorrect statement in that plaintiffs had not entered into any transaction involving North Sun involving a mortgage or loan for the $ 73,400." (see Defs' Art. 15 to DE # 30). As such, although plaintiffs attempt to assert a disputed issue of fact over whether a prior loan existed, this assertion is belied by plaintiffs' own admissions in the record.
Moreover, even assuming, arguendo, that plaintiffs had a prior construction loan with North Sun and that the February 15, 2001 loan was a refinancing of such loan, TIL A still does not require rescission notice. The court in Heuer addressed and rejected an argument similar [*25] to plaintiffs' here, explaining:
Although the loan in question might have been characterized in differing ways in various bank papers concerning it (as a refinancing (in the loan application), as a renegotiated mortgage and/or as a construction loan (in various bank documents)),. there is no dispute that the purpose of the loan was to enable the plaintiffs to acquire and have installed on their real property, a manufactured (mobile) home. The fact that some fraction of the proceeds might have been used to refinance old consumer debts or for other purposes personal to the borrowers is not material. The point is that the purpose of the loan was undeniably to finance the acquisition of a mobile home. Thus, the loan was exempted from the rescission and notice requirements of 15 U.S.C. § 1635(a)by operation of 15 U.S.C. § 1635(e)(1), incorporating by reference 15 U.S.C. § 1602(w).
Heuer, 728 F. Supp. at 1200. The court further explained the rationale for this exception to the rescission requirement:
The statutory language creating the exemption has been persuasively construed [*26] as applying to mobile home loans as well as loans for the construction of more traditional residences. Copley v. Rona Enters., 423 F. Supp. 979, 984 (S.D.Ohio 1976). This result is consistent with the Congressional purpose in creating the statutory rescission right in the first place, viz., to protect home owners from certain sharp practices of home improvement contractors (and those financing such contractors), by creating a rescission right for home improvement loans that were secured by residential mortgages on existing dwellings. This federal remedy was thought necessary to protect consumers against surprise and oppression stemming from mortgages unwittingly executed on homes to pay for often questionable "home improvements." N.C. Freed Co., Inc. v. Board of Governors of the Federal Reserve System, 473 F.2d 1210, 1214-15 (2d Cir.1973).
Id. This reasoning applies equally to the facts of this case. In particular, although documents pertaining to the February 15, 2001 loan may reference a previous loan amount or refinancing of an earlier stated amount, "there is no dispute that the purpose of the loan was to enable the plaintiffs [*27] to acquire and have installed on their real property, a manufactured (mobile) home." Id. Therefore, the requirements of TILA, 15 U.S.C. § 1635(a), do not apply to plaintiffs' February 15, 2001 loan.
B. TILA Financing Costs Disclosure
Next, as to other TILA claims by plaintiffs concerning failure to disclose information on the financing statement, defendant argues that such claims are barred by the one-year TILA statute of limitations. The court agrees. Specifically, 15 U.S.C. § 1640(e) provides, in pertinent part that "Any action under this section may be brought . . . within one year from the date of the occurrence of the violation." 15 U.S.C. § 1640(e). An exception, providing for a three-year statute of limitations, applies to actions brought under § 1639, which lists certain language that must be included in a mortgage in conspicuous type. See 15 U.S.C. § 1639. In addition, section 1635(f), applying to notice of rescission rights, provides for a three-year limitations period. See 15 U.S.C. § 1635(f).
In this case, plaintiffs' loan transaction [*28] occurred on February 15, 2001 and plaintiffs' suit under TIL A commenced over three years later on February 17, 2005. Accordingly, plaintiffs' claim that defendants failed to include certain information on the financing disclosure statement, pertaining to additional costs of the loan transaction, and not pertaining to the requirements of § 1639 or § 1635, (see id. pp. 11-12), is barred by the one-year statute of limitations. See e.g., In re Dickson v. Local Acceptance Company, 432 F. Supp. 752, 756 (W.D.N.C. 1976)(dismissing non-disclosure claims by debtor due to one-year statute of limitations).
Plaintiffs argue that the three year TILA statute of limitations applies, or in the alternative that the four-year statute of limitations for the North Carolina Unfair and Deceptive Trade Practices Act applies. These arguments are misplaced. First, plaintiffs' argument that the three-year statute of limitation applies pertains only to the failure to give "notice of the right to rescind," which the court has addressed on the merits above. (Pls' Mem. in Opp. S.J., p. 12). Second, the court will address plaintiffs' Unfair and Deceptive Trade Practices claim below, and [*29] finds no authority for otherwise extending the applicable TILA limitation due to the presence of an Unfair and Deceptive Trade Practices claim. Accordingly, the court finds plaintiffs' arguments without merit, and judgment in favor of defendants is ALLOWED and the court DISMISSES plaintiffs' claims herein remaining based upon a TILA violation.
C. North Carolina Retail Installment Sales Act
Next, defendants argue that plaintiffs' claims under the North Carolina Retail Installment Sales Act fail as a matter of law. Specifically, defendants claim that the North Carolina Retail Installment Sales Act does not apply to lenders such as Equiplus and Flagstar, who are not engaged in the sale of consumer goods or services.
The North Carolina Retail Installment Sales Act "applies only to consumer credit sales" and does not apply to "a bona fide direct loan transaction in which a lender makes a direct loan to a borrower, and such lender is not regularly engaged, directly or indirectly, in the sale of goods or the furnishing of services as defined in this Chapter." N.C. Gen. Stat. § 25A-1. In relevant part, the statute defines services to include
(1) Work, [*30] labor, and other personal services; and
(2) Privileges with respect to transportation, hotel and restaurant accommodations, education, entertainment, recreation, physical culture, hospital accommodations, funerals and other similar services.
N.C. Gen. Stat. § 25A-5.
In this case, plaintiffs' allegations and the evidence of record show that defendants were engaged only in the capacity as lender or assignee of a lender, and are not engaged in the sale of goods or services, as defined in the Retail Installment Sales Act. (See Compl., PP 8,11; Henderson Dep. 86-89; Rice Dep. 102-103). Moreover, plaintiffs do not present evidence to the contrary in their response brief. (See Pls' Mem. in Resp. to S.J., p. 8). Accordingly, plaintiffs' claim under the Retail Installment Sales Act fails as a matter of law. See Collins v. Horizon Hous., Inc., 135 N.C. App. 227, 229, 519 S.E.2d 534 (N.C. Ct. App. 1999)(rejecting claim against bank under the North Carolina Retail Installment Sales Act in home mortgage loan transaction). Where the court finds that plaintiffs' claims under the North Carolina Retail Installment Sales Act fail are as a matter of law, [*31] judgment in favor of defendants is ALLOWED and these claims against defendants are DISMISSED.
D. Unfair and Deceptive Trade Practices Act
Defendants argue that plaintiffs' Unfair and Deceptive Trade Practices claim fails as a matter of law because the underlying statutory violations upon which it is based are also without merit. In the alternative, defendants argue that even if plaintiffs have alleged a violation of TILA or Retail Installment Sales Act, any Unfair and Deceptive Trade Practices claim is preempted.
To recover damages under the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1, plaintiffs must prove (1) an unfair or deceptive act or practice, or an unfair method of competition, (2) in or affecting commerce, (3) which proximately caused actual injury to the plaintiffs. Furr v. Fonville Morisey Realty, Inc., 130 N.C. App. 541, 551, 503 S.E.2d 401 (N.C.Ct.App. 1998). With respect to the first element, a practice is unfair if it violates public policy or "is immoral, unethical, oppressive, unscrupulous, or substantially injurious to customers." Id. (citations omitted); Johnson v. Beverly-Hanks & Assoc., Inc., 328 N.C. 202, [*32] 208, 400 S.E.2d 38 (1991)
In this case, where plaintiffs' Unfair and Deceptive Trade Practices Act claim against defendants Equiplus and Flagstar is based solely upon violations addressed in plaintiffs' other claims, which the court has rejected on their merits or on the basis of statute of limitations, the court finds plaintiffs' Unfair and Deceptive Trade Practice Act claim meritless. In particular, two cases in North Carolina have held that unfair trade practices claim could not be based upon violations of other federal statutes providing pervasive regulation of a particular area of law. See e.g. Skinner v. E. F. Hutton & Co., 314 N.C. 267, 275, 333 S.E.2d 236 (1985)("We do not believe that the North Carolina legislature would have intended § 75-1.1, with its treble damages provision, to apply to securities transactions which were already subject to pervasive and intricate regulation."); Brinkman v. Barrett Kays & Assocs., P.A., 155 N.C. App. 738, 745, 575 S.E.2d 40 (N.C. Ct. App. 2003)(holding that where Clean Water Act provides no private right of action, plaintiff may not use N.C. Gen. Stat. § 75-1.1 to provide cause of action pertaining to matters regulated under [*33] that federal statutory framework). The court finds these cases persuasive in the present context, which involves application of specific statutory disclosure requirements under TILA and North Carolina statutes.
Although plaintiffs contend that there is no bar to allowing plaintiffs to recover under both state and federal statutes, the cases cited by plaintiffs do not involve application of the Unfair and Deceptive Trade Practices Act. See e.g., Addison v. Britt, 83 N.C. App. 418, 420, 350 S.E.2d 158 (1986)(finding defendant liable for violations of TILA); Berryhill v. Rich Plan of Pensacola, 578 F.2d 1092, 1100 (5th Cir. 1978)(finding defendant liable for violations of TILA and state consumer finance statute). In fact, Berryhill involved the violation of several specific federal and state consumer financing statute requirements, which is a circumstance not present in this case. See Berryhill, 578 F.2d at 1100. Accordingly, the court finds plaintiffs' argument inapposite. In sum, motion for summary judgment in favor of defendants is ALLOWED, and plaintiffs' Unfair and Deceptive Trade Practice Act claim is DISMISSED.
CONCLUSION
Based upon the [*34] foregoing, the motions to dismiss by defendant Flagstar and Equiplus (DE # 19, 31), are DENIED, where the court finds the former motion not well taken for reasons set forth above, and the latter rendered moot by the court's determination to proceed on summary judgment. Motions for summary judgment by defendants Flagstar and Equiplus (DE #'s 28 & 33) are ALLOWED, and all remaining claims against these two defendants dismissed. Accordingly, the clerk is directed to close the case file.
SO ORDERED, this 2nd day of September, 2005.
LOUISE W. FLANAGAN Chief
United States District Judge
