The opinion of the court was delivered by: William J. Martini Judge
MARTIN LUTHER KING JR. FEDERAL BLDG. & U.S. COURTHOUSE 50 WALNUT STREET, P.O. BOX 419 NEW ARK, NJ07101-0419 (973) 645-6340
This matter comes before the Court on Defendants Chevy Chase Bank, F.S.B. ("Chevy Chase") and B.F. Saul II's (incorrectly pleaded as B.F. Saul) motion to dismiss Plaintiffs Laura Busse and Richard Busse's Second Amended Complaint with prejudice, as well as Plaintiffs' separate motion for summary judgment. The Court did not hold oral argument. Fed. R. Civ. P. 78. For the reasons stated below, Defendants' motion to dismiss is GRANTED in part and DENIED in part. Plaintiffs' motion for summary judgment is DENIED.*fn1
BACKGROUND AND PROCEDURAL HISTORY
This is a consumer fraud action arising out of an adjustable rate mortgage ("ARM") refinancing. In March 2005, Laura Busse responded to a New York City radio commercial offering refinancing at 1.50% interest. She spoke to Vincent Seneri, a mortgage broker for Homebank LLC.*fn2 (Second Amend. Compl. ¶ 2.) Seneri informed Laura about a government program for people with excellent credit. (Id. at ¶ 3.) He checked Plaintiffs' credit history and informed them that they qualified for the program. (Id. at ¶ 4.) Under the terms of the mortgage, Plaintiffs would pay 1.00% for the first year, and 4.70% for the following four years. (Id. at ¶ 5.)
Homebank sent Plaintiffs a copy of the loan application, as well as a Good Faith Estimate and a Truth in Lending Disclosure Statement ("TILDS"). (Id. at ¶ 6.) The Good Faith Estimate stated that the loan was for $365,000 at an interest rate of 1.00%. (Id.) Homebank's TILDS contained a box titled "Annual Percentage Rate" ("APR") that noted that the mortgage was subject to a "a yearly rate" of 4.835%. (Id.)
On April 6, 2005, Plaintiffs received ten documents from Chevy Chase, including a preliminary TILDS and an ARM Disclosure.*fn3 (Id. at ¶ 8.) The preliminary TILDS listed several interest rates, a payment schedule, as well as definitions of various financial terms. The TILDS stated that the loan was subject to an APR of 6.009%, which represented the "cost of your credit as a yearly rate." It also contained, in small print on the top right corner, the phrase "Note Interest Rate: 1.000%." (Id. at ¶ 9.) The document listed amounts and number of payments, which were grouped yearly for the first five years.
Number of PaymentsAmount of PaymentsPayments are Due Beginning
(Id.) The TILDS provided Plaintiffs with a definition of APR. The document defined APR as "the cost of the loan in percentage terms taking into account various loan charges of which interest is only one such charge." (Pl. Ex. on Mt. for Summ. J. as to Liability and in Opp. to Defs.' Mot. to Dismiss ("Pl. Ex.") 22.) The definition cautioned that the APR was "not the Note rate for which the borrower applied," because of various finance charges, and informed Plaintiffs that the APR was a "rate higher than the interest rate shown on your Mortgage/Deed of Trust Note." (Id. at ¶ 10.)
In addition to the preliminary TILDS, Plaintiffs received an ARM Disclosure, which notified Plaintiffs that their interest rate under the mortgage would change. The disclosure stated that "[f]ollowing an initial period, the interest rate will vary in response to movement in an index . . . plus a fixed amount of percentage points" and detailed that "[t]he time period for the initial interest rate is one month." (Pl. Ex. 28.) The disclosure warned Plaintiffs that "[t]his is not a commitment to make a loan to you, nor does it describe the specific terms of the loan the Lender may offer you. Those terms will be described in your Note and Deed of Trust or Mortgage." (Second. Amend. Compl. ¶ 11.)
On April 19, 2005, Chevy Chase and Plaintiffs closed the loan. In conjunction with the closing, Plaintiffs received a battery of documents from Chevy Chase, including the Adjustable Rate Note, an Adjustable Rate Rider, and a final TILDS. (Id. at ¶ 12.) The final TILDS tracked the preliminary TILDS except with nominally higher values for the Amount of Payments, APR, Finance Charge, and Amount Financed. (Id. at ¶ 13.) The definition of APR remained the same. (Id.)
The Adjustable Rate Note and Adjustable Rate Rider recited that Plaintiffs will "pay interest at the yearly rate of 1.000%" and notified Plaintiffs that the "interest rate . . . may change." (Id. at ¶ 14.) The document also informed Plaintiffs that the interest rate "may change . . . on the first day of June, 2005 and on that day every month thereafter." (Id. at ¶ 15.)
Starting in June 2005, Chevy Chase began sending monthly invoices to Plaintiffs. (Id. at ¶ 26.) After Plaintiffs paid 1.00% for the first month, the interest rate jumped to 6.25%. The rate continued to climb until it reached 8.25%, at the beginning of the second year. (Id.) Plaintiffs allege that the refinancing resulted in negative amortization, adding over $11,000 in principal to their mortgage. (Id.)
On July 27, 2007, Plaintiffs filed a three count complaint against Chevy Chase and Saul. Defendants filed a motion to dismiss on October 31, 2007, which the Court granted without prejudice on June 5, 2008. Plaintiffs subsequently filed a Second Amended Complaint on August 8, 2008.
The Second Amended Complaint makes the following allegations. Counts One and Two allege violations of the Truth In Lending Act ("TILA"), 15 U.S.C. § 1601 et seq. Plaintiffs seek a rescission of the mortgage issued by Chevy Chase, as well as attorneys' fees and costs, in Count One and compensatory and punitive damages in Count Two. Count Three alleges common law fraud against Saul, while Counts Four and Five allege violations of the New Jersey Consumer Fraud Act ("CFA"), N.J.S.A. 56:8-1 et seq., based on allegations of unconscionable commercial practices in securing and subsequently keeping Plaintiffs' business. On September 8, 2008, Defendants filed a second motion to dismiss pursuant to Fed. R. Civ. Pro 12(b)(2) for lack of personal jurisdiction over Saul and Fed. R. Civ. Pro. 12(b)(6) for failure to state a claim.*fn4 In response, Plaintiffs filed a motion for summary judgment on October 7, 2008. Both motions are opposed.
When deciding a motion to dismiss under Fed. R. Civ. P. 12(b), all allegations in the complaint must be taken as true and viewed in the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501, 95 S.Ct. 2197, 45 L.Ed. 2d 343 (1975); Trump Hotels & Casino Resorts, Inc., v. Mirage Resorts Inc., 140 F.3d 478, 483 (3d Cir. 1998). In evaluating a Rule 12(b)(6) motion to dismiss for failure to state a claim, a court may consider only the complaint, exhibits attached to the complaint, matters of public record, and undisputedly authentic documents if the plaintiff's claims are based upon those documents. See Pension Benefit Guar. Corp. v. White Consol. Indus., 998 F.2d 1192, 1196 (3d Cir. 1993). If, after viewing the allegations in the complaint in the light most favorable to the plaintiff, it appears that no relief could be granted ...