The opinion of the court was delivered by: RICHEY
On February 8, 1986, plaintiffs entered into a contract to purchase a dwelling at 3972 Georgetown Court, N.W., Washington, D.C. Complaint, para. 7. One day later, plaintiffs submitted to defendant McLean Financial Corporation an application for a mortgage loan for the purchase of the Georgetown court house. Id. at para. 8. Plaintiffs maintain that defendant through its agents "constantly assured" them "that the loan application had been approved and that there were no problems in obtaining the requested loan." Id. at para. 11. On May 20, 1986, AmeriWest Mortgage Corporation (hereinafter "AmeriWest"), an entity whose involvement in their mortgage application allegedly was never disclosed to plaintiffs, mailed plaintiffs a notice that their application for a mortgage loan had been denied. Id. at para. 13.
On December 2, 1986, plaintiffs brought this lawsuit, charging defendant with violation of the Equal Credit Opportunity Act (hereinafter "ECOA"), 15 U.S.C. § 1691, breach of contract, "fraud and intentional misrepresentation," breach of fiduciary duty, and negligence. Now before the Court is defendant's motion to dismiss all claims in this complaint, a motion that plaintiffs vigorously oppose. The Court has considered the motion, the Opposition thereto, the legal memoranda submitted by both parties, and the underlying law. The Court will deny defendant's motions to dismiss the ECOA claim, the fraud claim, the breach of fiduciary duty claim, and the negligence claim. The Court will grant defendant's motion to dismiss the breach of contract claim, and will dismiss that claim without prejudice.
THE COMPLAINT STATES A CLAIM FOR VIOLATION OF THE EQUAL CREDIT OPPORTUNITY ACT ON WHICH THIS COURT MAY GRANT RELIEF.
The Equal Credit Opportunity Act specifies that "within thirty days . . . after receipt of a completed application for credit, a creditor shall notify the applicant of its action on the application." 15 U.S.C. § 1691(d)(1). In Count One of the Complaint, plaintiffs contend that defendant was required to inform them that their loan application had been denied within thirty days after they submitted their "completed" application. Complaint at para. 15. Plaintiffs contend both that the notice they received was not sent within that thirty-day period and that defendant itself never notified plaintiffs of the adverse action on their loan application. Id. Defendant has moved to dismiss Count One of the Complaint, pursuant to Fed. R. Civ. P. 12(b)(6), for failure to state a claim on which relief may be granted.
Defendant is correct to argue that plaintiffs were not entitled to notification of adverse action within thirty days after they applied for their loan. Plaintiffs fail to recognize the meaning of "completed application" in the context of the ECOA. The regulations issued to implement the ECOA specify that a "completed application" is:
12 C.F.R. § 202.2(f)(1986). Thus, the regulations make clear that an application is considered "complete" not when the applicant completes it -- as plaintiff would have it -- but when the creditor has obtained verifying information and whatever other types of reports or information it ordinarily requires to evaluate a loan.
Dismissal of a claim under Fed. R. Civ. P. 12(b)(6) is proper when "the allegations of the complaint itself clearly demonstrate that plaintiff does not have a claim." C. A. Wright and A. MIller, Federal Practice and Procedure : Civil § 1357, at 604. As the ECOA regulations make clear, plaintiffs were not entitled to notice within thirty days after they submitted an application they deemed "complete." If this were the only allegation in Count One, the Court would have to grant defendant's motion to dismiss.
But plaintiffs allege that defendant violated the ECOA in two other respects as well. They maintain that defendant itself was required to notify them that their application for a mortgage loan had been denied. Complaint at paras. 15, 16. They also argue that defendant was required to notify them that another institution would be involved in the decision whether to extend credit. Id.
While neither the law nor the regulations provides that a primary lender must inform an applicant that another financial institution is involved in the decision to extend credit, the regulations clearly provide that each "creditor" taking adverse action against the applicant must notify the applicant of that decision. See 12 C.F.R. § 202.9(g)(1986). Unless AmeriWest, which ultimately notified plaintiffs that their loan was denied, was an "assignee, transferee, or subrogee" that, "in the ordinary course of business, regularly participates in" defendant's evaluations of mortgage loan applications, id. at § 202.2(1), defendant and AmeriWest are separate creditors for the purposes of the ECOA. If so, under the terms of the statute, plaintiffs were entitled to notice from defendant, even if defendant merely adopted AmeriWest's decision.
The Court cannot at this time say whether AmeriWest and defendant had business relations such that defendant did not itself have to inform plaintiffs that their loan application had been denied. As such, the Court must deny defendant's motion to dismiss this count of the complaint.
Count Two of the Complaint alleges that plaintiffs and defendant executed several contracts that "were to take effect upon the Defendant's approval of Plaintiff's [sic] credit application." Complaint at para. 18. Plaintiffs allege that defendant was obligated to process plaintiffs' loan application "promptly and properly," id., and contend that the notice of denial of credit constituted breach of contract. Id. at para. 19. Defendant has moved to dismiss plaintiffs' breach of contract claim for failure to state a claim on which this Court may grant relief.
The Court must grant defendant's motion.
While there may be situations in which a loan applicant and a creditor enter into an agreement or series of agreements that ensure that some credit will be provided to the applicant, nothing in the complaint suggests that such unusual arrangements are involved here. Indeed, plaintiffs admit that the "contracts were to take effect upon the Defendant's approval of Plaintiff's [sic] credit application." Complaint at para. 18. Thus, the complaint alleges that plaintiffs had entered into an a conditional agreement to contract, not a contract, when they submitted their loan ...