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First Circuit Affirms Dismissal of Consumer-Protection Lawsuit Against Lender - Latson v. Plaza Home Mortgage

March 7, 2013

Vincent Howard and our Riverside predatory lending attorneys were interested to see a mortgage lawsuit in which the homeowners alleged fraud and bad faith when the loans were originated. In Latson v. Plaza Home Mortgage, Dynell and Annabel Latson alleged that Plaza had not adequately disclosed the terms of their mortgage before they signed it. The Latsons bought a three-family building in Dorchester, Mass., in 2006, putting 100 percent down on two high-interest loans. Five years later, after the housing market collapsed, they sued Plaza, saying the appraisal was fraudulent and federally required documents were not provided. The district court ultimately found that their state consumer protection claim was time-barred and that they failed to state a claim on other counts. The First U.S. Circuit Court of Appeals affirmed.

The Latsons bought their tri-plex in 2006, using two loans from Plaza. One had a fixed interest rate of 11.5 percent, and another had an interest rate that varied from 6.75 percent to 11.75 percent. The housing market collapsed in 2008 and 2009. In 2011, they sued in federal court, arguing that Plaza had failed to provide various documents required under the Real Estate Settlement Procedures Act; did not give them an opportunity to review the loan before signing; and knew or should have known the appraisal was inflated. Plaza moved to dismiss, arguing that the statute of limitations for the Massachusetts consumer protection law had expired, and that their factual allegations didn't state a legal claim. The district court granted the motion without opposition from the Latsons, then denied their motion for reconsideration.

The Latsons appealed, repeating their arguments, but the First Circuit was not impressed. The Massachusetts implied covenant of good faith and fair dealing requires that parties do not interfere with each other's ability to enjoy the "fruits of the contract." The First Circuit agreed that here, the fruits of the contract for the Latsons were the loan funds. It found no breach, noting that the Latsons received the funds and their allegations relate to behaviors from before the contract was formed. It declined to even reach the Latsons' claims on the Massachusetts consumer protection statute, finding this unnecessary because the four-year statute of limitations had ended 17 months before they sued. The Latsons argued that the statute should be tolled because of discovery or fraud, but found that any injury was apparent right away, and that they did not cite any facts supporting the fraud argument. Thus, it upheld the dismissal.

Vincent Howard and our Costa Mesa predatory lending lawyers are disappointed to see that procedural rules have barred what might otherwise be a strong case. The statute of limitations is a deadline to sue, and it can't generally be ignored (tolled) unless the court believes there's a good reason why. Here, the court was apparently not convinced that the Latsons were prevented from taking action earlier. Unfortunately, many people aren't aware that there's a deadline to sue, and they sometimes lose their opportunity to file otherwise strong cases. That's why, if you believe a lender defrauded you when you took out your loan, you should call our San Bernardino County predatory lending attorneys right away.

Vincent Howard and the team at Howard Law, P.C., vigorously defend Californians who were victims of predatory lending or other predatory behavior during the mortgage lending process. To tell us your story or learn more, call us toll-free at 1-800-87-25925 or send us a message online.

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