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Soberanis v. City Title Loan LLC

United States District Court, D. South Carolina, Charleston Division

April 3, 2017

Latitia Soberanis, Plaintiff,
v.
City Title Loan, LLC, and 1st Choice Recovery, LLC, Defendants.

          ORDER AND OPINION

          Richard Mark Gergel, United States District Court Judge.

         This matter is before the Court on Defendants' motion to dismiss. For the reasons set forth below, the Court grants the motion as to unfair trade practices claims against Defendant 1 st Choice Recovery, LLC, and otherwise denies the motion.

         I. Background

         Defendant City Title Loan, LLC ("City Loan") loaned $2, 800 to Defendant Letitia[1]Soberanis for the purchase of a used 2003 Mercury Mountaineer, to be repaid over three years at an annual percentage interest rate of 118.49%. (Dkt. No. 14 ¶ 7.) Ms. Soberanis provided City Loan a security interest in the vehicle. (Id. ¶ 8.) Ms. Soberanis apparently[2] did not remit the first payment installment and, on August 19, 2015, Defendant 1st Choice Recovery, LLC ("1st Choice"), repossessed the vehicle from Ms. Soberanis's property on behalf of City Loan, allegedly over Ms. Soberanis's objections in a manner constituting breach of the peace. (Id. ¶¶ 11-15.) Ms. Soberanis alleges City Loan did not mail her a right to cure letter, which South Carolina law requires as a prerequisite to repossession of personal property securing a consumer loan. (Id. ¶ 9.)

         Ms. Soberanis filed a complaint with the South Carolina Department of Consumer Affairs, to which Defendants allegedly responded that she was attempting to avoid the mandatory arbitration agreement in her promissory note. (Id. ¶ 19.) On June 1, 2016, she attempted to commence an arbitration action with the American Arbitration Association ("AAA"), the arbitration organization identified in the promissory note. (Id. ¶ 20.) The arbitration agreement provides for arbitration in South Carolina, with Ms. Soberanis responsible for arbitration fees up to the amount of filing fees for bringing a civil suit in state or federal court in South Carolina and City Loan responsible for the remainder of all arbitration fees. (Dkt. No. 11-1 at 6.) Ms. Soberanis alleges that because City Loan failed to register the arbitration clause with the AAA and refused to pay required arbitration fees, AAA closed the file and refused to administer the arbitration agreement. (Dkt. No. 14 ¶ 22-26.)

         On September 30, 2016, Ms. Soberanis filed the present action in the Dorchester County Court of Common Pleas. (Dkt. No. 1-1.) The complaint was served on November 30, 2016, and Defendants removed to this Court on December 30, 2016. (Dkt. No. 1.) Defendants move to dismiss the amended complaint in its entirety. (Dkt. No. 17.)

         II. Legal Standard

         Rule 12(b)(6) of the Federal Rules of Civil Procedure permits the dismissal of an action if the complaint fails "to state a claim upon which relief can be granted." Such a motion tests the legal sufficiency of the complaint and "does not resolve contests surrounding the facts, the merits of the claim, or the applicability of defenses. . . . Our inquiry then is limited to whether the allegations constitute 'a short and plain statement of the claim showing that the pleader is entitled to relief.'" Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992) (quotation marks and citation omitted). In a Rule 12(b)(6) motion, the Court is obligated to "assume 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." E. Shore Mkts., Inc. v. J.D. Assocs. Ltd. P'ship, 213 F.3d 175, 180 (4th Cir. 2000). However, while the Court must accept the facts in a light most favorable to the non-moving party, it "need not accept as true unwarranted inferences, unreasonable conclusions, or arguments." Id.

         To survive a motion to dismiss, the complaint must state "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Although the requirement of plausibility does not impose a probability requirement at this stage, the complaint must show more than a "sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint has "facial plausibility" where the pleading "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

         III. Discussion

         A. First Cause of Action - Conversion

         South Carolina law provides that creditor in a secured consumer credit transaction payable in installments may not take possession of goods that are collateral for the debtor's obligation "until twenty days after a notice of the consumer's right to cure is given." S.C. Code 37-5-111(1) (citation omitted). A notice of the right to cure must be delivered to the consumer or mailed to the consumer's residence no earlier than ten days after the consumer defaults-i.e., fails to make a required payment. S.C. Code 37-5-110(1). If the creditor repossesses the collateral in violation of those statutory requirements, it is liable to the debtor in conversion. S.C. Code 37-5-111(7).

         Plaintiffs first cause of action asserts a claim for conversion against City Loan because City Loan had 1st Choice repossess Plaintiffs vehicle without first sending a right to cure letter in compliance with statutory requirements. (Dkt. No. 14 ¶¶ 30-34.) Defendants move to dismiss the conversion claim, arguing Plaintiff is estopped from denying that a proper right to cure letter was mailed.

         Defendants' argument is without merit. Estoppel is an affirmative defense. See Fed. R. Civ. P. 8(c)(1). "[A] motion to dismiss filed under Federal Rule of Procedure 12(b)(6), which tests the sufficiency of the complaint, generally cannot reach the merits of an affirmative defense .. . [b]ut in the relatively rare circumstances where facts sufficient to rule on an affirmative defense are alleged in the complaint, the defense may be reached by a motion to dismiss filed under Rule 12(b)(6). This principle only applies, however, if all facts necessary to the affirmative defense 'clearly appear[ ] on the face of the complaint.'" Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir. 2007). A court "may consider a document submitted by the movant that was not attached to or expressly incorporated in a complaint, so long as the document was integral to the complaint and there is no dispute about the document's authenticity, " and "a document is integral to the complaint where the complaint relies heavily upon its terms and effect." Goines v. Valley Cmty. Servs. Bd, 822 F.3d 159, 166 (4th Cir. 2016) (internal quotation marks omitted). Here, Plaintiff alleges a right to cure letter was not sent. (Dkt. No. 14 ¶ 9.) Defendants cannot move to dismiss by refuting that allegation with evidence like envelopes and postal tracking information because that evidence is not apparent from the face of the complaint, or from documents integral to it, such as the promissory note. The complaint does not "rely heavily" on the terms of postal tracking information or an envelope returned to City Loan as undeliverable. Defendant's "estoppel" argument is really an argument that there is no genuine dispute that the letter was sent. That is an argument for summary judgment under Rule 56, not dismissal under Rule 12. The Court therefore denies the motion to dismiss as to the first cause of action.

         Although the Court denies Defendants' motion to dismiss the first cause of action based on the above without considering evidence beyond the complaint and documents integral to it, the Court, in the interests of judicial economy, will address the merits of Defendants' estoppel argument to prevent relitigation of the argument. Defendants appear to argue Plaintiff is estopped because Plaintiff provided evidence to refute Defendants' baseless suggestion that Plaintiff actually refused to accept delivery of the letter or is otherwise responsible for City Loan's failure to deliver it:

Plaintiff has argued that City Loan handwrote the address. Plaintiff is incorrect as the envelope in question in Dkt 11-2 is a copy of the failed certified delivery with the handwritten notes on the label to refuse delivery. More importantly, the only way to fail a delivery is to attempt delivery, which is all that is required by S.C. Code Ann ยง 37-5-110. In fact, this Exhibit provided by Plaintiff goes directly to prove Defendant City Loan mailed a letter to Plaintiff ...

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