Durham Commercial Capital Corp. v. Ocwen Loan Servicing, LLC

Filing 156

OPINION AND ORDER denying 77 Motion for Summary Judgment; granting in part and denying in part 93 Motion for Summary Judgment; denying in part 99 Motion to exclude ; denying as moot 107 Motion to exclude ; denying 124 Motion to Dismiss ; denying 124 Motion to Change Venue; denying 124 Motion to Stay; granting 141 Motion to Strike ; granting 148 Motion to Strike. (Calendar Call set for 7/7/2017 10:00 AM in West Palm Beach Division before Judge Kenneth A. Marra., Jury Trial set for 7/10/2017 09:00 AM in West Palm Beach Division before Judge Kenneth A. Marra Signed by Judge Kenneth A. Marra on 3/30/2017. (ir)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
CASE NO. 15-80200-CIV-MARRA/MATTHEWMAN
DURHAM COMMERCIAL CAPITAL
CORP.,
a New York corporation,
Plaintiff,
vs.
OCWEN LOAN SERVICING, LLC, a Delaware
limited liability company,
Defendant.
____________________________________/
OPINION AND ORDER
This cause is before the Court upon Defendant’s Motion for Summary Judgment (DE 77);
Plaintiff’s Amended Motion for Summary Judgment (DE 93); Plaintiff’s Objection to and
Motion to Exclude Portions of Defendant’s Summary Judgment Evidence from the Summary
Judgment Record (DE 99); Plaintiff’s Motion to Exclude Portions of the Summary Judgment
Evidence Proffered by Defendant in Connection with Defendant’s Memorandum in Opposition
to Plaintiff’s Motion for Final Summary Judgment (DE 107); Defendant’s Renewed Motion to
Dismiss or, in the alternative, to Transfer or Stay as to Durham’s Alternative Theory of Liability
(DE 124); Defendant’s Motion to Strike (DE 141) and Plaintiff’s Motion to Strike (DE 148).
I. Background
The facts, as culled from affidavits, exhibits, depositions, answers, answers to
interrogatories, for the purpose of these motions, are as follows:
Plaintiff Durham Commercial Capital Corporation (“Plaintiff”) is in the factoring

business, which entails the contractual purchasing of accounts from a client. In this case,
Plaintiff purchased the accounts of the law firm, Connolly, Geaney, Ablitt and Willard, P.C.
(“CGAW”).1 (DE 100-1 at ¶ 1.) On November 7, 2012, CGAW (through its predecessor name
Ablitt Scofield, P.C.) and Plaintiff entered into a non-recourse receivables purchase contract and
security agreement (the “factoring agreement”). (DE 100-1 at ¶ 2.) Defendant Ocwen Loan
Servicing, LLC (“Defendant”) is a mortgage servicing company that services mortgage loans,
often on behalf of residential mortgage backed securities trusts. (DE 100-1 at ¶ 4.)
On or about June 12, 2012, CGAW and Defendant entered into a local counsel agreement
pursuant to which CGAW performed legal services for Defendant including evictions,
bankruptcies and mortgage foreclosure actions. (DE 100-1 ¶ 8.) CGAW issued invoices to
Defendant for legal services and costs that CGAW incurred in connection with professional legal
services performed for Defendant. (DE 100-1 ¶ 9.) CGAW was required to submit invoices on
loans being serviced by Defendant via Defendant’s REALRemit processing system. (DE 100-1 ¶
10.) Defendant claims it cannot unilaterally change vendor payment remittance information on
its system (Bryon Gay Decl. ¶ ¶ 32-36, DE 79),2 whereas Plaintiff claims Defendant can change
this information (Dec. 6, 2012 email, DE 79-5).
In or about late 2012, Defendant acquired another mortgage servicer named Homeward

1

CCAW is now in bankruptcy proceedings. (DE 78-3.)

2

The Court denies Plaintiff’s motion to exclude this portion of Gay’s declaration, as Gay
acted as a corporate representative and is competent to testify as to Defendant’s corporate
knowledge. See Sunbelt Worksite Mktg., Inc. v. Metropolitan Life Ins. Co., No.
8:09–cv–02188–EAK–MAP, 2011 WL 3444256, at *2 (M.D. Fla. Aug. 8, 2011) (“it is not
necessary for a corporate representative designated as a Rule 30(b)(6) witness to have direct,
personal knowledge of each and every fact discussed in an affidavit or deposition”).
2

Residential, Inc. f/k/a American Home Mortgage Servicing, Inc. (“American Mortgage”). In or
about early 2013, Defendant acquired from GMAC, Inc. (“GMAC”), GMAC’s mortgage
servicing rights to various mortgage loans. (DE 100-1 ¶ 11.)
On December 6, 2012, Plaintiff sent Defendant correspondence that stated the following:
I am pleased to inform you that [CGAW] has attained [Plaintiff] as a source of capital and
accounts receivable processor. This will enable [CGAW] to accommodate the growth
and development of their business while maintaining a high level of customer service.
As part of the program the accounts receivable of [CGAW] have been assigned to
[Plaintiff] and are processed through [Plaintiff]. Therefore payments of invoices should
be made payable to and mailed directly to:
Durham Commercial Capital Corp.
for the account of:
[CGAW]
101 Sully’s Trial, Bldg 20
Pittsford, NY 14534
This assignment has been duly recorded under the Uniform Commercial Code. Please
make the proper notations on your ledger and acknowledge receipt of this assignment by
signing at the place provided and fax a copy to [Plaintiff] . . . Payment to any other party
will not constitute payment. . . This notice and instructions herein will remain in full force
and effect until you are notified to the contrary in a writing signed by [Plaintiff] . . .

(Craig McGrain Decl. ¶ 9, DE 93-3.)
Plaintiff filed UCC-1 Form on November 14, 2012. (Ex. 3, DE 93-3.) Plaintiff filed
UCC-3 Form - Amendment on October 10, 2013. (Ex. 4, DE 93-3.) Plaintiff sent follow-ups to
the December 6, 2012 letter to Defendant, dated December 21, 2012, September 10, 2013,
January 7, 2014 and May 22, 2014. (Ex. 4-7, DE 93-3.)
Plaintiff’s motion for summary judgment argues that (1) Defendant breached its statutory
duty under Florida Statute § 679.4061(1) to pay the accounts to Plaintiff; (2) Defendant waived

3

all of its defenses by paying Plaintiff more than $400,000.00 without dispute and (3) Defendant’s
defenses are legally insufficient and/or factually unsupportable.
Defendant’s motion for summary judgment makes the following arguments: (1) Plaintiff
has failed to adduce evidence sufficient to establish what accounts receivable it factored and
retained; (2) Plaintiff has waived its rights to collect payment from Defendant because Defendant
told Plaintiff it considered Plaintiff to be a vendor, Plaintiff did not change the payment
remittance information even though it had access to do so, Plaintiff knew Defendant was
continuing to direct payments to CGAW, and Plaintiff had an arrangement with CGAW to hold
payments in trust and remit to Plaintiff; (3) Plaintiff’s notices of assignment were invalid and
vague; (4) Defendant has a defense and offset by virtue of CGAW’s misappropriation and (5) the
factoring agreement is void as a matter of public policy.
II. Summary Judgment Standard
The Court may grant summary judgment "if the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.
R. Civ. P. 56(a). The stringent burden of establishing the absence of a genuine issue of material
fact lies with the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The Court
should not grant summary judgment unless it is clear that a trial is unnecessary, Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986), and any doubts in this regard should be resolved
against the moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970).
The movant "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., 477 U.S. at 323. To discharge this
4

burden, the movant must point out to the Court that there is an absence of evidence to support the
nonmoving party's case. Id. at 325.
After the movant has met its burden under Rule 56(a), the burden of production shifts and
the nonmoving party "must do more than simply show that there is some metaphysical doubt as
to the material facts." Matsushita Electronic Industrial Co. v. Zenith Radio Corp., 475 U.S. 574,
586 (1986). "A party asserting that a fact cannot be or is genuinely disputed must support the
assertion by citing to particular parts of materials in the record . . . or showing that the materials
cited do not establish the absence or presence of a genuine dispute, or that an adverse party
cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1)(A) and (B).
Essentially, so long as the non-moving party has had an ample opportunity to conduct
discovery, it must come forward with affirmative evidence to support its claim. Anderson, 477
U.S. at 257. "A mere ‘scintilla' of evidence supporting the opposing party's position will not
suffice; there must be enough of a showing that the jury could reasonably find for that party."
Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990). If the evidence advanced by the
non-moving party "is merely colorable, or is not significantly probative, then summary judgment
may be granted." Anderson, 477 U.S. 242, 249-50.
III. Discussion
New York Uniform Commercial Code §9-406(a)3 states:
(a) Discharge of account debtor; effect of notification. Subject to subsections (b) through
(h), an account debtor on an account, chattel paper, or a payment intangible may
discharge its obligation by paying the assignor until, but not after, the account debtor
receives a notification, authenticated by the assignor or the assignee, that the amount due
or to become due has been assigned and that payment is to be made to the assignee. After
3

The parties agree that New York law applies to the factoring agreement. (DE 150, 151.)
5

receipt of the notification, the account debtor may discharge its obligation by paying the
assignee and may not discharge the obligation by paying the assignor.
N.Y.U.C.C. § 9-406.
The parties disagree whether the notice provided by Plaintiff to Defendant was sufficient
under this provision. The December 6, 2012 letter identified that the accounts receivable of
CGAW were now assigned to Plaintiff, told Defendant the assignment was recorded under the
Uniform Commercial Code, informed Defendant how payment should be made and that payment
made to any other party would not constitute payment. The Court finds, as a matter of law, that
this constitutes effective notice. See General Motors Acceptance Corp. v. Albany Water Bd.,
187 A.D. 2d 894, 896 (N.Y App. Div. 1992) (no particular form is required as long as the notice
apprises debtor of assignment or puts debtor on inquiry); see also Santander Bank, N.A. v.
Durham Comm. Capital Corp., No. 14–13133–FDS, 2016 WL 199408, at * 8 (D. Mass. Jan. 15,
2016) (no “magic words” required for notices to be effective) (quoting Municipal Trust and Sav.
Bank v. Grant Park Community Dist., 525 N.E.2d 255, 258 (Ill. App. Ct. 1988)); John Deere Co.
v. Neal, 544 S.W.2d 514 (Tex. Civ. App. 1976) (“notice of assignment without notice that future
payments are to be made to the assignee will not impose double liability on the obligor who pays
an assignor”); City of North Miami v. American Fidelity Fire Ins. Co., 505 So. 2d 511 (Fla. Dist.
Ct. App. 1987) (assignment which did not request account debtor to pay assignee not sufficient
notice that payment to be made to assignee); American Bank of Commerce v. City of McAlester,
555 P.2d 581 (Okla. 1976) (delivery of the assignment constituted notice of assignment and gave
rise to duty of account debtor to make payments to assignee); First Nat. Bank of Rio Arriba v.
Mountain States Tel. & Tel. Co., 571 P.2d 118 (N.M. 1977) (no reason to instruct account debtor

6

to pay assignee where unconditional language of assignment).
In so finding, the Court rejects Defendant’s argument that Plaintiff must identify actual
purchases and identify actual CGAW invoices it purchased. Significantly, the caselaw upon
which Defendant relies, Durham Commercial Capital Corp. v. Select Portfolio Servicing, Inc.,
14-cv-877-J-34PDB (M.D. Fla. Jan. 30, 2017), is unpersuasive because that complaint sought
payment on purchased accounts, whereas the instant complaint seeks payment on both purchased
and non-purchased accounts.
Next, Defendant contends that it did not understand the notice to reflect an assignment,
and communicated that to Plaintiff. The facts, however, show that Plaintiff followed up the
initial letter by five additional notices of assignment. In any event, as long as Plaintiff complied
with N.Y.U.C.C. § 9-406, there is effective notice and Defendant is responsible for its conduct
after such notice.4
Next, the Court will address the various defenses.5 With respect to many of the
affirmative defenses, the Court concludes that there are genuine issues of material fact that
preclude the granting of summary judgment to either party.
The Court examines the arguments surrounding waiver raised by both parties. “The

4

Given that Plaintiff provided adequate notice of the assignment, summary judgment for
Defendant on affirmative defenses one (failure to state a claim when U.C.C. § 9-406 is
inapplicable), thirteen (Plaintiff’s claims are barred because Defendant did not breach any legal
duty owed to Plaintiff) and sixteen (notice of assignment is insufficient) is denied and granted to
Plaintiff.
5

The Court will apply Florida law to the defenses. The parties agreed that Florida law
applies to the issues relating to the local counsel agreement. Plaintiff states that Defendant’s
“dominion and control” defenses would have the same outcome under Florida, New York or
Massachusetts law.
7

elements of waiver are: (1) the existence at the time of the waiver of a right, privilege, advantage,
or benefit which may be waived; (2) the actual or constructive knowledge of the right; and (3) the
intention to relinquish the right.” Zurstrassen v. Stonier, 786 So. 2d 65, 70 (Fla. Dist. Ct. App.
2001) (citing Leonardo v. State Farm Fire & Cas. Co., 675 So. 2d 176, 178 (Fla. Dist. Ct. App.
1996)). Issues of waiver typically involve factual issues, making it inappropriate for summary
judgment. Goodwin v. Blu Murray Ins. Agency, Inc., 939 So. 2d 1098, 1104 (Fla. Dist. Ct. App.
2006); Scheibe v. Bank of Am., N.A., 822 So. 2d 575, 575 (Fla. Dist. Ct. App. 2002); Woodruff
v. Government Employees Ins. Co., 669 So. 2d 1114, 1115 (Fla. Dist. Ct. App. 1996).
Plaintiff contends Defendant waived all of its defenses by paying certain CGAW invoices
to Plaintiff without raising any defenses at the time. Defendant, however, points out that those
payments were the result of remittance information entered into CGAW’s remittance system, of
which Defendant claims it had no control.6 (Def. Statement ¶¶ 39-43, DE 78.) As such,
Defendant has raised a genuine issue of material fact as to whether it intended to waive its right
to assert its defenses.
Likewise, there are questions of fact regarding Defendant’s claim of waiver. Defendant
asserts that Plaintiff knew that Defendant did not understand that Plaintiff was assignee of
CGAW accounts, that Plaintiff could have changed the remittance information and Plaintiff did
nothing to address the continued payments to CGAW. Plaintiff, however, points out that
numerous notices of assignment were sent to Defendant and that there is a question of fact as to

6

There is a question of fact on this point as well. (Pl. Statement ¶ 41, DE 98-1.)
8

whether Plaintiff had the ability to make changes to the remittance system.7 8 (Pl. Resp. To Def.
Mot., DE 98 at 11.)
Next, the Court will briefly highlight some of the factual issues with respect to
Defendant’s set-off defense. According to Defendant, CGAW breached its local counsel
agreement with Defendant on November 28, 2012 by failing to remit to Defendant third-party
foreclosure funds in the amount exceeding $1.5 million. Due to these breaches, Defendant
contends that it was excused from performance under the contract, including its obligation to pay
CGAW on invoices submitted by the firm. Defendant asserts that this defense is equally
applicable to Plaintiff’s claim as assignee and constitutes a valid offset pursuant to N.Y.U.C.C.
§ 9-404.
Various factual issues preclude the granting of summary judgment on this defense. First,
the breaches at issue, and the damages resulting from the breaches, arose from services rendered

7

Defendant relies upon a deposition that states Plaintiff had access to the remittance
system, but the witness only testified that Plaintiff had access to invoice numbers and payment
status. The additional correspondence relied upon by Defendant shows Plaintiff was given a
password to the remittance system, but not the type of access given. (Def. Statement ¶ 44, DE
78.)
8

Defendant states that the same facts support the following affirmative defenses (DE 100
at 17 n.14): estoppel, ratification, accord and satisfaction, failure to mitigate, laches and
affirmative defense seven which states that “[a]ny harm suffered or damages incurred by Plaintiff
were caused in whole or in part by the negligent and improper conduct of Plaintiff and/or third
parties not within the knowledge or control of [Defendant], for which acts or omissions
[Defendant] is not responsible.” As such, there are factual questions surrounding these
affirmative defenses. These same factual inquiries implicate Defendant’s eighth affirmative
defense that Plaintiff’s claims are barred because it has no standing and suffered no damages
since Plaintiff was in control of CGAW’s finances.
9

pursuant to a contract between CGAW and Homeward, not Defendant.9 There are also questions
of fact relative to the contractual relationships among the parties which would permit Defendant
to be able to assert a setoff defense stemming from a breach by CGAW of a contract different
than the contract upon which Plaintiff’s claim is based. Lastly, there are questions of fact as to
whether Defendant is the real party in interest to claim this defense, as opposed to the certificate
holders to whom the withheld funds are ultimately due.
Next, the Court finds, as a matter of law, that affirmative defense two- the failure to join
CGAW as a necessary party - and affirmative defense fourteen - that Plaintiff’s claims are barred
to the extent Plaintiff’s interest in CGAW’s accounts was subordinate to other secured creditors are not viable here since the Court’s ruling is not based upon a security interest.10 (Tr. at 82.)
Thus, summary judgment is granted for Plaintiff and denied for Defendant with respect to these
defenses.
Lastly, Defendant argues that the factoring agreement violates the rules of professional
conduct when CGAW provided Plaintiff with access to its confidential files and established an
impermissible fee-splitting arrangement between a law firm and non-lawyers.11 The Court
disagrees. See Santander Bank, N.A. v. Durham Commercial Capital Corp., No.
14–13133–FDS, 2016 WL 199408, at * 7 (D. Mass. Jan. 1, 2016) (“the very existence of section

9

This argument also implicates Defendant’s affirmative defense eleven which states that
“Plaintiff’s claims are barred, in whole or in part, because it is subject to defenses that
[Defendant] may have against CGAW.” Defendant’s setoff affirmative defense is number fifteen.
10

For this reason, the Court denies Defendant’s motion to dismiss or transfer to the
bankruptcy court.
11

This is affirmative defense twelve.
10

9 of the Uniform Commercial Code evidences a public policy in favor the creation and
assignment of security interests”). The cases relied upon by Defendant in support do not address
a factoring agreement. Even assuming arguendo that CGAW engaged in wrongdoing, while that
may be a basis for a claim of legal malpractice, it is an inadequate basis to void an otherwise
valid agreement. Id. Summary judgment is granted to Plaintiff and denied to Defendant regarding
this defense.
IV. Conclusion
Accordingly, it is hereby ORDERED AND ADJUDGED as follows:
1)

Defendant’s Motion for Summary Judgment (DE 77) is DENIED.

2)

Plaintiff’s Amended Motion for Summary Judgment (DE 93) is GRANTED IN
PART AND DENIED IN PART.

3)

Plaintiff’s Objection to and Motion to Exclude Portions of Defendant’s Summary
Judgment Evidence from the Summary Judgment Record (DE 99) is DENIED IN
PART WITH RESPECT TO THE GAY DECLARATION RELIED UPON
IN THIS ORDER AND DENIED AS MOOT IN PART with respect to the
evidence not relied upon in its rulings.

4)

Plaintiff’s Motion to Exclude Portions of the Summary Judgment Evidence
Proffered by Defendant in Connection with Defendant’s Memorandum in
Opposition to Plaintiff’s Motion for Final Summary Judgment (DE 107) is
DENIED AS MOOT because the Court did not rely upon this evidence in its
rulings.

5)

Defendant’s Renewed Motion to Dismiss or, in the alternative, to Transfer or
11

Stay as to Durham’s Alternative Theory of Liability (DE 124) is DENIED.
6)

Defendant’s Motion to Strike Docket Entry 140 (DE 141) is GRANTED as a
violation of Local Rule 7.1(c) which prohibits additional memoranda of law
without prior leave of Court.

7)

Plaintiff’s Motion to Strike Docket Entry 146 (DE 148) is GRANTED as a
violation of Local Rule 7.1(c) which prohibits additional memoranda of law
without prior leave of Court.

8)

The case has been set for the two-week trial period beginning July 10, 2017.
Calendar call will be at 10 a.m. on July 7, 2017. The trial will address the
remaining affirmative defenses. The parties must conduct mediation 60 days prior
to calendar call.

DONE AND ORDERED in Chambers at West Palm Beach, Palm Beach County,
Florida, this 30th day of March, 2017.
______________________________________
KENNETH A. MARRA
United States District Judge

12