Bravo v. Merscorp Inc. et al

Filing 38

MEMORANDUM AND ORDER, For the foregoing reasons, defendant's 34 Motion to Dismiss for Failure to State a Claim is granted in substantial part and denied in part. Only plaintiff's TILA claim as to MERS survives. All other remaining claims are dismissed with prejudice. Ordered by Judge Eric N. Vitaliano on 8/31/2013. Fwd. for jgt. (Layne, Monique)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

----__________________________________________________ ------x
VICTORIANO BRAVO,
Plaintiff,
-against1: 12-CV-884 (ENV)(LB)

MERSCORP, INC. et aI.,
Defendant.

____________________________________________________________ x
VIT ALIANO, D.J.
On February 22, 2012, pro se plaintiff Victoriano Bravo filed this
action against defendants, MERSCORP Holdings, Inc. ("MERSCORP"), Mortgage
Electronic Registration Systems, Inc. ("MERS"), Bank of America Corp. ("BOA"),
BAC Home Loans Servicing, LP ("BAC Home Loans"), and Bank of America N.A.
("BANA"). By Memorandum and Order dated April 9, 2013, the Court dismissed
the majority of plaintiff's claims with prejudice. Bravo v. MERSCORP, Inc., 2013
WL 1652325 (E.D.N.Y. 2013). Only plaintiff's Truth in Lending Act ("TILA")
claims against BANA and BAC Home Loans survived the motion. Additionally,
plaintiff's Fair Debt Collection Practices Act ("FDCPA") claim as to BANA, BAC
Home Loans, and MERS, and TILA claim as to MERS were dismissed without
prejudice, and plaintiff was granted leave to replead these claims.
On May 15, 2013, Bravo filed an amended complaint, to which he
appended at least one new exhibit. Defendants moved to dismiss on July 26, 2013.
For the following reasons, defendants' motion is granted in substantial part and

denied in part.
Standard of Review
To survive a 12(b)(6) motion, a complaint must "contain sufficient
factual matter, accepted as true, to 'state a claim for relief that is plausible on its
face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). This "plausibility standard is not akin to a
probability requirement, but it asks for more than a sheer possibility that a
defendant has acted unlawfully." Id. (internal quotations omitted). On a Rule
12(b)(6) motion, a court must accept as true all factual statements alleged in the
complaint and draw all reasonable inferences in favor of the nonmoving party.

Vietnam Ass'nfor Victims ofAgent Orange v. Dow Chem. Co., 517 F.3d 104, 115 (2d
Cir. 2008). Where, as here, the plaintiff is not represented by counsel, the complaint
must be construed liberally and interpreted to raise the strongest arguments that it
suggests, Chavis v. Chappius, 618 F.3d 162, 170 (2d Cir. 2010) (citing Harris v. City of

New York, 607 F.3d 18,24 (2d Cir. 2010)), no matter how in artfully pleaded. Boykin
v. KeyCorp, 521 F.3d 202, 214 (2d Cir. 2008) (citing Erickson v. Pardus, 551 U.S. 89,
94 (2007)).
Discussion I
1. Causes of Action Dismissed by the April 9 Memorandum and Order

Plaintiff may not reassert claims that have already been dismissed with

I Familiarity with the facts of the case is preswned. They are not repeated here but are recounted
at Bravo, 2013 WL 1652325.

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prejudice. See Lee v. Underhill Wiping Cloth, 13 F. App'x 62 (2d Cir. 2001).
Therefore, the claims dismissed with prejudice by the April 9 Memorandum and
Order, including FDCPA and TILA claims against MERSCORP and BOA, and
fraud, breach of contract, Real Estate Settlement Procedure Act, and Uniform
Commercial Code claims against all defendants, are not properly before the Court.
Similarly, plaintiff's redoubled effort to craft a claim under the Declaratory
Judgment Act fails for the same reason. To the extent the purported repleading
might be construed as a motion for reconsideration, that motion is denied as
meritless. These claims were, and remain, dismissed.
2. Truth in Lending Act
Despite a less than seamless amendment to the original pleading, at
issue on this motion are plaintiff's TILA claims as to MERS, BANA, and BAC
Home Loans. 2 Bravo contends that all are responsible for BAN A and BAC Home
Loan's failure to reply to a request for information, dated December 17, 2011. 3
Defendants do not argue on this motion that Bravo's letter did not trigger a duty to
reply under TILA. See 15 U.S.c. § 1641(1)(2). Rather, they claim that they escape
liability because they did not own the loan at the time Bravo sent the letter.

Exhibit H to the amended complaint, which was not appended to the initial complaint, supplies
new facts critical to the plausibility of plaintiffs TILA claim. Therefore, the Court has
reevaluted plaintiffs TILA claims as to BANA and BAC Home Loans, even though they
survived defendants' initial motion to dismiss.
3 Plaintiff struck from his amended complaint the paragraph of the original complaint that
alleged a TILA violation. Nonetheless, he preserved his claim by annexing his letter to BANA
and BAC Home Loans, which references T1LA. Solicitously, the Court incorporates the letter
into the amended pleading.
2

3

TILA imposes a duty on a loan servicer to respond to a borrower's
requests for information about the identity and contact information of the owner or
master servicer of his loan. See 15 U.S.c. § 1641(1)(2). However, as the Court
observed in its April 9 Memorandum and Order, in the event of a servicer's breach,
the statute imposes liability not on the servicer but on the creditor or assignee-owner
of the loan. 4 See also Gale v. First Franklin Loan Servs., 701 F.3d 1240, 1245 (9th
Cir. 2012); Runkle v. Federal Nat 'I Mortgage Assoc., 905 F. Supp. 2d 1326 (S.D. Fla.
2012). Additionally, liability attaches to a creditor or assignee-owner's nominee.

Barberan v. Nationpoint, 706 F. Supp. 2d 408, 422 (S.D.N.Y. 2010); Johnson v. Scala,
2007 WL 2852758 at *1 (S.D.N.Y. 2007).
That BANA and BAC Home Loans had a role in Bravo's loan
arrangement is well pleaded. The extent of that role is more complicated to dissect.
As a starting point, the parties agree, and the documents attached to Bravo's
complaint bear out, that the two entities serviced the loan at some point. Defendants
assert, however, that their duties ended there. Stated differently, they claim that
BAN A and BAC Home Loans were nothing more than mere servicers; they did not
own the loan. Ultimately, the documents incorporated into plaintiff's amended
complaint support defendants' story. A printout from Fannie Mae's website, which
was not attached to the original complaint, reflects that Fannie Mae acquired

In this context, creditor liability adheres only to the party that owns a loan at the time of a
servicer's violation, not to the original lender. Gale v. First Franklin Loan Servs., 701 F.3d
1240, 1245 (9th Cir. 2012).

4

4

Bravo's loan (ostensibly, but not necessarily, from Bravo's original lender,
Countrywide Home Loans, Inc.) on August 1, 2003, and held the loan at least until
May 11,2013. (Amended Compl., Count 1 at ~ 12, Ex. H at 77.)
An official record showing that the mortgage instrument-as
distinguished from the note evidencing the loan itself-was assigned to BANA on
October 3, 2011 does not support an alternate inference. (See Amended Compl., Ex.
Gat 69.) While it is true that, in New York, a mortgage instrument cannot be
separated from the note evidencing the corresponding debt, In re MERSCORP, Inc.,
8 N.Y.3d 90, 100,861 N.E.2d 81, 85-86, 828 N.Y.S.2d 266, 270-71 (2006) (Ciparick J.
concurring), it is "the mortgage [that) passes as an incident to the note," Bank of

N. Y. v. Silverberg, 926 N.Y.S.2d 532, 537, 86 A.D.3d 274, 280 (2d Dep't 2011). The
reverse is not true. In re Escobar, 457 B.R. 229, 241 (Bkr. E.D.N.Y. 2011). The note
evidencing the loan does not follow the assignment of the mortgage instrument. Id.
If anything then, the disparity between Exhibits G and H, calls into question the

validity of the transfer of the mortgage instrument to BANA.5 See In re

MERSCORP, Inc., 8 N.Y.3d at 100, 861 N.E.2d at 85, 828 N.Y.S.2d at 270 (Ciparick
J. concurring) «'''a transfer of the mortgage without the debt is a nullity, and no
interest is acquired by it"') (quoting Merritt v. Bartholick, 36 N.Y. 44, 45 (1867». It
does not, in any event, undercut evidence of Fannie Mae's ownership of Bravo's

The question of whether a loan servicer may service (as distinguished from foreclose upon) a
mortgage loan on behalf of a creditor or assignee-owner in the absence of a proper mortgage
assignment is not before the Court and, as a consequence, is not decided on this motion.
S

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loan. Therefore, BAN A and BAC Horne Loans are not liable under § 1641(f)(2).
Conversely, the complaint supports a TILA claim against MERS.
Under the terms of the mortgage instrument associated with Bravo's loan, MERS
acted as nominee for both Bravo's original creditor, Countrywide Horne Loans,
Inc., and its successors and assigns, including current owner Fannie Mae. (See
Amended Compl., Ex. B at 28.) As nominee of the owner of Bravo's debt at the time
BANA and/or BAC Horne Loans' allegedly violated § 1641(f)(2), MERS can be held
liable.
Accordingly, Bravo's TILA claim against BANA and BAC Horne
Loans is dismissed with prejudice. But, as to MERS, the motion is denied.
3. Fair Debt Collection Practices Act
FDCPA governs the conduct of debt collectors, which it defines as "any
person ... who regularly collects or attempts to collect ... debts owed or due or
asserted to be owed or due another." 15 U.S.C § 1692a(6). Excepted from the broad
definition is "any person collecting or attempting to collect any debt owed or due or
asserted to be owed or due another to the extent such activity ... (iii) concerns a
debt which was not in default at the time it was obtained by such person." 15 U.S.C

§ 1692a(6)(G). The legislative history of § 1692a(6) reflects that the exemption
extends to mortgage servicing companies that service debt for others so long as the
debt was not in default when it was taken for servicing. S. REP. 95-382, S. REP. 95382,3-4,1977 U.S.C.CA.N. 1695, 1698.
Both BAC Horne Loans and BANA fit squarely within the exception
6

described in the legislative history.6 Bravo's mortgage, according to documents he
attached to his complaint, did not default until October 2011, (Amended Comp\.,
Ex. D at 59), over three years after BAC Home Loans became the servicer,7
(Amended Comp\., Parties' Description

~

5) and three months after BANA replaced

BAC Home Loans as servicer. Neither are liable under FDCPA. These claims are
dismissed. Lacking an underlying violation for which MERS can be held
vicariously liable, Bravo's claim against MERS must, and does, fail as well.
Conclusion
For the foregoing reasons, defendant's motion is granted in substantial
part and denied in part. Only plaintiffs TILA claim as to MERS survives. All

BANA escapes liability under FDCPA because of when it began servicing Bravo's loan, not
because it owns Bravo's loan. Therefore, Bravo's prolix effort to establish BANA's liability by
attacking its ownership of the loan, (see Amended Comp!. ~~ 17-18,33), has no bearing on the
outcome of his claim. Nonetheless, the Court turns briefly to the substance of his two-pronged
challenge. Bravo begins with the premise that BANA does not in fact own his loan, because the
assignment of his mortgage was invalid. He cites violations of the Pooling and Servicing
Agreement ("PSA") by which, he alleges, his loan was securitized, as well as noncompliance
with various notarial statutes by the notary who notarized the assignment of his mortgage.
(Amended Comp!. ~~ 17-33). As an initial matter, Bravo takes aim at the wrong target. He
focuses on the assignment of the mortgage instrument associated with his loan, not the note
evidencing his mortgage. The note, not the mortgage instrument, establishes ownership of the
loan. See supra at 5-6. Therefore, even if the mortgage assignment were invalid, it would not
affect whether BANA owned his loan. Moreover, and dispositively, Bravo lacks standing to
challenge the assignment of his mortgage, meaning that he is not a proper party to challenge the
assignment as a nonparty to the PSA. See Rajamin v. Deutsche Bank Nat 'I Trust, 2013
WLl285160 at *3 (S.D.N.Y. 2013) (collecting cases); see also Lujan v. Defenders ofWildli!e,
504 U.S. 555, 560-61 (1992) ("[P]laintiffmust have suffered an "injury in fact" ... [and] there
must be a causal connection between the injury and the conduct complained of .... "). The
Court construes Bravo's notarization claims~which he directs at the corporate defendants, not
the notaries themselves-to be a further attack on compliance with the PSA. Therefore, it too is
foreclosed by Bravo's lack of standing.
7 According to the complaint, SAC Home Loans began servicing Bravo's loan when it merged
with Countrywide Home Loans Servicing LP, ostensibly the servicer of Bravo's loan at that
time.
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7

other remaining claims are dismissed with prejudice.
SO ORDERED.
Dated:

Brooklyn, New York
August 31,2013

s/ENV

E~dANO=-United States District Judge

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