Boniel et al v. U.S. Bank, N.A., et al

Filing 16

ORDER granting 6 Motion for Summary Judgment; denying 11 Motion for Judgment as a Matter of Law. Ordered by Judge Edward R. Korman on 2/6/2013. (Davies, Jamison)

UNITED STATES DISTRICT COURT
NOT FOR PUBLICATION
EASTERN DISTRICT OF NEW YORK
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YOSSEF BONIEL AND SHELLY BONIEL,
:
:
Plaintiffs,
:
: MEMORANDUM & ORDER
- against :
:
U.S. BANK N.A., as trustee for LEHMAN
: 1:12-CV-3809 (ERK)(MDG)
MORTGAGE TRUST PASS THROUGH
:
CERTIFICATES, SERIES 2006-8;
:
NATIONSTAR MORTGAGE, LLC,
:
:
Defendants.
:
------------------------------------------------------------ X
KORMAN, J.:

Plaintiffs Yossef and Shelly Boniel filed suit in the Supreme Court of New York, Queens
County, alleging negligent misrepresentation, fraudulent misrepresentation, invalid assignment,
unjust enrichment, violation of Regulation Z of the Truth in Lending Act and are seeking to quiet
title on their property. The claims stem from the allegedly improper transfer of mortgages on
plaintiffs’ property at 72 Tennis Place, Forest Hills, New York.

On August 1, 2012, the

defendants removed the action. The parties filed cross-motions for summary judgment. While
the defendants filed a statement of undisputed material facts, the plaintiffs have failed to respond.
The result is that the defendants’ statement of undisputed material facts is “deemed to be
admitted.” Local Rule 56.1(c).
FACTS
Plaintiffs obtained a mortgage from Lehman Brothers Bank, FSB (“Lehman FSB”) on
September 29, 2006 in the amount of $2,250,000 secured by their property at 72 Tennis Place in
Forest Hills, Queens. Def.’s Statement of Undisputed Material Facts (“Def. SUMF”) ¶ 1; Loll
Decl. Ex. 2. The mortgage served to consolidate two prior mortgages on the subject property,
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one from North Fork Bank in the amount of $590,000 and one from Webster Bank N.A. in the
amount of $850,000. Def. SUMF ¶ 2; Loll Decl. Ex. 3 at 5. The remaining funds after the prior
mortgages were paid off were distributed to plaintiffs in cash in the amount of $639,776.70. Id.
The new mortgage with Lehman FSB was denominated a “Consolidation, Extension, and
Modification Agreement” (“CEMA”). Def. SUMF ¶ 6; Compl. Ex. E; Loll Decl. Ex. 3. The
beneficial ownership of the plaintiffs’ loan was transferred to the Lehman Mortgage Trust1 on
November 28, 2006.

Def. SUMF ¶ 3.

The mortgage is currently serviced by Nationstar

Mortgage LLC, on behalf of the trust. Def. SUMF ¶ 5.
The transaction which consolidated the outstanding mortgages into a single mortgage and
note involved the transfer of the Webster Bank note. The transfer document was signed by
Adele DiNuzzo on behalf of Webster Bank. Def. SUMF ¶ 7; DiNuzzo Decl. Ex. A; Compl. Ex.
C. The CEMA itself was executed by Krista L. Gingrich on behalf of Mortgage Electronic
Registration Systems, Inc. (“MERS”) which, in turn, was acting as the nominee of Lehman FSB.
Def. SUMF ¶ 9; Loll Decl. Ex. 3, at 3; Compl. Ex. E. Defendants submitted a declaration from
DiNuzzo attesting to the validity of her signature and her authority to sign for Webster Bank, as
well as the declaration of Nitin Mhatre attesting to her position and authority. DiNuzzo Decl.;
Mhatre Decl. They also submitted a MERS corporate resolution which authorizes Ms. Gingrich
to execute documents on behalf of MERS. Def. SUMF ¶ 11; Loll Decl. Ex. 7.
Plaintiffs, for their part, argue that DiNuzzo’s signature was not valid because she was a
“robosigner” and not authorized to sign on behalf of Webster Bank. Compl. ¶ 11–12. They
further argue that Ms. Gingrich had no authority to sign for MERS because she in fact worked
for Aurora Loan Services. Compl. ¶ 13. The complaint also disputes the validity of the
assignment to the Lehman Trust and U.S. Bank’s authority to collect as trustee.

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The full name of the Lehman Mortgage Trust is “Lehman Mortgage Trust Mortgage Pass Through
Certificates, Series 2006-8.” Defendant U.S. Bank, N.A. serves at its Trustee.

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ANALYSIS
I.

Standing
While I agree that plaintiffs have standing the issue does not require extended discussion

because I also conclude that the defendants are entitled to summary judgment. Plaintiffs have
made payments to defendants on the mortgage. If plaintiffs prevail, they would be entitled to the
return of the monies paid to defendants under the false pretense that defendants were entitled to
that money. Thus, they have sufficiently alleged injury-in-fact to support standing.
II.

Plaintiffs’ First Five Causes of Action.
Plaintiffs’ first cause of action, though lacking a title, appears to be for fraudulent

misrepresentation. A common law claim of fraudulent misrepresentation requires the plaintiff
prove that the defendant made a misrepresentation of a material fact with knowledge of its falsity
and with the intent to induce detrimental reliance on the part of the plaintiff. See Katara v. D.E.
Jones Commodities, Inc., 835 F.2d 966, 970–71 (2d Cir. 1987). Claims of fraud must be pled
with particularity, under both New York and Federal rules of procedure. See Fed. R. Civ. P.
9(b); N.Y. C.P.L.R. 3016(b).
Plaintiffs’ second cause of action is for negligent misrepresentation. To prevail on a
claim of negligent misrepresentation under New York law a plaintiff must show that (1) the
defendant owed the plaintiff a duty of care due to a special relationship; (2) the defendant knew
or should have known that their representations were false; (3) the defendant knew or should
have known that the plaintiff would rely on the misrepresentations; and (4) the plaintiff in fact
relied on those misrepresentations to their detriment. See Hydro Investors, Inc. v. Trafalgar
Power, Inc., 227 F.3d 8, 20 (2d Cir. 2000).
The complaint alleges that the defendants either misrepresented the fact that there was a
valid consolidation of their prior mortgages and that later assignments were valid, with
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knowledge of the falsity of those representations, or that they failed to use reasonable care to
discover and convey information about the validity of the consolidation or assignments and that
they had a duty to “impart correct information.”. See Compl. ¶¶ 20–30. Consequently, by
purposefully or negligently failing to impart such information, defendants induced the plaintiffs
to pay their monthly mortgage payments to an entity not entitled to collect. Id. at ¶¶ 24, 30.
Plaintiffs’ claims fail primarily because they cannot identify any false statement or
misrepresentation that defendants made to them. Though plaintiffs allege in the complaint and
argue in their papers that the various loan documents were invalid and that the signatories were
unauthorized to sign or signed improperly, they have adduced no evidence to that effect and done
nothing to rebut defendants’ plentiful evidence showing the mortgage and the assignments were
valid. Defendants have provided the signed original CEMA as well as the signed and executed
assignments and declarations from relevant persons with personal knowledge attesting to the
validity of the signatures and the authority of the signatories to sign on behalf of their respective
organizations. See Loll Decl. Ex. 2, 3, 7; DiNuzzo Decl.; Mhatre Decl.
Plaintiffs make several arguments to the contrary, none of which give rise to a genuine
issue of material fact or illustrates why summary judgment in their favor would be proper. First,
they argue that Adele DiNuzzo was not an authorized signatory for Webster Bank and was, in
fact, a “robosigner.”

Pl. Brief at 7, 12.

This is flatly contradicted by the declaration of

DiNuzzo’s, who has first-hand knowledge of her position and signature, and the declaration of
Nitin Mhatre. The only evidence plaintiffs set forth to the contrary are several examples of
DiNuzzo’s signature that are not precisely the same. Pl. Br. Ex. A. To start, this contradicts
their claim that DiNuzzo is a robosigner; if her signature was mechanically reproduced one
would expect it to be identical. Additionally, none of those documents are admissible because
they are not accompanied by any statement authenticating them or an affidavit or declaration
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attesting to their source and provenance. See Fed. R. Civ. P. 56(c); Local Rule 56.1(d). Finally,
and most importantly, the fact that DiNuzzo’s signature may have varied at times does nothing to
rebut the evidence that defendants have set forth through declarations and documentary evidence
that DiNuzzo was an authorized signatory for Webster Bank and her signature in fact appears on
the assignments.
Plaintiffs go on to argue that there are two different versions of the CEMA, one signed by
Krista L. Gingrich on behalf of MERS and one which is blank. Pl. Br. at 30. This is of no
moment because, as defendants note, it demonstrates only that Gingrich signed the document
later in time and, without more, raises no suspicion that the document is in any way fraudulent.
Def. Reply and Opp’n at 12. Plaintiffs also argue that Gingrich had no authority to sign on
behalf of MERS, which is contradicted by defendants’ submission of a MERS corporate
resolution giving Gingrich authority to execute documents on their behalf. Loll Decl. Ex. 7.
That submission is unchallenged by the plaintiffs and clearly demonstrates her authority.
Plaintiffs argue, and defendants concede, that she was an employee of Aurora Loan Services.
This is irrelevant.

Nothing precludes someone from having two positions and the basic

undisputed fact is that she had authority to sign on behalf of MERS. Id.
Plaintiffs also argue that the loan could never have been transferred to the Lehman Trust
because the Trust closed on November 1, 2006 and the loan was purportedly assigned on
November 28, 2006. Compl. ¶¶ 15, 20. Defendants point out that the Trust actually closed on
November 30, 2006 and lists plaintiffs’ loan on its schedule of assets, Def. Br. at 7–8, and
plaintiffs do not further pursue their argument about the timeliness of the transfer in their
opposition.
Plaintiffs further argue that the transfer of the mortgage was ineffective without the
transfer of the note on which the mortgage was based. Pl. Br. at 15–16. It is correct, as plaintiffs
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note, that while “assignment of a promissory note also effectuates assignment of the mortgage,
the converse is not true: since a mortgage is merely security for a debt, it cannot exist
independently of the debt.” U.S. Bank N.A. v. Dellarmo, 94 A.D.3d 746, 748 (2d Dep’t 2012).
The note, however, was properly assigned. First, the “mere possession of a promissory
note endorsed in blank (just like a check) provides presumptive ownership of that note by the
current holder.” Deutsche Bank Nat’l Trust Co. v. Pietranico, 33 Misc. 3d 528, 545 (Sup. Ct.
2011); see also Mortg. Elec. Registration Sys., Inc. v. Coakley, 41 A.D.3d 674, 674 (2d Dept.
2007). It is undisputed that the defendants possess the note. See Def. SUMF ¶ 12; Loll Decl. ¶ 4
Ex. 2. In addition, the CEMA explicitly states that its purpose is to “combin[e] into one set of
rights and obligations all of the promises and agreements stated in the Notes and Mortgages . . . .
This means that all of Lender’s rights in the Property are combined so that under the law Lender
has one mortgage and [the borrower has] one loan obligation.”

Compl. Ex. E at II(A).

Defendants have also produced the assignment form itself, which assigns the mortgages along
with “the bonds or notes or obligations described in said mortgages” to MERS as nominee for
Lehman Brothers. DiNuzzo Decl. Ex. A, at 3.
Judgment is therefore proper for the defendants on both of the first two causes of action.
Given the ample documentary evidence provided by defendants and the complete lack of any
rebuttal, beyond conclusory factual statements not supported by any admissible evidence,
plaintiffs cannot raise a triable issue of fact that there was ever any misrepresentation made to
them by defendants, let alone show they are entitled to judgment.
The second cause of action is also independently barred because there is no “special
relationship” between plaintiffs and defendants which would give rise to a duty to impart
information. A standard lender-borrower relationship is not the kind of special relationship that
supports a claim of negligent misrepresentation. See, e.g., Dobroshi v. Bank of Am., N.A., 65
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A.D.3d 882, 884 (1st Dep’t 2009) (noting that the Appellate Division has “repeatedly held” that
arm’s length lender-borrower relationship does not support a claim of negligent
misrepresentation and collecting cases).
The third cause of action seeks a declaratory judgment that the challenged assignments of
the mortgage were invalid and the fourth seeks to quiet title to the subject property.
Functionally, these two causes of action are the same and may be analyzed together. As
explained above, the evidence adduced by the defendants shows that the assignments were valid
and the plaintiffs have not produced any evidence to the contrary. Thus, these causes of action
also fail and summary judgment for the defendants should be granted.
The fifth cause of action is for unjust enrichment; plaintiffs claim that defendants were
enriched by the receipt of mortgage payments to which they were not entitled. To prevail on a
claim of unjust enrichment under New York law a plaintiff must show that the defendant was
enriched at the plaintiff’s expense and that “circumstances are such that in equity and good
conscience the defendant should return the money or property to the plaintiff.” Golden Pac.
Bancorp v. F.D.I.C., 273 F.3d 509, 519 (2d Cir. 2001). Because the mortgages and notes were
validly assigned and the defendants were legally entitled to collect the payments, they were not
unjustly enriched at plaintiffs’ expense.
Moreover, there is no recovery for unjust enrichment where the parties have entered into
a “valid and enforceable contract.” Whitman Realty Grp., Inc. v. Galano, 41 A.D.3d 590, 593
(2d Dep’t 2007). An agreement consisting of a “note and mortgage” is a contract which bars
recovery for unjust enrichment. See Lum v. New Century Mortg. Co., 19 A.D.3d 558, 559–60
(2d Dep’t 2005). Given the valid note and mortgage agreement, the action for unjust enrichment
is barred.

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III.

Plaintiffs’ Sixth Cause of Action.
Plaintiffs’ final cause of action alleges that defendants violated the mortgage transfer

disclosure requirements of the regulations promulgated pursuant to the Truth in Lending Act and
its amendments, commonly known collectively as Regulation Z. 12 C.F.R. § 226.39. The
provision at issue requires the disclosure of certain information to a consumer who owns a
mortgaged property when the loan which the property secures is “sold, assigned, or otherwise
transferred.” Id. § 226.39(b) & (d).
The fundamental flaw in plaintiffs’ cause of action for violation of mortgage transfer
disclosure provisions of Regulation Z is that the relevant law was not enacted until May 2009,
and its supporting regulations were not final until November 2009, three years after the alleged
conduct by the defendants. See Helping Families Save Their Homes Act, Pub. L. No. 111-22 §
404, 123 Stat. 1632, 1658 (May 20, 2009); see also Truth In Lending, 74 Fed. Reg. 60143
(interim final rule implementing Pub. L. No. 111-22 § 404 by enacting 12 C.F.R. § 226.39 with
an effective date of Nov. 20, 2009). Indeed, even though the regulation had an effective date of
November 20, 2009, compliance with the rule was “optional until January 19, 2010.” 74 Fed.
Reg. at 60143. Because the transfer of the note and mortgage occurred in late 2006, more than
three years before the requirement to send transfer disclosures was binding, summary judgment
should be granted for the defendants on this claim.
Even if the action had a valid basis, it would be untimely. The statute of limitations for
actions under the Truth In Lending Act, of which the subject disclosure requirement is a part, is
one year.

See 15 U.S.C. § 1640(e) (“Any action under this section may be brought in any

United States district court, or in any other court of competent jurisdiction, within one year from
the date of the occurrence of the violation”); see also Cardiello v. The Money Store, 29 Fed.
App’x 780, 781 (2d Cir. March 15, 2002) (Appellants' Truth in Lending Act (“TILA”) claim is
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barred by the one-year statute of limitations.”). The statute requires the claim be brought within
one year of the “occurrence of the violation” which, in mortgages, is the date on which a plaintiff
enters into a loan agreement. See Clement v. United Homes, LLC, No. 10-CV-2122, 2012 WL
6720701, at *5 n.3 (E.D.N.Y. Dec. 27, 2012). Here, that date is in November 2006 and therefore
this action is well outside of the one-year limitations period.
CONCLUSION
The defendants’ motion for summary judgment is granted and the plaintiffs’ cross-motion
is denied.

SO ORDERED.
Brooklyn, New York
February 6, 2013

Edward R. Korman
Edward R. Korman
Senior United States District Judge

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