Wells Fargo Bank, N.A. v. Landi et al

Filing 31

ORDER ADOPTING REPORT AND RECOMMENDATION: For the reasons stated in the attached Order,the Court has reviewed the Report and Recommendation of Magistrate Judge Orenstein, overrules the limited objections of plaintiff Wells Fargo, and orders the foll owing: The Court awards judgment on default in favor of Wells Fargo and against defendant Benjamin Landi on its cause of action for mortgage foreclosure. That judgment shall permit the foreclosure and sale of the Property, and judgment against Land i in the amount of $1,413,663.01 (including unpaid principal of $953,310.30; interest in the amount of $411,457.87; late charges in the amount of $3,504.78; a prepayment fee of $38,132.41; attorneys fees in the amount of  6;5,553.75; and $1,703.90 in litigation costs.) The Court denies any award for UCC fees, interest on advances, inspection fees and witness expenses.The Court denies in its entirety Wells Fargos motion for default judgment against defendant B.W.T. Tailor Shop Corp. and dismisses the claim against this defendant.The Clerk of Court shall enter Judgment accordingly, and close the case. Ordered by Judge Roslynn R. Mauskopf on 9/22/2015. (Mauskopf, Roslynn)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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WELLS FARGO BANK, N.A., AS TRUSTEE
FOR THE HOLDERS OF WATERFALL
VICTORIA MORTGAGE TRUST 2011-SBC2
MORTGAGE-BACKED CERTIFICATES,
SERIES 2011-SBC2,

ORDER ADOPTING
REPORT AND
RECOMMENDATION
13-CV-5822 (RRM)(JO)

Plaintiff,
- against BENJAMIN LANDI, an individual, and B.W.T.
TAILOR SHOP CORP., a New York corporation,
Defendants.
-----------------------------------------------------------X
ROSLYNN R. MAUSKOPF, United States District Judge.
Before the Court is the Report and Recommendation (“R&R”) of Magistrate Judge James
Orenstein (Doc. No. 28), and plaintiff’s limited objections to that R&R (Doc. No. 30). Plaintiff
takes issue with Judge Orenstein’s decision to 1) deny relief against defendant B.W.T. Tailor
Shop Corp. (“BWT”), and 2) to award damages for inspection and attendance fees. 1 The Court
presumes familiarity with the pleadings, submissions, and hearings in this matter.
Standard of Review
The Court reviews de novo the portions of an R&R to which a party has objected. See
Fed. R. Civ. P. 72(b)(3); Bouzzi v. F & J Pine Rest., LLC, 841 F. Supp. 2d 635, 638 (E.D.N.Y.
2012). Portions to which no party has objected are reviewed for clear error. See Morritt v.
Stryker Corp., No. 07 CV 2319, 2013 WL 5350109, at *1 (E.D.N.Y. Sept. 23, 2013); Price v.
City of New York, 797 F. Supp. 2d 219, 223 (E.D.N.Y. 2011). Objections that offer only

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Also before the undersigned, and not before the magistrate judge is a motion for the appointment of a receiver
(Doc. No. 27) filed before the motion for default judgment and before the issuance of the R&R. As the posture of
this case has changed dramatically since the filing of that motion with the imminent filing of a judgment of
foreclosure based on this Order, the Court denies that motion without prejudice.

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perfunctory responses, merely reiterate arguments already made and rejected, or state a general
disagreement with the outcome are also reviewed for clear error. See Ortiz v. Barkley, 558 F.
Supp. 2d 444, 451 (S.D.N.Y. 2008). The Court will find clear error only where, upon a review
of the entire record, it is left with the definite and firm conviction that a mistake has been
committed. See Fed. R. Civ. P. 72(a); Regan v. Daimler Chrysler Corp., No. 07 CV 1112, 2008
WL 2795470, at *1 (E.D.N.Y. July 18, 2008) (quoting Nielsen v. New York City Dep’t of Educ.,
No. 04 CV 2182, 2007 WL 1987792, at *3 (E.D.N.Y. July 5, 2007)) (“[T]he district court must
affirm the decision of the magistrate judge unless the district court on the entire evidence is left
with the definite and firm conviction that a mistake has been committed.”). After reviewing the
R&R, the Court may accept, reject, or modify its findings or recommendations, receive further
evidence, or return the matter to the magistrate judge with instructions. See Fed. R. Civ. P.
72(b); 28 U.S.C. § 636(b)(l)(C).
Order of Foreclosure Against Landi
The Court has reviewed for clear error those portions of the R&R to which plaintiff does
not object, and finds none. As such, the Court awards judgment on default in favor of Wells
Fargo and against defendant Benjamin Landi on its cause of action for mortgage foreclosure.
That judgment shall permit the foreclosure and sale of the Property, and judgment against Landi
in the amount of $1,413,663.01 (including unpaid principal of $953,310.30; interest in the
amount of $411,457.87; late charges in the amount of $3,504.78; a prepayment fee of
$38,132.41; attorney’s fees in the amount of $5,553.75; and $1,703.90 in litigation costs.) The
Court denies any award for UCC fees, and interest on advances.

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Objections Regarding Inspection Fees and Prospective Witness Expenses
The Court has reviewed de novo those portions of the R&R that denies the award
damages for expenses described as inspection fees ($226.91), and those of a prospective witness
who did not testify ($1,113.00), and to which plaintiff objects. In its objections, Wells Fargo
first claims, as it did before the magistrate judge, that it is entitled to inspection fees because the
mortgage allows both for both inspection “at all responsible times and upon reasonable notice”
and in the event a forclosure action, payment of the Lender’s reasonable attorney’s fees and
expenses. Yet, the mortgage itself does not link these two events. Perhaps recognizing its own
strained reading of the mortgage, Wells Fargo attempts to salvage this claim by suggesting, as it
did before Judge Orenstein, that an inspection
enables the Lender to determine property condition and assess what amount the Lender
may be willing to bid at the coming foreclosure. It also permits the Lender to determine
whether the Borrower has also ignored its duties to maintain the property in accordance
with the Borrower’s covenants in . . . the Mortgage.
Doc. No. 30 at 7. As Judge Orenstein correctly concluded in denying the requested relief, “[a]ll
of those are reasons that Wells Fargo might want to inspect the Property to vindicate its interests
in the event it prevails in this litigation, but none of them is reasonably necessary to prosecute the
claims in the instant foreclosure action.” R&R at 11. The Court agrees, and upon de novo
review, overrules Wells Fargo’s objections, and denies any award of inspection fees.
Similarly, the Court denies the award of expenses incurred by Wells Fargo in bringing
prospective witness Kyle Morris, Lender’s representative, to appear at the inquest. The Court
reviewed the entire record de novo, including the record of the transcript of the inquest hearing
before Judge Orenstein (Doc. No. 24-1). Mr. Morris was never called as a witness. Judge
Orenstein made perfectly clear to Wells Fargo’s counsel that it was counsel’s decision whether to
call Mr. Morris. Id. at 3. Moreover, counsel acknowledged that Mr. Morris could not add
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anything in testimony that had not already been documented in his own affidavit. That Wells
Fargo brought Mr. Morris out of an abundance of caution “to the extent the Court had any factual
questions, such as questions about the loan history, the documents submitted in support of the
expenses, or questions about possession of the original loan documents, that could require
testimony from a person with knowledge” is a contingency for which Wells Fargo must bear the
costs. (Doc. No. 30 at 8.) As such, this Court overrules Wells Fargo’s objections to this portion
of the R&R and denies the motion for the award of such expenses.
Nominal Liability of BWT
The Court has also reviewed de novo Judge Ornstein’s decision to deny relief against
defendant BWT and in so doing, agrees that such relief is not warranted. Wells Fargo correctly
notes, and Magistrate Judge Orenstein duly acknowledged, that the joinder of all tenants and
other junior lienholders in a foreclosure action is required in order to extinguish the rights of
redemption of all those who may have a subordinate interest in the property and to vest complete
title in the purchaser at the judicial sale. See, N.Y. Real Prop. Act. L. § 1311; see e.g., 6820
Ridge Realty LLC v. Goldman, 701 N.Y.S.2d 69, 72 (App. Div. 1999). And both acknowledge
that entry of default judgment under Rule 55 of the Federal Rules of Civil Procedure can be
proper against a junior lienholder where the complaint alleges “nominal liability” – that is, where
the complaint alleges that any liens a defaulting defendant may have against the debtor on
mortgaged property are subordinate to the debtor. See, e.g., Bank of Am. N.A. v. 3301 Atl., LLC,
2012 WL 2529196 at *14 (E.D.N.Y. June 29, 2012); Christiana Bank & Trust Co. v. Dalton,
2009 WL 4016507, at *5 (E.D.N.Y. Nov. 17, 2009).

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Wells Fargo claimed before the Magistrate Judge, and again in its objections, that it has
properly alleged such nominal liability against BWT. Wells Fargo relies on three allegations in
its Complaint:
1) the fact that BWT, one of only two defendants, has its principal place of business at
the mortgaged premises;
2) the allegation in paragraph 25 of its Complaint, which states: “The Defendants herein
have or claim to have some interest in, or lien upon, the Property or some part thereof,
which interest or lien, if any, has accrued subsequent to the lien of the Mortgage, and is
subject and subordinate thereto;” and
3) the “Wherefore” clause which seeks a finding that “such foreclosure will vest in the
purchaser threat free and clear title to the Property, free of any and all interests that are or
might be asserted by the Defendants to this Complaint.”
Doc. No. 30 at 6. These conclusory allegations are insufficient to give rise to an allegation of
nominal liability.
First, these allegations are not specific to BWT. They are wholly conclusory, and lump
together both defendants, Landi, the Borrower, and BWT. Most important, nowhere in its
Complaint does Wells Fargo even allege the nature of BWT’s interest in the property – that of a
tenant, a fact that Wells Fargo asserts for the first time in his motion for default judgment. Nor
does Wells Fargo append any lease instrument in the eighty-plus pages of documents appended
to its Complaint as exhibits.
In the face of conclusory assertions, BWT’s default has not been established. Indeed, in
those cases finding nominal liability on a defaulting defendant, including those on which Wells
Fargo relies, each of the Complaints specified in great detail the nature of the interest held by all
such defendants. See, e.g., 3301 Atl. LLC, 10-CV-5204, Doc. No. 1 at ¶¶ 42-48 (setting forth
the specific interests of nominal defendants including tenants, lease guarantors, and holders of a
Notice of Pendency); see also Christiana v. Dalton, 06-CV-3206, Doc. No. 1-3 at ¶¶ 16-22

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(same with respect to specific judgments obtained by Brooklyn Union Gas, NYC Criminal
Court, NYS Dept. of Taxation and Finance, NYC Parking Violations Bureau, inter alia.) For
these reasons, upon de novo review, the Court concurs with the conclusions of Magistrate Judge
Orenstein, overrules Wells Fargo’s objections, and denies Wells Fargo’s motion for default
judgment against defendant BWT.
Conclusion
For the reasons stated herein, the Court has reviewed the Report and Recommendation of
Magistrate Judge Orenstein, overrules the limited objections of plaintiff Wells Fargo, and orders
the following:
The Court awards judgment on default in favor of Wells Fargo and against defendant
Benjamin Landi on its cause of action for mortgage foreclosure. That judgment shall permit the
foreclosure and sale of the Property, and judgment against Landi in the amount of $1,413,663.01
(including unpaid principal of $953,310.30; interest in the amount of $411,457.87; late charges
in the amount of $3,504.78; a prepayment fee of $38,132.41; attorney’s fees in the amount of
$5,553.75; and $1,703.90 in litigation costs.) The Court denies any award for UCC fees, interest
on advances, inspection fees and witness expenses.
The Court denies in its entirety Wells Fargo’s motion for default judgment against
defendant B.W.T. Tailor Shop Corp. and dismisses the claim against this defendant.
The Clerk of Court shall enter Judgment accordingly, and close the case.
SO ORDERED

Roslynn R. Mauskopf
____________________________________
ROSLYNN R. MAUSKOPF
United States District Judge

Dated: Brooklyn, New York
September 22, 2015

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