Nucci v. PHH Mortgage Corporation et al

Filing 45

ORDER ADOPTING 42 REPORT AND RECOMMENDATIONS: For the reasons set forth above, the court ADOPTS IN FULL the R&R, and GRANTS Defendant PHH's 36 motion to dismiss and DENIES Plaintiff's request for leave to amend. The Complaint is DISMISSED. So Ordered by Judge Nicholas G. Garaufis on 3/15/2016. (c/m to pro se; fwd'd for jgm) (Lee, Tiffeny)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK

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NICOLA NUCCI,
Plaintiff,
-against-

MEMORANDUM & ORDER
14-CV-2683 (NGG) (RML)

PHH MORTGAGE CORPORATION, and
COMMERCE BANK, N.A.,
Defendants.

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NICHOLAS G. GARAUFIS, United States District Judge.

On February 27, 2014, prose Plaintiff Nicola Nucci initiated this action to quiet title in
the Supreme Court of the State of New York, Kings County, against Defendants PHH Mortgage
Corporation ("PHH") and TD Bank, N.A. ("TD Bank"). 1 (Not. of Removal (Dkt. 1) ~ 1.) TD
Bank removed the action to this court on April 29, 2014. (IQ) On May 22, 2014, Plaintiff
voluntarily dismissed TD Bank. (Stip. of Voluntary Dismissal (Dkt. 10).)
PHH now moves to dismiss the Complaint. (Not. of Mot. to Dismiss (Dkt. 36).) By
Order dated October 6, 2015, the court referred PHH's motion to Magistrate Judge Robert M.
Levy for a Report and Recommendation ("R&R") pursuant to 28 U.S.C. § 636(b)(l)(B) and
Federal Rule of Civil Procedure 72(b)(l). (Order (Dkt. 41).) On January 28, 2016, Judge Levy
recommended that the court grant PHH' s motion to dismiss, and deny Plaintiff's request for
leave to amend the Complaint. (See generally R. & R. (Dkt. 42).) For the reasons discussed
below, the court ADOPTS IN FULL the R&R, and accordingly, DISMISSES the Complaint.

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The Complaint named Commerce Bank, N.A. as a defendant. Commerce Bank, N.A. is now known as TD Bank,
N.A. (Not. of Removal.)

I.

BACKGROUND
A.

Facts 2

Plaintiff is the owner of the real property located at 762 39th Street, Brooklyn, New York
(the "Property"). (Comp!. (Not. of Removal, Ex. A) if 1.) On December 20, 2005, Plaintiff, .
PHH, and non-party Mortgage Electronic Registration Systems, Inc. ("MERS") entered into the
Consolidation, Extension, and Modification Agreement ("CEMA"). (CEMA (Comp!., Ex. B).)
Under the CEMA, Plaintiff is the borrower, PHH is the lender, and MERS is PHH's nominee as
the mortgagee of record. (CEMA iii! (A)-(D).) The CEMA was signed by all parties, including
Plaintiff, and notarized. (CEMA at 4-5.) It consolidated two existing mortgages encumbering
the Property and the promissory notes that they secure: (1) a September 12, 2003, mortgage
securing a promissory note with an unpaid principal balance of $398,074.63 ("2003 Mortgage");
and (2) a December 20, 2005, mortgage securing a promissory note for $15,278.17 ("2005
Mortgage"). (List of Mortgs., Notes, & Agreements (CEMA, Ex. A).) Annexed to the CEMA
as Exhibits C and D are documents titled the Consolidated Note and the Consolidated Mortgage,
respectively. Both are specifically referenced in the CEMA. (CEMA §§II-IV.) The
Consolidated Note contained Plaintiff's promise to pay $413,352.80 plus interest to the holder of
the note. (Consolidated Note (CEMA, Ex. C).) This principal amount represented the sum of
the unpaid balances of the two notes consolidated by the CEMA. Plaintiff signed the
Consolidated Note. (Id. at 3.) There is no signature on the Consolidated Mortgage.
(Consolidated Mortgage (CEMA, Ex. D) at 16.)3

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The court adopts the summary of the factual record outlined in the R&R. (See R. & R. at 1-4.) Familiarity with
the factual record and procedural history is assumed, and therefore only those facts pertinent to this Memorandum
and Order are included here.
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The court notes that the 2005 Mortgage and the CEMA are both dated December 20, 2005. It appears that the
parties entered into the 2005 Mortgage and associated note first. They then executed the CEMA to consolidate this
new mortgage with the 2003 Mortgage. Although executed on the same day, the 2005 Mortgage is separate and

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B.

The Report and Recommendation

On January 28, 2016, Judge Levy issued the R&R recommending that the court grant
PHH's motion to dismiss, and deny Plaintiff's request for leave to amend the Complaint.
Judge Levy first recommended rejecting Plaintiffs argument that title to the Property
should be quieted to him because any assignment of mortgages by MERS relating to the Property
was invalid. (R. & R. at 5-6.) Judge Levy found that Plaintiff lacked constitutional and
prudential standing to mount such a challenge. (Id.) Plaintiff lacked constitutional standing
because he failed to plausibly allege an injury stemming from assignments by MERS. Q4J
Plaintiff lacked prudential standing because he was not a party to, or a third-party beneficiary of,
any MERS assignment. (Id. at 6.) Judge Levy also rejected Plaintiffs reliance on the allegation
that the Consolidated Mortgage was unsigned because it is not a cognizable basis for an action to
quiet title. Under New York law, "a suit to quiet title does not arise when 'the invalidity will
necessarily appear in any proceeding taken to enforce title under it."' (Id. at 8 (quoting Herbert
v. HSBC Mortg. Servs., No. 13-CV-322 (NGG) (RER), 2014 WL 3756360, at *9 (E.D.N.Y.
June 30, 2014) (quoting Townsend v. City ofNew York, 77 N.Y. 542, 546 (1879))).)
Judge Levy also recommended denying Plaintiff's request for a declaration barring PHH
from commencing a foreclosure action relating to the Property. (Id. at 7.) Judge Levy found that
under New York law, there is no justiciable controversy where no foreclosure action has been
commenced. (@ Moreover, Plaintiff's bare assertion that PHH fraudulently obtained the notes
and mortgages relating to the Property are insufficient as a matter of law. (Id.)

distinct from the CEMA and the Consolidated Mortgage attached as an exhibit. PHH appears to have confused the
two. (See Mem. of Law in Supp. of Def. PHH Mortg. Corp.'s Mot. to Dismiss (Dkt. 37) at 7 (attaching the 2005
Mortgage as an exhibit and arguing that the Consolidated Mortgage attached to the Complaint was missing the pages
bearing Plaintiff's signature).)

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Finally, Judge Levy recommended denying Plaintiff-leave to amend the Complaint
because any amendment would be futile. (Id. at 9.)

C.

Plaintiff's Objections to the Report and Recommendation

On February 9, 2016, Plaintiff timely objected to the R&R. (Pl.'s Obj. to R. & R. ("Pl.'s
Obj.") (Dkt 43).) PHH responded to Plaintiff's objections on February 23, 2016. (Def.'s Mem.
of Law in Opp'n to Pl.'s Obj. to R. & R. ("Def.'s Resp.") (Dkt. 44).)
Plaintiff first repeats his arguments that he has standing to challenge assignments by
MERS regardless of whether he is a party to them, and that the Consolidated Mortgage was
unsigned and therefore void ab initio. (Pl.'s Obj. at 2-3.) Plaintiff then asserts for the first time
that third party Fannie Mae claims to be "the owner and holder of the note and mortgage," and
argues that the existence of such a third party claim satisfies the standing requirements set forth
in the R&R. (Id. at 4-5.) Finally, Plaintiff seeks leave to amend to name "the real party in
interest as now Fannie Mae is stating they are the real party in interest, not PHH." (Id. at 5.)

II.

ST AND ARD OF REVIEW
In reviewing a magistrate judge's report and recommendation, the district court "may

accept, reject, or modify, in whole or in part, the findings or recommendations made by the
magistrate judge." 28 U.S.C. § 636(b)(l). The court must make "a de novo determination of
those portions of the report or specified proposed findings or recommendations to which
objection is made." Id. To obtain de novo review, an objecting party "must point out the
specific portions of the report and recommendation to which [that party] object[s]." U.S. Flour
Com. v. Certified Bakery. Inc., No. 10-CV-2522 (JS), 2012 WL 728227, at *2 (E.D.N.Y.
Mar. 6, 2012); see also Fed. R. Civ. P. 72(b)(2) ("[A] party may serve and file specific written
objections to the [R&R]."). If a party "makes only conclusory or general objections, or simply

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reiterates his original arguments, the Court reviews the Report and Recommendation only for
clear error." Pall Corp. v. Entegris, Inc., 249 F.R.D. 48, 51 (E.D.N.Y. 2008); see also Mario v.
P&C Food Mkts., Inc., 313 F.3d 758, 766 (2d Cir. 2002). Portions of an R&R to which a party
makes no objection are also reviewed for clear error. U.S. Flour, 2012 WL 728227, at *2.
Where a prose party objects to an R&R, "the court reads his objections 'liberally and
will interpret them to raise the strongest arguments that they suggest."' Velasquez v. Metro Fuel
Oil Coro., 12 F. Supp. 3d 387, 398 (E.D.N.Y. 2014) (quoting Burgos v. Hopkins, 14
F.3d 787, 780 (2d Cir. 1994)). However, a court "need not argue a prose litigant's case nor
create a case for the prose which does not exist." Molina v. New York, 956 F. Supp. 257, 259
(E.D.N.Y. 1995).

III.

DISCUSSION
The court finds that Plaintiff has put forward specific objections to the R&R, and

therefore, performs a de novo review of these objections. With respect to any portion of the
R&R that is not specifically objected to, the court reviews for clear error, and finds none.
Although Plaintiff repeats several of the arguments made before Judge Levy (and at times
attempts to introduce new, conclusory allegations), the court construes his brief to object to
Judge Levy's core holdings that: (I) Plaintiff lacked standing to challenge any assignment by
MERS (R. & R. at 5-6); (2) there is no actionable claim to quiet title even if the Consolidated
Mortgage was unsigned (R. & R. at 8); and (3) leave to amend should be denied because any
amendment would be futile (R. & R. at 9). Applying de novo review, the court ADOPTS the
portions of the R&R specifically objected to, and, like the R&R, GRANTS PHH's motion to
dismiss and DENIES Plaintiff leave to amend.

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A.

Standing

In his objections, Plaintiff relies on Glaski v. Bank of America, N.A., 160 Cal.
Rptr. 3rd 449 (Cal. Ct. App. 2013), to argue that a borrower has prudential standing to challenge·
the assignment of his loan to a third party even if the borrower is not a party to the assignment.
(Pl. 's Obj. at 2-3.) The court is not persuaded. As Judge Levy explained, the weight of authority
in this district is contrary to Plaintiff's position. (R. & R. at 5-6 (citing Zutel v. Wells Fargo
Bank, N.A., No. 12-CV-3635 (RRM) (VMS), 2014 WL 4700022, at *3-6 (E.D.N.Y.
Sept. 22, 2014), Tamir v. Bank ofN.Y. Melon, No. 12-CV-4780 (DLI) (JO), 2013 WL 4522926,
at •3 (E.D.N.Y. Aug. 27, 2013)).) To have standing, Plaintiff must either be a party to, or a third
party beneficiary of, the challenged assignment. (Id. at 6.) Plaintiff offers no New York federal
or state case Jaw suggesting otherwise, and the court finds none. Judge Levy correctly decided
that Plaintiff does not have standing to challenge MERS assignments to which he was not a
party.
Plaintiff alternatively argues that he has prudential standing because Fannie Mae, a third
party, has allegedly asserted an interest in the notes and mortgages related to the Property. (Pl. 's
Obj. at 4-5.) Plaintiff's argument appears to flow from a mistaken reading of the Report and
Recommendation. Judge Levy found that Plaintiff Jacked standing to challenge an assignment
by MERS because Plaintiff was not "a party to, or a third-party beneficiary of, any such
assignment." (R. & R. at 6.) Plaintiff misunderstands the R&R ifhe believes it found that he
would have standing if a third party asserted an interest from the assignment. Whether a third
party asserts an interest is irrelevant to Plaintiff's standing to challenge an assignment to which
he is not a party.

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Plaintiff further asserts, for the first time in his objections, that "he is continuing to suffer
harm on a regular basis therefrom [with] each new invoice, each new demand .... " (Pl.'s Obj.
at 4.) Judge Levy had found that Plaintiff lacked constitutional standing to challenge any MERS
assignments because Plaintiff failed to allege a plausible injury from it. (R. & R. at 5-6.) To the
extent that Plaintiff now argues that he has constitutional standing to sue because he was harmed
by having to pay back his loans at an interest rate higher than he should be charged (or that he
has to repay at all), the court finds his conclusory allegations insufficient to survive a motion to
dismiss. The court first notes that "a party has 'no right to present further testimony when it
offered no justification for not offering the testimony at the hearing before the magistrate."'
Rivera v. Ercole, No. 09-CIV-5547 (DAB), 2013 WL 4414863, at *1 (S.D.N.Y. Aug. 15, 2013)
(quoting Pan Am. World Airways, Inc. v. Int'! Bros. of Teamsters, 894 F.2d 36, 40 n.3
(2d Cir. 1990)). Regardless, as Judge Levy noted, Plaintiff has never disputed that he received
the proceeds from the notes that were consolidated in the CEMA (R. & R. at 6), and in fact
appears to concede that he is obligated to repay these loans (see Pl.'s Combined Opp'n & Mem.
of Points & Auths. in Supp. of Pl.'s Opp'n to Def. PHH Mortg. Corp.'s Mot. to Dismiss ("Pl.'s
Opp'n") (Dkt. 35) at 27 (noting he is deprived "of the right to cure by paying the 'lender"')). In
any event, Plaintiff's belated allegations still fail to connect the alleged harm to any MERS
assignment. Plaintiff lacks constitutional standing to argue the invalidity of a MERS assignment
because he has not alleged a plausible injury.

B.

Unsigned Consolidated Mortgage

Judge Levy found that the unsigned Consolidated Mortgage cannot serve as the basis of a
quiet title action because "a suit to quiet title does not arise when 'the invalidity will necessarily
appear in any proceeding taken to enforce title under it."' (R. & R. at 8 (quoting Herbert, 2014

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WL 3756360, at *9 (quoting Townsend, 77 N.Y. at 546)).) While this may be the case for a
common law claim to quiet title, there is no such restriction for a quiet title action pursuant to
Article 15 of New York's Real Property Actions and Proceedings Law ("RPAPL"). See N.Y.
Real Prop. Acts. Law§ 1501(2) ("Such action may be maintained, even though the defendant's
claim appears to be invalid on its face .... "); cf. Herbetl, 2014 WL 3756360, at* 10 (dismissing
statutory quiet title claim because defendants do not assert a claim adverse to plaintiff, even
though common law counterpart was dismissed on the ground that the mortgage was invalid on
its face). Plaintiff clarified in his opposition to Defendant's motion to dismiss that the sole cause
of action asserted in the Complaint was to quiet title pursuant to the RPAPL. (Pl.'s Opp'n at 12.)
To state a claim under the RP APL, Plaintiff must, among other things, sufficiently allege "the
existence of a bona fide justiciable controversy as to whether the subject property is wrongfully
encumbered." Jahan v. U.S. Bank Nat'! Ass'n, 9 N.Y.S.3d 65, 66 (App. Div. 2015). The court
finds that Plaintiff failed to meet his burden.
As an initial matter, Plaintiffs repeated and unequivocal assertions that he did not
execute or agree to the consolidation is baffling. (See Pl.' s Obj. at 3 ("Plaintiff did not execute
this agreement because he did not agree to this."), 4 ("Instead of agreeing, Plaintiff did not sign
the mortgage ...."); see also, e.g., Comp!. iii! 14, 16, 19(1) (referring to "unsigned note

~d

mortgage," "unsigned note and deed of trust," and "unsigned notes").) He clearly did. The copy
of the CEMA that Plaintiff attached to the Complaint was notarized and bears his signature.
(CEMA (Comp!., Ex. B) at 4-5.) Plaintiff also signed the Consolidated Note, which was
referenced in the CEMA and attached to it as Exhibit C. (See CEMA §§II-III; Consolidated
Note (CEMA, Ex. C) at 3.) The interest rate that Plaintiff agreed to pay after consolidation was
listed in the Consolidated Note. (Consolidated Note at I.) The documents that Plaintiff himself

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put forth contradict his claim that he never agreed to the CEMA. The Consolidated Mortgage
attached as Exhibit D to the CEMA was not signed, but it was unmistakably referenced in the
CEMA. (CEMA §§III-IV). Plaintiff does not allege that he did not know about it or had not
seen it. Indeed, Plaintiff argues that he chose not to sign it. (See Pl.'s Obj. at 4.) However, by
signing the CEMA, Plaintiff agreed to be bound by its terms, as well as the documents annexed
to it and to which it specifically referred, i.e., the Consolidated Mortgage. See Crabtree v.
Elizabeth Arden Sales Coro., 110 N.E.2d 551, 554 (N.Y. 1953) ("[S]igned and unsigned writings
[may] be read together, provided that they clearly refer to the same subject matter or
transaction."); In re Bd. ofComm'rs of Wash. Park, 52 N.Y. 131, 134 (1873) ("A paper so
referred to and described, in a written instrument, that it may be identified beyond all reasonable
doubt, may be, by such reference, made a part of the instrument, as if incorporated into the body
of it."). Any argument that Plaintiff did not enter into the CEMA is without merit.
Even if the court accepts Plaintiff's untenable theory and isolate the unsigned
Consolidated Mortgage from the signed CEMA to which it was incorporated, Plaintiff's claim
still fails because the Consolidated Mortgage is not a new mortgage encumbering the Property as
Plaintiff claims. "A consolidation of outstanding loans is a device intended for the convenience
of only the contracting parties." F.D.l.C. v. Five Star Mgmt., Inc., 692 N.Y.S.2d 69, 74 (App.
Div. 1999)). A consolidation agreement combining multiple outstanding mortgages into a single
lien is not considered a new mortgage where no new money is included in the consolidation. See
D. Kirk Drussel et al., 1 Mortgages and Mortgage Foreclosure in New York § 17: 13 (2015); see
also Benson v. Deutsche Bank Nat. Trust. Inc., 970 N.Y.S.2d 794, 797 (App. Div. 2013)
("Where, as here, balances of first mortgage loans are increased with second mortgage loans and
CEMAs are executed to consolidate the mortgages into single liens, the first notes and mortgages

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still exist .... "). A new mortgage is deemed to be created only if the consolidation agreement
"creates a new lien upon property not originally covered by the prior instruments." See Drussel,
supra.
Here, no new money was included in the CEMA. The CEMA consolidated two existing
mortgages and the promissory notes secured by them: (1) a September 12, 2003, mortgage
securing a promissory note with an unpaid principal balance of $398,074.63 ("2003 Mortgage");
and (2) a December 20, 2005, mortgage securing a promissory note for $15,278.17 ("2005
Mortgage"). (List ofMortgs., Notes, & Agreements (CEMA, Ex. A).) There is no dispute that
Plaintiff executed and notarized these mortgages. See Automated City Register Information
System, Office of the City Register, New York City Department of Finance, http://a836acris.nyc.gov/CP/ (last visited March 15, 2015). 4 Plaintiff and PHH agreed among themselves to
create a single lien with the CEMA (List ofMortgs., Notes, & Agreements), but they did not
extinguish or replace the two existing mortgages. See Bechard v. Monty's Bay Recreation,
Inc., 11N.Y.S.3d695, 696 (App. Div. 2015) ("It is well established that a subsequent note does
not discharge the original indebtedness secured unless there is an express agreement between the
parties." (quoting Bank ofN.Y. v. Cerasaro, 470 N.Y.S.2d 894 (App. Div. 1983))); Bodden v.
Kean, 950 N.Y.S.2d 490 (Sup. Ct. 2010) (finding consolidation of two prior mortgage loans were
"not a refinancing or replacement of an existing mortgage loan"). Plaintiff does not argue
otherwise. Plaintiff also appears to acknowledge his obligation to repay the notes secured by
the 2003 Mortgage and the 2005 Mortgage. (See Pl.'s Opp'n at 27 (noting he is deprived "of the
right to cure by paying the 'lender'").) Plaintiff thus fails to allege that the Property is

4

"It is well-settled that, in considering a motion to dismiss, the Court is entitled to take judicial notice of documents
integral to or referred to in the complaint, as well as documents filed in other courts and other public records." See
Herbert, 2014 WL 3756360, at *2.

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"wrongfully encumbered," and his action to quiet title must be dismissed for failure to state a
claim.
C.

Leave to Amend

Plaintiff also seeks leave to amend the Complaint to name Fannie Mae as a defendant,
doing so for the first time in his objections to the R&R. Plaintiff alleges that "Fannie Mae is now
claiming that they are the owner and holder of the note and mortgage." (Pl.'s Obj. at 4.)
Plaintiff appears to want to replace PHH as defendant. (See id. ("The Court should grant leave
to amend to name the real party in interest as now Fannie Mae is stating they are the real party in
interest.").) Regardless of whether Plaintiffs intention is to replace PHH with Fannie Mae,
neither a substitution nor an addition of a new defendant affects the core holdings in the R&R
and this Memorandum and Order. First, Plaintiff does not have standing to challenge any
assignment by MERS because Plaintiff is not a party to any such assignment. Second, there is
no viable cause of action in New York for a declaration preemptively barring the commencement
of foreclosure proceedings. Third, there is no basis for a quiet title action because the record
shows that Plaintiff agreed to the CEMA and he has failed to allege that the Property is
"wrongfully encumbered." Swapping Fannie Mae for PHH does not cure any of these fatal
deficiencies. Plaintiffs request for leave to amend is therefore futile and must be denied.

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IV.

CONCLUSION
Accordingly, for the reasons set forth above, the court ADOPTS IN FULL the R&R, and

GRANTS Defendant PHH's motion to dismiss and DENIES Plaintiff's request for leave to
amend. The Complaint is DISMISSED.
SO ORDERED.

s/Nicholas G. Garaufis
Dated: Brooklyn, New York
March /5;2016

NICHOLAS G. GARAUFISU
United States District Judge

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