OneWest Bank, NA v. Vaval et al
Filing
46
ORDER ADOPTING REPORT AND RECOMMENDATIONS IN PART. The Court (1) dismisses the claims against defendant Jane Doe; (2) grants OneWest's motion for a default judgment; and (3) denies OneWest's motion for judgment of foreclosure a nd sale and its request for damages, costs, and attorney's fees without prejudice. OneWest may renew its requests for a judgment of foreclosure and sale and for damages by submitting the following within thirty (30) days of the dat e of this Order: (1) a revised proposed order of foreclosure and sale in compliance with this Order; and (2) briefing and supporting documentation regarding the requested damages and attorney's fees. Any defendant who wishes to oppose these submissions may do so within fifteen (15) days of the date that those submissions are filed. So Ordered by Judge Carol Bagley Amon on 7/18/2016. (Lee, Tiffeny)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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ONEWEST BANK, N.A.,
Plaintiff,
NOT FOR PUBLICATION
MEMORANDUM & ORDER
14-CV-3437 (CBA) (PK)
-againstFRANTZ VAVAL, KETL Y VAVAL,
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC. as
nominee for FRANKLIN FIRST
FINANCIAL, LTD., NEW YORK CITY
TRANSIT ADJUDICATION BUREAU,
NEW YORK CITY ENVIRONMENTAL
CONTROL BOARD, JEANINE
ALTENOR, LISTON ALTENOR, and
JANE DOE,
Defendants.
------------------------------------------------------x
AMON, United States District Judge:
OneWest Bank, N.A. ("OneWest") brings this action seeking to foreclose on a mortgage
encumbering a property owned by Frantz and Ketly Vaval. (D.E. # 14 ("Am. Compl.").) After
defendants failed to appear and defend the action, OneWest requested a certificate of default
against all defendants, (D.E. # 27), which the Clerk of Court entered on January 22, 2015, (D.E.
dated Jan. 22, 2015.) OneWest then moved for a defaultjudgment, (D.E. # 30 ("Mot. for Default
J.")), and, on February 10, 2015, this Court referred its motion to the Honorable Viktor V.
Pohorelsky, United States Magistrate Judge, for a Report and Recommendation ("R&R"), (D.E.
dated Feb. 10, 2015).
On August 27, 2015, Magistrate Judge Pohorelsky issued an R&R recommending that the
Court deny One West's motion for default judgment subject to the submission of supplemental
information.
(D.E. # 39 ("R&R").)
The R&R concludes: (1) that the Court should grant
OneWest's request to dismiss defendant Jane Doe from the case because she no longer resides at
1
the property at issue, (ill at 3-4); (2) that One West's complaint sufficiently establishes defendants'
liability, (ill at 5-6); and (3) that One West is entitled to sale and foreclosure of the property as
well as the requested attorneys' fees, (ill at 10-11). However, the R&R recommends that default
judgment should not be entered "unless and until" One West establishes this Court's subject matter
jurisdiction, (ill at 1-2), and the proper amount of damages, (ill at 8-10).
DISCUSSION
When deciding whether to adopt an R&R, a 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). To accept those portions of an R&R to which no timely objection has been made, "a
district court need only satisfy itself that there is no clear error on the face of the record." Jarvis
v. N. Am. Globex Fund. L.P., 823 F. Supp. 2d 161, 163 (E.D.N.Y. 2011) (internal quotation marks
and citation omitted). No party has objected to the R&R, and the time for doing so has passed.
In response to Magistrate Judge Pohorelsky's recommendation, OneWest filed a
supplemental affidavit in support of its motion for a default judgment. (D.E. # 41 ("Suppl. Aff. ").)
The Court has reviewed the record and, finding no clear error in the R&R's recommendations to
grant OneWest's request to dismiss Jane Doe and to find that OneWest's complaint establishes
defendants' liability, adopts those portions of the R&R as the opinion of the Court. However, in
light of the supplemental affidavit OneWest provided, the Court considers the issues of subject
matter jurisdiction and whether OneWest is entitled to the requested relief de novo.
I.
Subject Matter Jurisdiction
The Court concludes that One West's supplemental affidavit provides sufficient
information to establish this Court's subject matter jurisdiction. As a national banking association,
(ill, 5), OneWest is deemed by statute to be a citizen of the states in which it is "located," 28
2
U.S.C. § 1348. In Wachovia Bank v. Sclunidt, the Supreme Court explained that a national bank
is "located," for purposes of this statute, "in the State designated in its articles of association as its
main office." 546 U.S. 303, 318 (2006). Although Wachovia "left open the question of whether
a national bank is also a citizen of the state of its principal place of business," the Second Circuit
recently confirmed that a national bank "is a citizen only of the state listed in its articles of
association as its main office." OneWest Bank. N.A. v. Melina, No. 15-3063, slip op. at 7-8 (2d
Cir. June 29, 2016). Although OneWest's supplemental affidavit persists in referring to its
"principal place of business" rather than its "main offices" when discussing its citizenship, it
provides sufficient information to determine that its main office is in fact located in California.
(Suppl. Aff.
~
6; id. Ex. A.) Despite the R&R's concerns regarding the citizenship ofOneWest's
parent corporation, "'a subsidiary corporation has its own principal place of business for purposes
of diversity of citizenship jurisdiction, unless it is merely an 'alter ego' or agent of the parent
corporation."' Melina, slip op. at 14 (quoting Charles Alan Wright, et al., 13F Federal Practice
and Procedure § 3625 (3d ed.)). Because defendants are citizens ofNew York and Delaware, (Am.
Comp!. ~ 3-10), while OneWest is a citizen of California, the Court concludes that the complete
diversity requirement is satisfied and this Court has subject matter jurisdiction over this case.
II.
Relief
In its motion for default judgment, OneWest requests the following relief: (1) orders
authorizing sale of the mortgaged property, foreclosure on existing debts, and distribution of the
proceeds, and (2) a money judgment against the defendant Frantz Vaval for damages, costs, and
fees. The Court considers whether OneWest is entitled to each form of relief in turn.
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A.
Order of Foreclosure and Sale
"A plaintiff is entitled to foreclose on a property if it demonstrates the existence of an
obligation secured by a mortgage, and a default on that obligation." E. Sav. Bank. FSB v. Beach,
No. 13-CV-341 (JS) (AKn, 2014 WL 923151, at *15 (E.D.N.Y. Mar. 10, 2014) (internal
quotation marks and citation omitted); see also United States v. Freidus, 769 F. Supp. 1266, 1277
(S.D.N.Y. 1991). OneWest has produced copies of the Note and Mortgage, as well as proof that
the Mortgage was assigned to OneWest. (See D.E. # 30-10 ("San Pedro Aff."), Ex. A ("Note"),
Ex. B ("Mortgage"), Exs. E-F.) OneWest has also alleged that "Frantz Vaval and Ketly Vaval
failed to make payment in accordance with the terms of the note and mortgage by not making the
payment due on September I, 2009 and subsequent payments." (Am. Comp!.
~
18.) This
allegation is supported by affidavits and exhibits attached to the motion for defaultjudgment. (See
San Pedro Aff. ~ 8; id., Ex. H.) OneWest is therefore entitled to foreclose on the property. In light
of the deficiencies discussed below, however, the Court cannot order thejudgment of foreclosure
and sale at this time. In order to effectuate the foreclosure and sale, the Court directs One West to
submit a revised proposedjudgment of foreclosure and sale in conformance with this Order.
B.
Damages
When entering a default judgment, courts must "conduct an inquiry in order to ascertain
the amount of damages with reasonable certainty." Credit Lyonnais Sec. USA. Inc. v. Alcantar!!,
183 F.3d 151, 155 (2d Cir. 1999). In conducting this inquiry, courts may rely upon "detailed
affidavits and documentary evidence, supplemented by the District Judge's personal knowledge
of the record." Fustok v. ContiCommodity Serv.. Inc., 873 F.2d 38, 40 (2d Cir. 1989). OneWest
seeks the amount due for "principal, interest, late charges, taxes, assessments, insurance,
maintenance and preservation of the property and other similar charges, together with costs,
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allowances, expenses of sale, [and] reasonable attorney's fees, all with interest." (Am. Comp!.
'I[ 22.) In support of its claim for damages, plaintiff submitted an affidavit from JC San Pedro, First
Vice President for One West Bank N.A., and a number of supporting exhibits.
In the R&R, Magistrate Judge Pohorelsky expressed concerns regarding "fundamental
flaws" with One West's submissions that prevented him from calculating the amount of damages
with the requisite certainty. (R&R at 8-10.) OneWest filed a supplemental affidavit purporting
to address these concerns.
The Court considers the information contained in OneWest's
supplemental affidavit and addresses OneWest's requests for the principal and interest owed,
escrow items, and other fees, costs, and attorney's fees below.
I.
Principal and Interest
OneWest seeks an award for unpaid principal and interest on the Note. The Note provides
that once the borrower is in default, if the borrower does not pay the overdue amount within thirty
days, the Note Holder, here OneWest, "may require [the borrower] to pay immediately the full
amount of Principal that has not been paid and all the interest that [the borrower] owe[s] on that
amount." (Note§ 7(c).) Given that the Vavals have defaulted on the Note, One West is entitled to
recover any unpaid principal and the unpaid interest on the Note.
The Court cannot awardjudgment on these amounts, however, because One West has failed
to adequately support the amounts requested.
In OneWest's supplemental affidavit, Jon
Dickerson, an "Authorized Signatory of CIT Bank, N.A formerly known as OneWest Bank N.A.,"
(Suppl. Aff., Ex. B ("Dickerson Aff. ") 'If 1), reviewed the business records and certified that the
following amounts are due on the Note: $580,018.70 for unpaid principal on the Note; $97,878.24
for unpaid interest from August 1, 2009, through January 31, 2014; and $27,550.92 for unpaid
interest from February 1, 2014, through February 1, 2015. (M, 'I[ 13.) The affidavit further explains
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that although the initial principal was $556,000, (see Am. Comp!. 'l) 15; Note § 1), on January 8,
2009, the principal increased to $587,733.97 when the mortgage was modified, 1 (Dickerson Aff.
'll
7; see also id., Ex. A ("Modification Agreement")).
However, OneWest provides no
documentation or explanation supporting the affidavit's assertion that the unpaid principal at the
time of default was $580,018. 70. Although it stands to reason that the Vavals made payments that
decreased the principal between January 8, 2009, when the mortgage was modified, and September
1, 2009, when they defaulted on the mortgage, OneWest has provided no evidence to support the
claimed outstanding principal. The Court therefore denies OneWest's request for an award of
$580,018.70 without prejudice.
One West also seeks interest at the Note rate until the date of entry of judgment and at the
statutory rate thereafter. (Suppl. Aff. 'l) 12.) After the January 8, 2009, modification, the following
interest schedule applied: starting February 1, 2009, the interest rate is 3.75%; starting February 1,
2014, the interest rate is 4.75%; and starting February 1, 2015, the interest rate is 5.125%.
(Modification Agreement§ 4.) Although the interest rates One West requests are proper, because
there is uncertainty regarding the amount of unpaid principal, and particularly regarding the
amount of unpaid interest-bearing principle, the Court denies the request for unpaid interest
without prejudice.
2.
Escrow Items
One West seeks an award of$60,040.81 for escrow advances. The Mortgage provides that
the borrower will make periodic payments toward "Escrow Items" including taxes and insurance
payments, (Mortgage § 3(a)), and provides that ifthe borrower defaults on the Note or Mortgage
1 OneWest
explains that although the mortgage was modified again on February I, 2010, increasing the principal to
$594, 151.97, the modification was subsequently reversed, returning the outstanding principle to $581,825.68. (Suppl.
Aff, Ex. B ("Dickerson Aff.") 1J 7.)
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the lender may require immediate payment of the amount remaining unpaid under the Note or
Mortgage, (ill § 22). Given that the Vavals have defaulted, One West is entitled to recover these
items.
The Court cannot awardjudgment on these items, however, because OneWest has failed
to adequately support the amounts requested.
The listed escrow advances for insurance
disbursements and tax disbursements appear proper, but OneWest has provided no documents
indicating when these costs were incurred. OneWest may recover these items if they are supported
by proper documentation, but absent such documentation, the Court denies the requested escrow
advances without prejudice.
3.
Fees and Costs
One West seeks additional damages of$2,555 as compensation for inspection and valuation
fees and $2,908.20 as compensation for litigation costs. The Note and Mortgage both provide that
OneWest, as the note holder and lender, may recover "costs and expenses" for enforcing the Note,
(Note§ 7(E)), may charge "fees for services performed in connection with [a] default" including
"property inspection and valuation fees," (Mortgage § 14), and may "collect all costs and
disbursements and additional allowances in connection with any lawsuit for Foreclosure and Sale,"
(ill § 22). Given that the Vavals have defaulted, OneWest is entitled to recover these items.
The Court cannot award judgment on these items, however, because One West has failed
to adequately support the amounts requested. The listed fees appear to be properly related to
services in connection with default and the costs appear to be necessary to a lawsuit for foreclosure
and sale. Although the cost of filing in this court is easily verifiable, the other fees and costs
require supporting documentation or explanation. One West may recover these items if they are
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supported by proper documentation, but absent such documentation, the Court denies the requested
fees and costs without prejudice.
4.
Attorney's Fees
Finally, OneWest seeks an award of$3,500 for attorney's fees. As the R&R recognizes,
the "Mortgage expressly provides for the recovery of reasonable attorneys' fees by [OneWest] in
the event of a foreclosure sale." (R&R at 10 (citing Mortgage § 22).) As a general matter, in
determining appropriate attorney's fees, the "starting point" for calculating a "presumptively
reasonable fee" is "the lodestar-the product of a reasonable hourly rate and the reasonable number
of hours required by the case." Millea v. Metro-North R.R. Co., 658 F.3d 154, 166 (2d Cir. 2011).
In order to calculate the presumptively reasonable fee, courts in this Circuit require parties
requesting attorney's fees to submit "contemporaneous time records specifying relevant dates,
time spent, and work done." General Nutrition Inv. Co. v. General Vitamin Centers. Inc., 817 F.
Supp. 2d 66, 76 n.2 (E.D.N.Y. 2011) (citing New York State Ass'n for Retarded Children. Inc. v.
Carey. 711 F.2d 1136, 1148 (2d Cir. 1983)). "[T]he fee applicant bears the burden of establishing
entitlement to an award and documenting the appropriate hours expended and hourly rates."
Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). "[W]here adequate contemporaneous records
have not been kept, the court should not award the full amount requested." F.H. Krear & Co. v.
Nineteen Named Trustees, 810 F.2d 1250, 1265 (2d Cir. 1987).
Here, OneWest has failed to provide sufficient records to support its request for attorney's
fees. Instead, it requests attorney's fees based on a flat-rate agreement with its counsel. Although
counsel for OneWest provides a detailed list of work performed in this matter, there is no indication
of the time required to complete each task or who completed the task. (See D.E. # 30-11 ("Att'y
Affirm.") iii! 3-4.) Despite counsel's claim that "[t]he flat legal fee ... is based on attorney time
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at a rate of$175 per hour, and paralegal time at a rate of$125 per hour,"
(id.~
6), without more
detailed information regarding the hours expended on this matter, the Court cannot determine
whether the fee requested is reasonable.
Courts in this District have declined to award attorney's fees pursuant to a flat-rate
agreement unless the request is accompanied by supporting documentation sufficient to allow the
court to "calculat[e] the presumptively reasonably fee via the lodestar method and compar[ e] it to
the flat fee amount." OneWest Bank. N.A. v. Cole, No. 14-CV-3078 (FB) (RER), 2015 WL
4429014, at *6 (E.D.N.Y. July 17, 2015). In fact, courts in this Circuit have specifically declined
to award OneWest's requests for flat-rate attorney's fees on numerous occasions. See id. at *7
(denying fees because One West's affirmation supporting requested fees included a list of tasks
completed but did "not denote any hours expended" nor "attribute any of the listed tasks
specifically to [the attorney] or his paralegal"); One West Bank. N.A. v. Hawkins, No. 14-CV-4656
(NGO) (CLP), 2015 WL 5706945, at *11(Sept.2), adopted by 2015 WL 5706953 (Sept. 28, 2015)
(denying fees because OneWest's "counsel seemingly failed to maintain contemporaneous
records" and ''the papers submitted do not indicate whether the person performing the work was a
paralegal or an attorney, and if an attorney, what level of experience he or she possesses");
OneWest Bank. N.A. v. Shepherd, No. 13-CV-1104, 2015 WL 1957284 (TJM), at *l (N.D.N.Y.
Apr. 29, 2015) (denying fees because "[p]laintiff ha[d] not itemized the hours spent on various
tasks, or the[] personnel performing the tasks''); cf. One West Bank. N.A. v. Denham, No. 14-CV5529 (DRH) (AKT), 2015 WL 5562980, at *11 (Aug. 13), adopted by 2015 WL 5562981
(E.D.N. Y. Sept. 21, 2015) (granting fees because OneWest "provided a non-exhaustive list of work
performed, the amount of time spent on each task, and the name of the professional who performed
the respective task," which, though "not a model of compliance with the Second Circuit's guidance
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concerning contemporaneous billing records," was sufficient to allow the court to make the
required comparison to the lodestar amount). Without such records, the Court cannot determine
the presumptively reasonable fee needed to determine whether the fee requested in this case is
reasonable. The Court therefore denies One West's request for attorney's fees without prejudice.
CONCLUSION
For these reasons, the Court (1) dismisses the claims against defendant Jane Doe; (2) grants
OneWest's motion for a default judgment; and (3) denies OneWest's motion for judgment of
foreclosure and sale and its request for damages, costs, and attorney's fees without prejudice.
OneWest may renew its requests for ajudgment of foreclosure and sale and for damages
by submitting the following within thirty (30) days of the date of this Order: (1) a revised proposed
order of foreclosure and sale in compliance with this Order; and (2) briefing and supporting
documentation regarding the requested damages and attorney's fees. Any defendant who wishes
to oppose these submissions may do so within fifteen ( 15) days of the date that those submissions
are filed.
SO ORDERED.
f(,
Dated: July
2016
Brooklyn, NY
s/Carol Bagley Amon
-t:J.01 T3a~ / ...
~:et Judge
United S
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