Izmirligil v. Bank of New York Mellon et al

Filing 70

MEMORANDUM AND ORDER granting 66 Motion to Dismiss for Failure to State a Claim. For the reasons set forth herein, defendants motion to dismiss the amended complaint is granted to the extent that plaintiffs FDCPA claim is dismissed with prejudice and any remaining state law claims are dismissed without prejudice for lack of jurisdiction. The Clerk of Court is directed to close the file in this action. (Ordered by Judge Leonard D. Wexler on 4/2/2013.) c/Judgment Clerk (Fagan, Linda)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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ARIF S. IZMIRLIGIL,
Plaintiff,
-against-

MEMORANDUM AND ORDER
CV 11-5591 (LDW) (AKT)

BANK OF NEW YORK MELLON, et al.,
Defendants.
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WEXLER, District Judge
Plaintiff Arif S. Izmirligil brings this action against defendants Bank of New York
Mellon f/k/a The Bank of New York (“BNYM”), as trustee for Chase Mortgage Finance Trust
Series 2006 S-2, and JP Morgan Chase Bank, N.A. (“Chase”). Defendants move to dismiss the
amended complaint under Rule 12(b) of the Federal Rules of Civil Procedure. Plaintiff opposes
the motion.

I. BACKGROUND
For purposes of this decision, the allegations of plaintiff’s amended complaint and the
relevant background can be summarized as follows.1 On July 26, 2006, Chase extended to
plaintiff a 30-year mortgage loan for approximately $1.1 million (the “Mortgage Loan”) for the
purchase of a house in Miller Place, New York (the “Premises”). Amended Complaint (“AC”)
¶ 10. One day later, plaintiff’s Mortgage Loan was transferred in a series of transactions and then
pooled as part of a securitized loan trust, identified as the Chase Mortgage Finance Trust 2006 S-

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clarity.

Unfortunately, plaintiff’s amended complaint and opposing brief are far from models of

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2 (the “Trust”), pursuant to a “Pool and Servicing Agreement” (the “PSA”); BNYM was
appointed trustee of the Trust. AC ¶¶ 11-17.
On November 30, 2009, BNYM, as trustee, commenced a foreclosure action against
plaintiff in Suffolk County Supreme Court (the “Foreclosure Action”). AC ¶¶ 19, 57. To defend
the Foreclosure Action, plaintiff retained counsel, but counsel delayed filing an answer, putting
plaintiff in default. AC ¶ 58. As a result, plaintiff retained new counsel and moved to excuse his
default and extend his time to answer. AC ¶¶ 58-59. Supreme Court Justice Thomas F. Whelan
denied the motion on July 6, 2010, finding plaintiff failed to establish a justifiable excuse for his
default, and denied a motion to renew/reargue on September 22, 2010. AC ¶ 59. Plaintiff filed
an appeal with the Appellate Division, Second Department; on October 25, 2010, the Appellate
Division affirmed the denial of the motions. AC ¶ 59.
On November 16, 2011, more than five years after the loan was consummated, plaintiff
commenced this action, purportedly based on both federal question and diversity jurisdiction.
Plaintiff asserts four claims in the amended complaint, couched as: (1) wrongful foreclosure
despite lack of standing; (2) wrongful foreclosure based on deceptive accounting; (3) deceptive
practices in the loan origination and abusive lending practices that denied proper disclosures; and
(4) violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. §§ 1692, et seq.,
due to collection of a debt despite awareness of ownership and standing issues. Plaintiff
demands judgment for, inter alia, cancellation of the Note and Mortgage, damages, and
attorney’s fees and cost incurred in “this and related matters.” AC p. 32.
Plaintiff complains that BNYM filed the Foreclosure Action based on a “fraudulently
prepared late assignment” of the Mortgage Loan from “Servicer” Chase to “Trustee” BNYM,

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dated November 13, 2009. AC ¶¶ 19-30. According to plaintiff, the Trust never properly
acquired the Mortgage Loan in 2006, in that it was never properly conveyed to the Trust before
the “Trust Closing Date of September 26, 2006, due to defective documentation and lack of
recording.” AC ¶¶ 31-36. Plaintiff alleges that the purported conveyance to the Trust on
November 13, 2009 was “fraudulent” and “Late” in that it violated the PSA, the Trust
instrument, and various laws, including the New York Estates, Powers and Trusts Law and the
Internal Revenue Code. AC ¶¶ 22-25, 36-37. Plaintiff alleges that the purported transfer of the
Mortgage Loan to the Trust and late assignment resulted in an “improper chain of title” and
rendered “improper” BNYM’s “ownership” of, and “standing” to collect and foreclose on, the
Mortgage Loan. AC ¶¶ 18-19, 37; see also AC ¶ 100 (alleging transfer of Mortgage Loan to
BNYM made through “defective documentation and procedures,” creating “broken chain of
title”). Plaintiff alleges that, through these conveyances, BNYM “deceitfully asserted the right to
foreclose on the [Premises]” and “deceitfully alleged that it had assigned the [Mortgage Loan]
pursuant to the [PSA].” AC ¶¶ 19-21; see also AC ¶ 29 (alleging late assignment “evidences
forged signatures, questionable corporate roles and is an unlawfully notarized document”).
Regarding the loan origination, plaintiff complains that Chase “approved and fraudulently
processed” the Mortgage Loan as an interest only loan through an “institutionalized ‘ZIPPY
CHEATS & TRICKS’ System designed to bypass bank safe guards and standards in Lending,”
but then converted the loan into a principal and interest payment mortgage. AC ¶¶ 10, 45-47.
Chase failed to provide proper disclosures regarding financing costs, in that, inter alia, the actual
finance charges and APR were higher than disclosed. AC ¶¶ 48-49, 54-56. Plaintiff also alleges
that Chase “recklessly, knowingly, and intentionally” failed in its duty to verify plaintiff’s income

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and ability to sustain the loan payments, and “engaged in abusive and unconscionable lending
practices.” AC ¶¶ 50-53, 137.
Beyond the wrongful conduct in the loan origination, plaintiff complains that Chase
“knowingly, recklessly and/or negligently engaged in wrongful foreclosure based on accounting
errors.” AC ¶ 44. In this respect, plaintiff alleges that Chase engaged in faulty accounting as to
plaintiff’s payments, resulting in Chase’s failure to show all of plaintiff’s payments by the time
Chase declared plaintiff in default. AC ¶¶ 38-44. Chase also failed to provide plaintiff with
payment history, until recently, despite repeated requests, and prepared “Affidavits of Merit and
Amount Due without proper notarization and signature.” AC ¶¶ 42-43. According to plaintiff,
he applied for a loan modification on May 5, 2009, but Chase refused to accept mortgage
payments during the modification process, putting plaintiff in default. AC ¶¶ 68. In this respect,
plaintiff contends that, contrary to Chase’s “faulty accounting,” he was up to date with payments
as of July 22, 2009, but Chase sent an acceleration letter dated July 22, 2009 and refused to
accept payments after that date. AC ¶ 70. Plaintiff contends that Chase deceitfully pursued a
“Dual Path of Foreclosure and Loan Modification.” AC ¶ 71.
Plaintiff further complains that he did not have a “full and fair trial” or “hearing on
merits” in the Foreclosure Action, and that he was “unable to obtain full discovery” despite
multiple requests. AC ¶¶ 60-62. Plaintiff alleges that he “was able to get more thorough
compliance” through discovery in this action and from a more recent “forensic auditing of the
loan,” which “demonstrated [defendants’] deceptive practices and fraudulent claims.” AC ¶¶ 62,
81-96. Nevertheless, plaintiff maintains that “[t]his action is not seeking to re-litigate issues,
presented and/or decided by the State Court Foreclosure Action.” AC ¶ 64; see also AC ¶ 18.

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Rather, he characterizes this action as an “independent complaint” for “Deceptive Practices,
Fraudulent Claims, Fraudulently prepared assignment of Mortgage, related to the State Court
Foreclosure Action.” AC ¶ 63. Plaintiff maintains that the two actions are “distinguishable”
because his “defends [sic] in State Court were never actually litigated on the merits,” while the
claims in this action “raise much more fundamental problems with the defective and fraudulent
procedures of the Defendant’s [sic] that were identical [sic] by more recent discovery, a forensic
audit by some large scale settlements that involved Federal and State governmental entities,
where the issues raised appear in this case.” AC ¶ 64.
According to plaintiff, the Foreclosure Action is pending but defendants have been
“unable to continue” that action because of “many internal procedural problems raised” in the
Amended Complaint. AC ¶ 65. Specifically, plaintiff maintains that state court procedures and
orders and the “Settlement Terms” of the settlements with the governmental entities (applicable
to pending prejudgment judicial foreclosures) impose an obligation on defendants and/or their
attorneys to “re-execute all the sworn documents including the Assignment of Mortgage,
Affidavit of Merit and Amount, [sic] Due.” AC ¶ 66. Plaintiff claims that if defendants continue
the Foreclosure Action, they “would be knowingly perpetrating a fraud in that they are well
aware of the ownership and standing defects in their foreclosure and supporting documentation.”
AC ¶ 67.
Defendants move to dismiss, arguing, inter alia, (1) that all of the claims must be
dismissed for failure to state a claim upon which relief can be granted; (2) that the first and
second claims (the wrongful foreclosure claims) are barred by the Rooker-Feldman doctrine; and

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(3) that the third claim (to the extent that it is based on the Truth in Lending Act (“TILA”), 15
U.S.C. §§ 1601, et seq.) and the fourth claim are time barred.

II. DISCUSSION
On a motion to dismiss, the court must assume that all allegations in the complaint are
true and draw all reasonable inferences in favor of the nonmoving party. Plair v. City of New
York, 789 F. Supp. 2d 459, 463 (S.D.N.Y. 2011). To avoid dismissal, a plaintiff is required to
plead enough facts “to state a claim for relief that is plausible on its face.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678-80 (2009).
While heightened factual pleading is not required, a “formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550 U.S. at 555. Thus, a pleading that does nothing more
than recite the elements of a claim, supported by mere conclusory statements, is insufficient to
“unlock the doors of discovery.” Iqbal, 556 U.S. at 678. Rather, “only a complaint that states a
plausible claim for relief survives a motion to dismiss.” Id. at 679.
Initially, the Court observes that, contrary to plaintiff’s assertions, there is no diversity
jurisdiction in this action. Although plaintiff alleges the existence of diversity because he is “a
resident of the State of New York” and Chase is “organized under the laws of the State of Ohio,”
AC ¶ 8, he also alleges that Chase “maintains its principal place of business in New York,” AC
¶ 3. Because, for diversity purposes, Chase is also a citizen of New York, see 28 U.S.C.
§ 1332(c)(1), complete diversity does not exist and, therefore, there is no diversity jurisdiction in
this action. See Strawbridge v. Curtiss, 7 U.S. 267 (1806). Thus, plaintiff’s state law claims can
only be asserted under the Court’s supplemental jurisdiction. See 28 U.S.C. § 1367(a).

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Upon consideration of the motion, the Court concludes that plaintiff’s federal claims must
be dismissed, and the Court declines to exercise supplemental jurisdiction over any remaining
state law claims. See 28 U.S.C. § 1367(c)(3) (district court may decline to exercise supplemental
jurisdiction if it has dismissed all claims over which it has original jurisdiction); see also
Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988) (“[I]n the usual case in which all
federal-law claims are eliminated before trial, the balance of factors to be considered under the
pendent jurisdiction doctrine – judicial economy, convenience, fairness, and comity – will point
toward declining to exercise jurisdiction over the remaining state-law claims.).
The only apparent federal claim is the fourth claim – the FDCPA claim. Plaintiff claims
that BNYM violated the FDCPA through the commencement and prosecution of the Foreclosure
Action. According to plaintiff, BNYM is subject to the FDCPA as a “debt collector” because it
took an assignment of the alleged debt purportedly when the debt was in default. AC ¶ 139.
Plaintiff alleges that BNYM “used the foreclosure process to collect the alleged debt,” that
plaintiff disputed the validity of the debt and BNYM’s standing, and that BNYM has failed to
provide the correct amount of the alleged debt. AC ¶¶ 140-41. Plaintiff claims that BNYM
violated the FDCPA by using “false, deceptive or misleading representations in connection with
the collection of the alleged debt despite their [sic] awareness of ownership and standing issues
that precluded such debt collection.” AC ¶ 143. In addition, plaintiff claims that Chase violated
the FDCPA in that Chase’s foreclosure counsel sent a “Debt Collection letter” to plaintiff on
January 25, 2012 for the same alleged debt, and foreclosure counsel did not respond to plaintiff’s
“dispute of debt letter” sent to foreclosure counsel. Defendants argue that this claim fails to state
a claim and is time barred.

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As against BNYM, plaintiff fails to state a claim. As an initial matter, neither the
foreclosure summons nor foreclosure complaint is an “initial communication” under the FDCPA,
so as to trigger a debt collector’s obligations under 15 U.S.C. § 1692g. See 15 U.S.C. § 1692g(d)
(providing that “[a] communication in the form of a formal pleading in a civil action shall not be
treated as an initial communication for purposes of subsection (a)).
More importantly, plaintiff does not sufficiently allege that BNYM is a “debt collector”
within the meaning of the FDCPA. A “debt collector” is defined as a person either (1) involved
“in any business the principal purpose of which is the collection of any debts,” or (2) “who
regularly collects . . . debts owed . . . another.” 15 U.S.C. § 1692a(6). Plaintiff does not allege,
nor does he argue in opposition that he can allege, that either BNYM’s “principal purpose” is the
collection of debts or that BNYM “regularly collects” debts owed another. Rather, plaintiff
alleges that BNYM is a “debt collector” simply “because [BNYM] took an assignment of the
alleged debt while the debt was allegedly in default.” AC ¶ 140. Whether a debt is in default at
the time a “person” obtained it is relevant to an exception to the definition of a “debt collector.”
See 15 U.S.C. § 1692a(6)(F)(iii) (excluding from definition of “debt collector” any “person
collecting . . . a debt which was not in default at the time it was obtained by such person”);
Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003) (“In other words, the
Act treats assignees as debt collectors if the debt sought to be collected was in default when
acquired by the assignee, and as creditors if it was not.”). Because plaintiff does not sufficiently
allege that BNYM is a “debt collector” in the first place, the statutory exception is irrelevant. See
Schlegel v. Wells Fargo Bank, N.A., 799 F. Supp. 2d 1100, 1104 (N.D. Cal. 2011); Schuh v.

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Druckman & Sinel, L.L.P., No. 07 Civ. 366 (LAK)(GWG), 2008 WL 542504, at *12 n.7
(S.D.N.Y. Feb. 29, 2008).
Moreover, although “actions taken in furtherance of legal action are not, in and of
themselves, exempt from liability under the FDCPA,” Gabriele v. Am. Home Mortg. Servicing,
Inc., No. 12-985-cv, 2012 WL 5908601, at *4 (2d Cir. Nov. 27, 2012) (summary order), as a
mortgagor represented by counsel, plaintiff had adequate protection from BNYM’s conduct in
commencing and prosecuting the Foreclosure Action. Indeed, as the Second Circuit has
recognized, “[w]here an attorney is interposed as an intermediary between a debt collector and a
consumer, we assume the attorney, rather than the FDCPA, will protect the consumer from a debt
collector’s fraudulent or harassing behavior.” Kropelnicki v. Siegel, 290 F.3d 118, 128 (2d Cir.
2002). In this context, plaintiff’s allegations do not state a plausible claim under the FDCPA.
As against Chase, the claim fails because plaintiff does not allege that Chase is a “debt
collector.” See 15 U.S.C. § 1692a(6). Moreover, plaintiff does not allege that Chase sent the
“Debt Collection letter” or that Chase failed to respond to the “dispute of debt letter.” Rather,
plaintiff alleges that foreclosure counsel sent the letter and failed to respond.2
As for the third claim, the amended complaint references various state and federal laws
purportedly imposing a duty on Chase regarding processing and approving plaintiff’s loan
application. Respecting federal law, plaintiff references, inter alia, 12 C.F.R. § 226.34(a)(4)
(repayment ability provision of Regulation Z), and section 5 of the Federal Trade Commission
Act (“FTCA”), 15 U.S.C. §§ 45, et. seq. However, plaintiff does not argue in his opposing brief

2

Given that plaintiff fails to state a claim for violation of the FDCPA, the Court need not
determine whether the fourth claim is also time barred.

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that this claim arises under federal law, that it is sufficient to state a claim under federal law, or
that it overcomes the specific defenses raised by defendants in their motion. Indeed, plaintiff
offers no response to defendants’ arguments (1) that any TILA claim by plaintiff for damages is
barred by a one-year statute of limitations, see 15 U.S.C. § 1640(e); Rodriguez v. SLM Corp., No.
07cv1866 (WWE), 2009 WL 598252, at *4 (D. Conn. Mar. 6, 2009) (“TILA’s statute of
limitations runs from the date of consummation of the transaction”); (2) that, even if a right of
rescission were applicable here, plaintiff’s right to rescind expired three years after the
consummation of the loan transaction, see 15 U.S.C. § 1635(f); 12 C.F.R. § 226.23(a)(3); (3) that
the repayment ability provision does not apply to a “residential mortgage transaction,” such as
plaintiff’s loan transaction, see 12 C.F.R. §§ 226.32(a)(2)(i), 226.34(a)(4); McLean v.
Countrywide Home Loans, Inc., No. 09-CV-11239, 2009 WL 2777017, at *4 (E.D. Mich. Aug.
27, 2009)3; and (4) that no private cause of action exists under FTCA § 5, see Dolan v. Fairbanks
Capital Corp., No. 03-CV-3285 (DRH) (MLO), 2005 WL 1971006, at *2 (E.D.N.Y. Aug. 16,
2005) (citing Alfred Dunhill Ltd. v. Interstate Cigar Co., 499 F.2d 232, 237 (2d Cir. 1974)). To
the extent that this claim is based on state law, the Court declines to exercise jurisdiction over it.4

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Notably, neither party points out that a prior version of 12 C.F.R. § 226.34(a)(4) was in
effect at the time the Mortgage Loan was originated. See ING Bank, FSB v. Am. Reporting Co.,
843 F. Supp. 2d 491, 497 (D. Del. 2012) (observing that current version of § 226.34(a)(4) not
effective until October 2009). The prior version was similar to the current one but prohibited a
“pattern or practice” of extending credit subject to § 226.32 without regard to a borrower’s
repayment ability as of loan consummation. See id. Even if plaintiff sufficiently alleges a
“pattern or practice,” his claim is insufficient, as discussed.
4

Defendants characterize plaintiff’s amended complaint and opposing brief as patently
improper because they are “rambling,” contain references to clearly irrelevant events, and cite
numerous inapplicable statutes. Defendants’ Reply Mem. of Law in Support of Defendants’
Motion to Dismiss (“Reply Br.”), at 5. Defendants urge the Court to dismiss the third claim as
violating FRCP 8(a)(2), requiring a “short and plain statement of the claim showing that the

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As for the first and second claims – the wrongful foreclosure claims, plaintiff does not
argue that these claims arise under federal law. To the extent that these claims are based on state
law, the Court declines to exercise jurisdiction over them.5

III. CONCLUSION
For the above reasons, defendants’ motion to dismiss the amended complaint is granted to
the extent that plaintiff’s FDCPA claim is dismissed with prejudice and any remaining state law
claims are dismissed without prejudice for lack of jurisdiction. The Clerk of Court is directed to
close the file in this action.
SO ORDERED.
_____________/s/_________________
LEONARD D. WEXLER
UNITED STATES DISTRICT JUDGE
Dated: Central Islip, New York
April 2, 2013

pleader is entitled to relief.” See Reply Br. at 4. While the Court does not necessarily disagree
with defendants’ characterization of plaintiff’s papers, it need not reach this ground for dismissal.
5

Given the dismissal of these claims, the Court need not reach defendants’ alternative
argument that the first and second claims are barred by the Rooker-Feldman doctrine, see Rooker
v. Fidelity Trust Co., 263 U.S. 413, 414-415 (1923); D.C. Ct. App. v. Feldman, 460 U.S. 462
(1983).