Knight-Hurney et al v. Suffolk County National Bank
MEMORANDUM & ORDER denying as moot 3 Motion to Remand to State Court; granting 9 Motion to Dismiss; For the foregoing reasons, SCNB's motion to dismiss (Docket Entry 9) is GRANTED insofar as it seeks dismissal of Plaintiffs' TILA c laim and this claim is DISMISSED WITH PREJUDICE. Plaintiffs' remaining state law claims are REMANDED to the Supreme Court of the State of New York, County of Suffolk. Plaintiffs' motion to remand the state law claims (Docket Entry 3), which seeks remand on different grounds than those stated herein, is DENIED AS MOOT. The Clerk of the Court is directed to mark this matter CLOSED. So Ordered by Judge Joanna Seybert on 9/30/2014. C/ECF (Valle, Christine)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
CAROL KNIGHT-HURNEY and WALTER HURNEY,
MEMORANDUM & ORDER
-againstSUFFOLK COUNTY NATIONAL BANK,
Matthew J. Barnes, Esq.
Barnes & Barnes, P.C.
445 Broadhollow Road, Suite 229
Melville, NY 11747
Cullen and Dykman Bleakley Platt, LLP
100 Quentin Roosevelt Boulevard
Garden City, NY 11530
SEYBERT, District Judge:
Plaintiffs Carol Knight-Hurney (“Mrs. Knight-Hurney”)
and Walter Hurney (“Mr. Hurney,” and together with Mrs. KnightHurney, “Plaintiffs”) originally commenced this action in New
National Bank (“SCNB”), asserting violations of the Truth in
Lending Act (“TILA”), 15 U.S.C. § 1601, et seq., and state law
enrichment, and deceptive trade practices in violation Section
349 of the New York General Business Law.
SCNB removed the action to this Court.
On February 20, 2014,
(1) Plaintiffs’ motion to remand the state law claims to state
court and to hold in abeyance the TILA claim pending resolution
of the state law claims (Docket Entry 3); and (2) SCNB’s motion
General Business Law for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6) (Docket Entry 9).
insofar as it seeks dismissal of Plaintiffs’ TILA claim and the
state law claims are REMANDED to the Supreme Court.
Plaintiffs are husband and wife.
(Compl. ¶ 3.)
Knight-Hurney is the fee owner of real property located at 60
resides with Mr. Hurney.
(Compl. ¶¶ 8-9.)
Mr. Hurney is the
(“WHRI”) and also is a member of Mt. Sinai LLC (“Mt. Sinai”).
(Compl. ¶¶ 10-11.)
WHRI and Mt. Sinai are companies engaged in
The following facts are taken from the Complaint and are
presumed to be true for the purposes of this Memorandum and
organized under the laws of New York with a principal place of
business in Riverhead, New York.
(Compl. ¶ 4.)
In 2004, WHRI obtained an unsecured commercial line of
credit from SCNB (the “2004 Line of Credit”).
(Compl. ¶ 13.)
In May 2009, Plaintiff advised SCNB that WHRI could no longer
repay the principal amount on the 2004 Line of Credit due to the
failing real estate market and resulting financial difficulties.
(Compl. ¶¶ 15-16.)
Plaintiffs claim that SCNB “insisted” that
Mr. Hurney not default on the 2004 Line of Credit and promised
that it would make additional extensions of credit to defer
WHRI’s repayment terms as a “temporary fix.”
(Compl. ¶¶ 18-19.)
Plaintiffs further claim that that SCNB “promised . . . that it
extensions of credit.
(Compl. ¶ 20.)
written ‘request[s] for extensions’ on behalf of WHRI so that
SCNB could process the loan extensions and thereby defer any
default by WHRI.”
(Compl. ¶ 21.)
As a result, by August 2009,
WHRI owed SCNB over $470,000 in additional commercial loans.
(Compl. ¶ 22.)
However, Plaintiffs claim that due to an SEC
investigation into these types of lending practices, SCNB then
regarding the WHRI commercial credit lines” and additional loans
Mt. Sinai had obtained from SCNB between 1998 and 2005.
On August 12, 2009, notwithstanding the fact that the
loans were not in default, SCNB allegedly threatened to “call”
the WHRI and Mt. Sinai loans and place a lien on Mrs. KnightHurney’s home unless Plaintiffs granted SCNB a security interest
in Mrs. Knight-Hurney’s home.
(Compl. ¶ 25.)
Plaintiffs claim that, given their tenuous financial
security interest in Mrs. Knight-Hurney’s home.
(Compl. ¶¶ 30-
On August 12, 2009, Mr. Hurney and Mrs. Knight-Hurney each
signed a Commercial Security Agreement “which purported to grant
a security interest in [Mrs. Knight-Hurney’s] personal residence
allege that they did not have an opportunity to review the 2009
Commercial Security Agreement and that SCNB failed to disclose
conjunction with the 2009 Commercial Security Agreement, WHRI
entered into a separate promissory note to pay SCNB the sum of
(Compl. ¶¶ 37-38.)
that they “were having difficulty” paying the August 2009 Note.
(Compl. ¶ 39.)
In response, SCNB, allegedly in effort “to cover
up its prior malfeasance,” “insisted” that Plaintiffs refinance
and consolidate Plaintiff’s original home debt (a mortgage of
residence ($480,000) for a combined lien of $640,000.
because of an excessive debt-to-income ratio but SCNB eventually
approved the loan in July 2012.
(Compl. ¶¶ 42-48.)
26, 2012, Plaintiffs executed a thirty-year promissory note for
(Compl. ¶ 49.)
The Complaint asserts four causes of action based on
Plaintiffs allege that SCNB violated TILA in connection with the
November 2012 Refinance Transaction because it failed to make
certain required disclosures regarding the loan and also failed
to make a reasonable and good faith determination as to whether
Plaintiffs could repay the loan.
(Compl. ¶¶ 52-58.)
seek rescission of the refinanced and consolidated loan pursuant
to 15 U.S.C. § 1635 and 12 C.F.R. § 226.23 and also ask the
Court to “void[ ] the security interest” in Mrs. Knight-Hurney’s
(Compl ¶¶ 55-57.)
The three remaining counts assert New
York state law claims seeking redress for SCNB’s conduct in
connection with the 2009 Commercial Security Agreement.
Plaintiff originally commenced this action in New York
State Supreme Court, Suffolk County, on November 22, 2012.
February 20, 2014, SCNB removed the action to this Court based
(Docket Entry 1.)
On February 28, 2014, Plaintiffs
moved to sever and remand the state law claims to state court
and to hold in abeyance the TILA claim pending resolution of the
state law claims.
(Docket Entry 3.)
On March 28, 2014, SCNB
moved to dismiss Plaintiffs’ claims under TILA and the New York
General Business Law for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6).
(Docket Entry 9.)
These motions are currently pending before the Court.
before the Court--Plaintiffs’ motion to remand their state law
claims and SCNB’s motion to dismiss Plaintiff’s claims under
TILA and the New York General Business Law.
The parties do not
dispute the order in which these motions should be addressed.
As a general rule, “when an action is removed from state court,
the district court first must determine whether it has subject
merits of a motion to dismiss . . . .”
Macro v. Independent
Health Ass’n, Inc., 180 F. Supp. 2d 427, 431 (W.D.N.Y. 2001).
Here, there is no dispute that the Court has federal question
jurisdiction over Plaintiff’s TILA claim, and Plaintiffs seek
only to remand the state law claims, arguing that the Court
lacks supplemental jurisdiction over them.
Since the Court has
jurisdiction to decided SCNB’s motion to dismiss insofar as it
jurisdiction of the state law claims depends in part on whether
a viable federal claims exists in this action, see One Commc’ns
Corp. v. J.P. Morgan SBIC LLC, 381 F. App’x 75, 82 (2d Cir.
2010) (“If all of a plaintiff’s federal claims are dismissed, a
assert supplemental jurisdiction over any state law claims.”),
the Court will first address SCNB’s motion to dismiss the TILA
As discussed below, Plaintiffs’ TILA claim fails as a
matter of law and the Court declines to exercise supplemental
jurisdiction over the remaining state law claims and remands
them to the Supreme Court.
The Court will first set forth the applicable legal
standard for a motion to dismiss before turning to SCNB’s motion
In deciding a Rule 12(b)(6) motion to dismiss, the
“[t]wo working principles.”
Ashcroft v. Iqbal, 556 U.S. 662,
678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 167 L. Ed. 2d
929 (2007); accord Harris v. Mills, 572 F.3d 66, 71–72 (2d Cir.
First, although the Court must accept all allegations as
true, this “tenet” is “inapplicable to legal conclusions;” thus,
“[t]hreadbare recitals of the elements of a cause of action,
Iqbal, 556 U.S. at 678; accord Harris, 572 F.3d at 72.
only complaints that state a “plausible claim for relief” can
survive a Rule 12(b)(6) motion to dismiss.
Iqbal, 556 U.S. at
Determining whether a complaint does so is “a context-
specific task that requires the reviewing court to draw on its
judicial experience and common sense.”
Id.; accord Harris, 572
F.3d at 72.
SCNB’s Motion to Dismiss
As noted, Plaintiffs allege that SCNB violated TILA in
connection with the November 2012 Refinance Transaction because
it failed to make certain required disclosures regarding the
reasonable and good faith determination as to whether Plaintiffs
C.F.R. § 226.23 and also ask the Court to “void[ ] the security
interest” in Mrs. Knight-Hurney’s home.
dismissed on three grounds.
(Compl ¶¶ 55-57.)
First, SCNB argues that TILA does
not apply to the November 2012 Refinance Transaction because
that transaction “was primarily for business purposes,” making
it exempt from TILA’s coverage.
(Def.’s Br. to Dismiss & in
Opp. to Pl.’s Mot. to Remand (“Def.’s Br.”), Docket Entry 10, at
Second, SCNB argues that the TILA claim must be dismissed
because Plaintiffs “have not pleaded their ability to tender
Finally, SCNB argues that TILA’s right of rescission does not
apply to the November 2012 Refinance Transaction because under
Section 1635(e)(2) of TILA and 12 C.F.R. § 226.23(f)(2), the
consolidation of a mortgage loan.
Entry 14, at 4-6.)
(Def.’s Reply Br., Docket
As discussed below, the TILA claim must be
dismissed because TILA’s right of rescission does not apply to
the November 2012 Refinance Transaction as a matter of law.
Since the Court dismisses the TILA claim on this ground, it will
not address SCNB’s additional grounds for dismissal.
disclosure of credit terms, avoid the uninformed use of credit,
and to protect the consumer against inaccurate and unfair credit
billing and credit card practices.”
McAnaney v. Astoria Fin.
security interests in their principal dwelling have a right to
rescind the transaction until midnight on the third business day
after the credit transaction, delivery of the rescission notice,
or delivery of all material disclosures, whichever is latest.”
Barberan v. Nationpoint, 706 F. Supp. 2d 408, 421 (S.D.N.Y.
transaction extends for three years.”
Kahraman v. Countrywide
§ 1635(f); and 12 C.F.R. § 226.23(a)(3)).
partially exempt refinancing and consolidation transactions from
refinancing or consolidation (with no new
advances) of the principal balance then due
and any accrued and unpaid finance charges
of an existing extension of credit by the
same creditor secured by an interest in the
15 U.S.C. § 1635(e)(2).
Similarly, the regulations state:
A refinancing or consolidation by
the same creditor of an extension
of credit already secured by the
consumer’s principal dwelling. The
right of rescission shall apply,
however, to the extent the new
amount financed exceeds the unpaid
attributed solely to the costs of
refinancing or consolidation.
12 C.F.R. § 226.23(f).
These provisions apply directly to this case.
is no dispute that the August 2012 Refinance Transaction simply
Hurney’s original home debt (a mortgage of $160,000) with the
WRHI debt ($480,000), which was already secured by the residence
pursuant to the 2009 Commercial Security Agreement.
Transaction or the 2009 Commercial Security Agreement.
Br. in Opp. to Mot. to Dismiss & in Supp. of Mot. to Remand,
Docket Entry 12, at 8.)
Thus, pursuant to Section 1635(e)(2) of
TILA and 12 C.F.R. § 226.23(f), TILA’s right of rescission does
Kahraman, 886 F. Supp. 2d at 119 (“Section 226.23(f)(2) clearly
governs plaintiffs’ rescission rights under TILA, and plaintiffs
have presented no legal argument why they are otherwise entitled
to rescission of their entire loan, or to a complete release of
Accordingly, SCNB’s motion to dismiss Plaintiffs’ TILA
claim is GRANTED and this claim is DISMISSED WITH PREJUDICE.
State Law Claims
Since the Court has dismissed Plaintiffs’ TILA claim,
Plaintiffs’ state law claims.
Ordinarily, “‘[w]hen all bases
for federal jurisdiction have been eliminated from a case so
that only pendent state claims remain, the federal court should
ordinarily dismiss the state claims.’”
Clorofilla v. Town of
New Castle, 106 F. App’x 90, 92 (2d Cir. 2004) (quoting Baylis
v. Marriott Corp., 843 F.2d 658, 665 (2d Cir. 1988)).
in situations like this, “[w]here the state claims originally
reached the federal forum by removal from a state court, the
district court has the discretion to dismiss the claims without
prejudice or remand them to the state court.”
Baylis, 106 F.
App’x at 665 (citing Carnegie–Mellon Univ. v. Cohill, 484 U.S.
343, 108 S. Ct. 614, 98 L. Ed. 2d 720 (1988)).
state law claims against SCNB are REMANDED to the New York State
Supreme Court, Suffolk County.
See Star Multi Care Servs., Inc.
v. Empire Blue Cross Blue Shield, --- F. Supp. 2d ----, 2014 WL
1057332, at *14 (E.D.N.Y. Mar. 19, 2014).
Plaintiffs’ motion to
remand the state law claims, which seeks remand on different
grounds, is therefore DENIED AS MOOT.
For the foregoing reasons, SCNB’s motion to dismiss
(Docket Entry 9) is GRANTED insofar as it seeks dismissal of
Plaintiffs’ remaining state law claims are REMANDED
Plaintiffs’ motion to remand the state law claims
(Docket Entry 3), which seeks remand on different grounds than
those stated herein, is DENIED AS MOOT.
The Clerk of the Court
is directed to mark this matter CLOSED.
/s/ JOANNA SEYBERT
Joanna Seybert, U.S.D.J.
September __30__, 2014
Central Islip, NY
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