Hourani v. Wells Fargo Bank, N.A.

Filing 17

MEMORANDUM AND ORDER granting 10 Motion to Dismiss. For the reasons stated herein, Wells Fargos motion to dismiss is granted, and the complaint is dismissed with prejudice. The Clerk of Court is directed to close the file. (Ordered by Judge Leonard D. Wexler on 2/1/2016.) (Fagan, Linda)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
-----------------------------------------------------X
GEORGE HOURANI,
Plaintiff,
-against-

MEMORANDUM AND ORDER
CV 15-2561 (LDW) (SIL)

WELLS FARGO BANK, N.A.,
Defendant.
-----------------------------------------------------X
WEXLER, District Judge
Plaintiffs George Hourani (“Hourani”) brings this diversity action against
defendant Wells Fargo Bank, N.A. (“Wells Fargo’), asserting various claims stemming
from a foreclosure action brought by Wells Fargo against Hourani in state court.
Wells Fargo moves to dismiss under Rules 12(b)(1) and 12(b)(6) of the Federal Rules of
Civil Procedure (“FRCP”). Hourani opposes the motion.

I. BACKGROUND
For purposes of this decision, the relevant background can be summarized as
follows. Hourani resides at 23 West Avenue, Lawrence, New York (the “Property”). The
Property was subject to a note, for $400,000, secured by a mortgage held by Wells Fargo.
On July 28, 2011, following Hourani’s default in making required payments, Wells Fargo
commenced a foreclosure action in Supreme Court, Nassau County (the “Foreclosure
Action”). On March 5, 2014, Wells Fargo obtained a judgment of foreclosure and sale in
the amount of $519,315.68, plus additional interest through the date of sale (the

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“Foreclosure Judgment”). The Property was sold to a non-party on October 21, 2014 (the
“Foreclosure Sale”). Hourani alleges that he first learned of the Foreclosure Sale on
October 22, 2014.
On or about October 29, 2014, Hourani filed a motion in the Foreclosure Action to
set aside the Foreclosure Sale on the grounds of fraud, bad faith, and breach of
agreement, alleging that he did not receive a notice of the Foreclosure Sale and that
Wells Fargo had misrepresented that it would adjourn the Foreclosure Sale while Hourani
completed an application to modify the mortgage loan (the “Motion to Vacate”). On
December 5, 2014, Wells Fargo filed opposition to the Motion to Vacate. In its
opposition, Wells Fargo submitted a “Notice of Sale,” with an “Affidavit of Service,”
indicating that the notice was served on Hourani on September 22, 2014 by Wells Fargo’s
counsel. By order dated April 1, 2015, the state court denied Hourani’s Motion to Vacate,
ruling that “[Hourani] has not established bad faith on the part of [Wells Fargo].
[Wells Fargo’s] Exhibit I evidences that a notice of sale was served” (the “Order Denying
Motion to Vacate”). Hourani did not file an appeal in the Foreclosure Action.
On May 5, 2015, Hourani commenced this action. In the complaint, he asserts
seven claims: (1) Count One, “Deceptive Advertising and Other Unfair Business
Practices”; (2) Count Two, “Breach of Fiduciary Duty by Fraudulent Concealment”; (3)
Count Three, “Common Law Fraud”; (4) Count Four, “Unjust Enrichment”; (5) Count
Five, “Breach of the Implied Covenant of Good Faith and Fair Dealing”; (6) Count Six,

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“Equitable Estoppel”; and (7) Count Seven, “Intentional Infliction of Emotional
Distress.” For each claim, Hourani requests “compensatory damages” and a judgment
“vacating the foreclosure sale.”
Wells Fargo moves to dismiss, arguing, inter alia, that Hourani’s claims are barred
by: (1) the Rooker-Feldman doctrine, and (2) res judicata and collateral estoppel.
Alternatively, Wells Fargo argues that the complaint fails to state a claim.

II. DISCUSSION
A. Motion to Dismiss Standards
On a motion to dismiss under FRCP 12(b)(1), the court should dismiss the action
when it “lacks the statutory or constitutional power to adjudicate it.” Makarova v. United
States, 201 F.3d 110, 113 (2d Cir. 2000). The court must accept as true all allegations in
the complaint, but it may refer to evidence outside the pleadings to resolve disputed issues
of jurisdiction. Kamen v. American Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986);
Woodcock v. Montefiore Med. Ctr., 48 F. Supp. 2d 231, 233-34 (E.D.N.Y. 1999).
On a motion to dismiss under FRCP 12(b)(6), 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).
Moreover, the plaintiff is required to “set forth enough facts to state a claim to relief that
is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007); see

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also Ashcroft v. Iqbal, 556 U.S. 662, 678-80 (2009). 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.
B. Rooker-Feldman Doctrine
The Second Circuit has established a four-part test for determining whether the
Rooker-Feldman doctrine deprives a federal district court of subject matter jurisdiction.
See Vossbrinck v. Accredited Home Lenders, Inc., 773 F.3d 423, 426 (2d Cir. 2014);
Hoblock v. Albany Cnty. Bd. of Elections, 422 F.3d 77, 85 (2d Cir. 2005). Under this test,
Rooker-Feldman applies only if four conditions are met: (1) the federal-court plaintiff
must have lost in state court; (2) the plaintiff must complain of injuries caused by a statecourt judgment; (3) the plaintiff must invite district court review and rejection of that
judgment; and (4) the state-court judgment must have been rendered before the district
court proceedings commenced. Vossbrinck, 773 F.3d at 426; Hoblock, 422 F.3d at 85.
Here, the four conditions are met, and the doctrine applies, to the extent that
Hourani requests an order “vacating the foreclosure sale”—as he does in every claim of
the complaint. First, Hourani lost in the state court. Second, the complained-of injury
(i.e., sale of the Property) was the result of the state court’s Foreclosure Judgment. Third,
Hourani clearly invites this Court to review and reject the state court’s Foreclosure
Judgment and subsequent Order Denying Motion to Vacate. Indeed, the complaint

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specifically requests, in each claim, a judgment by this Court “vacating the foreclosure
sale.” Hourani tellingly states that he “brings this action with the hope that this Court will
grant relief of a judgment entered in the [state court],” and that he “seeks to challenge
final ruling of a State Court foreclosure action.” Brief in Opposition of Defendant’s
Motion to Dismiss, at 1. Finally, the Foreclosure Judgment and Order Denying Motion to
Vacate were rendered before this action was commenced. Accordingly, the RookerFeldman doctrine deprives this Court of jurisdiction to hear Hourani’s claims against
Wells Fargo to the extent that his claims request that this Court vacate the Foreclosure
Judgment. See Posy v. HSBC Bank USA, 991 F. Supp. 2d 422, 426 (E.D.N.Y. 2013).
C. Res Judicata and Collateral Estoppel
A federal court must give a state court judgment the same preclusive effect that it
would have in that state’s courts. Green v. Montgomery, 219 F.3d 52, 55 (2d Cir. 2000);
Colon v. Coughlin, 58 F.3d 865, 869 n. 2 (2d Cir. 1995). Because the Foreclosure Action
occurred in New York, this Court applies New York’s res judicata and collateral estoppel
doctrines. See Beckford v. Citibank N.A., No. 00 CV 205 DLC, 2000 WL 1585684, at *3
(S.D.N.Y. Oct. 24, 2000).
Under New York law, res judicata (or claim preclusion) “bars future litigation of
claims that were or could have been raised in a prior proceeding where that prior
proceeding resulted in a final judgment on the merits.” Id.; Yeiser v. GMAC Mortg. Corp.,
535 F. Supp. 2d 413, 422-23 (S.D.N.Y. 2008). New York applies a transactional

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approach to res judicata, meaning that “ ‘once a claim is brought to a final conclusion, all
other claims arising out of the same transaction or series of transactions are barred, even
if based upon different theories or if seeking a different remedy.’ ” Yeiser, 535 F. Supp.
2d at 422 (quoting Sosa v. JP Morgan Chase Bank, 33 A.D.3d 609, 611 (2d Dep’t 2006)).
Moreover, the doctrine applies “to defenses that could have been litigated, including
defenses to a foreclosure.” Beckford, 2000 WL 1585684, at *3 (citations omitted);
Yeiser, 535 F. Supp. 2d at 423. New York, however, has a permissive counterclaim rule.
While that rule “means that ‘res judicata generally will not necessarily bar claims that
could have been counterclaims in a prior action,’ this exception for counterclaims does
not permit an attack on a judgment.” Beckford, 2000 WL 1585684, at *3 (quoting
Eubanks v. Liberty Mortg. Banking, Ltd., 976 F. Supp. 171, 173 (E.D.N.Y.1997)). As the
New York Court of Appeals explains, while this
rule may save from the bar of res judicata those claims for
separate or different relief that could have been but were not
interposed in the parties’ prior action[,] [i]t does not . . .
permit a party to remain silent in the first action and then
bring a second one on the basis of a preexisting claim for
relief that would impair the rights or interests established in
the first action.
Henry Modell & Co. v. Minister, Elders & Deacons of Reformed Prot. Dutch Church, 68
N.Y.2d 456, 462 n. 2 (1986) (citation omitted); see also Signature Bank v. Epstein, 95
A.D.3d 1199, 1200 (2d Dep’t 2012) (“ ‘A judgment of foreclosure and sale entered
against a defendant is final as to all questions at issue between the parties, and concludes

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all matters of defense which were or might have been litigated in the foreclosure
action.’ ” (quoting Long Island Sav. Bank v. Mihalios, 269 A.D.2d 502, 503 (2d Dep’t
2000))).
Under New York law, collateral estoppel (or issue preclusion) “precludes a party
from relitigating in a subsequent action or proceeding an issue clearly raised in a prior
action or proceeding and decided against that party or those in privity, whether or not the
tribunals or causes of action are the same.” Ryan v. N.Y. Tel. Co., 62 N.Y.2d 494, 500
(1984); Colon, 58 F.3d at 869. Two requirements must be met for collateral estoppel to
apply: (1) an identical issue was necessarily decided in the prior action and is decisive of
the present action, and (2) there was a full and fair opportunity to contest that prior
determination. Buechel v. Bain, 97 N.Y.2d 295, 303-04 (2001).
Hourani’s claims in this action generally challenge Wells Fargo’s purported fraud,
bad faith, and breach of agreement in failing to or insufficiently notifying Hourani of the
pending Foreclosure Sale while simultaneously reviewing him for a mortgage loan
modification. Hourani did in fact raise similar challenges in his Motion to Vacate, but the
state court rejected them. Hourani did not appeal the state court’s rulings in the
Foreclosure Action. The Foreclosure Judgment is final as to all questions at issue
between these parties, and concludes all matters of defense that were or might have been
litigated in the Foreclosure Action. All of Hourani’s claims in this action were questions
at issue in the Foreclosure Action or matters that Hourani raised or might have raised in

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that action. As such, his claims are barred by res judicata. The issues of fraud, bad faith,
and breach of agreement underlie all of Hourani’s claims in this action, most clearly
Count Three (Common Law Fraud), Count Five (Breach of the Implied Covenant of
Good Faith and Fair Dealing) and Count Six (Equitable Estoppel). As such, collateral
estoppel bars all of Hourani’s claims. Even assuming that Counts One, Two, Four and
Seven are not barred by collateral estoppel (or res judicata), they are plainly insufficient,
as discussed below.
D. Failure to State a Claim
While the Court need not reach Wells Fargo’s alternative argument that the
complaint fails to state a claim, the Court concludes that Counts One, Two, Four, and
Seven are plainly insufficient even assuming that they are not otherwise barred.
Count One purports to assert a claim for “Deceptive Advertising and Other Unfair
Business Practices” for violation of the Federal Trade Commission Act (“FTCA”), 15
U.S.C. § 45. This count fails to state a claim because no private right of action may be
brought. See Naylor v. Case & McGrath, Inc., 585 F.2d 557, 561 (2d Cir.1978) (“[I]t is
clear that no private right of action arises under [the FTCA].”); Alfred Dunhill Ltd. v.
Interstate Cigar Co., 499 F.2d 232, 237 (2d Cir. 1974).
Count Two purports to assert a claim for “Breach of Fiduciary Duty by Fraudulent
Concealment.” Under New York law, “absent specific contractual language or
circumstances to the contrary, the ordinary relationship between a creditor and debtor

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does not rise to the level of imposing a fiduciary duty upon the creditor.” GorhamDiMaggio v. Countrywide Home Loans, Inc., 592 F. Supp. 2d 283, 294 (N.D.N.Y. 2008);
see also Bank Leumi Trust Co. of N.Y. v. Block 3102 Corp., 180 A.D.2d 588, 589 (1st
Dep’t 1992) (“The legal relationship between a borrower and a bank is a contractual one
of debtor and creditor and does not create a fiduciary relationship between the bank and
its borrower.”). This count fails to state a claim because Hourani does not allege
circumstances under which a fiduciary relationship existed between himself, as
borrower/mortgagor, and Wells Fargo, as lender/mortgagee. See Gorham-DiMaggio, 592
F. Supp. 2d at 294; Bank Leumi Trust Co. of N.Y., 180 A.D.2d at 589.
Count Four purports to assert a claim for “Unjust Enrichment.” Under New York
law, an unjust enrichment claim requires “(1) that the defendant benefitted; (2) at the
plaintiff’s expense; and (3) that equity and good conscience require restitution.” Kaye v.
Grossman, 202 F.3d 611, 616 (2d Cir. 2000) (internal quotation marks omitted).
However, an unjust enrichment claim is ordinarily precluded where the parties executed a
valid and enforceable written contract governing a particular subject matter, and recovery
is sought for events arising out of that subject matter. IDT Corp. v. Morgan Stanley Dean
Witter & Co., 12 N.Y.3d 132, 142 (2009); see Beth Israel Med. Ctr. v. Horizon Blue
Cross & Blue Shield of N.J., Inc., 448 F.3d 573, 586-87 (2d Cir. 2006); Hinds v. Option
One Mortg. Corp., No. 11-CV-06149 (NGG) (RER), 2012 WL 6827477, at *6 (E.D.N.Y.
Dec. 6, 2012) (Report & Recommendation), adopted by 2013 WL 132719 (E.D.N.Y. Jan.

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10, 2013). This count fails to state a claim because the note and mortgage are valid and
enforceable written contracts governing a particular subject matter, and Hourani seeks
recovery for events arising out of the subject matter of the note and mortgage. See Hinds,
2012 WL 6827477, at *6. Moreover, Hourani fails to plead that Wells Fargo was unjustly
enriched, in that it retained anything beyond what it was entitled to under the mortgage
and by the Foreclosure Action. See id. at *7 (“Plaintiff has made no allegations that
Defendants have improperly retained any surplus from the sale beyond the loan funds and
additional out-of-pocket expenses to which they are entitled.”).
Count Seven purports to assert a claim for “Intentional Infliction of Emotional
Distress.” Under New York law, a claim for intentional infliction of emotional distress
requires “(1) extreme and outrageous conduct; (2) intent to cause, or reckless disregard of
a substantial probability of causing, severe emotional distress; (3) a causal connection
between the conduct and the injury; and (4) severe emotional distress.” Stuto v.
Fleishman, 164 F.3d 820, 827 (2d Cir. 1999) (citing Howell v. New York Post Co., 81
N.Y.2d 115, 121 (1993)). For liability, the conduct must be “so outrageous in character,
and so extreme in degree, as to go beyond all possible bounds of decency, and to be
regarded as atrocious, and utterly intolerable in a civilized society,” a “matter for the
Court to determine in the first instance.” Id. This count fails to state a claim because
Hourani does not allege circumstances that are so “extreme and outrageous” as to permit
recovery. Hourani does not allege, for example, physical threats, verbal abuse,

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harassment, intimidation, or public humiliation—conduct that may allow recovery. See
id. at 828; Nelson v. Ulster Cnty., N.Y., 789 F. Supp. 2d 345, 353 (N.D.N.Y. 2010).

III. CONCLUSION
For the reasons above, Wells Fargo’s motion to dismiss is granted, and the
complaint is dismissed with prejudice. The Clerk of Court is directed to close the file.
SO ORDERED.
_____________/s/_________________
LEONARD D. WEXLER
UNITED STATES DISTRICT JUDGE
Dated: Central Islip, New York
February 1, 2016