Hilton v. Bank of New York Mellon
Filing
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DECISION AND ORDER: It is ORDERED that Plaintiff's appeal is DENIED, and Bankruptcy Judge Littlefield's decision is AFFIRMED. Signed by Chief Judge Glenn T. Suddaby on 1/19/2016. (mc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
________________________________________
ROBERT A. HILTON,
Appellant/Plaintiff,
1:15-CV-0667-GTS
v.
BANK OF NEW YORK MELLON, as Trustee
for the Certificate Holders of the CWALT, Inc.,
Alternative Loan Trust 2006-OC10, Mortgage
Pass-Through Certificates, Series 2006-OC10,
formerly known as The Bank of New York,
Appellee/Defendant.
________________________________________
APPEARANCES:
OF COUNSEL:
OFFICE OF SANDRA S. POLAND DEMARS
Counsel for Appellant/Plaintiff
13 Country Lane
East Greenbush, NY 12061
SANDRA S. POLAND DEMARS, ESQ.
HINSHAW & CULBERTSON LLP
Counsel for Appellee/Defendant
800 Third Avenue, 13th Floor
New York, NY 10022
KHARDEEN I. SHILLINGFORD, ESQ.
GLENN T. SUDDABY, Chief United States District Judge
DECISION and ORDER
Currently before the Court, in this adversary proceeding filed by Robert A. Hilton
(“Appellant” or “Plaintiff”) against Bank of New York Mellon (“Appellee” or “Defendant”), is
Plaintiff’s appeal from a Decision and Order of United States Bankruptcy Judge Robert E.
Littlefield, Jr., granting Defendant’s motion to dismiss Plaintiff’s Adversary Complaint pursuant
to Fed. R. Bankr. P. 7012. For the reasons set forth below, Plaintiff's appeal is denied, and
Bankruptcy Judge Littlefield's decision is affirmed.
I.
RELEVANT BACKGROUND
A.
Plaintiff’s Adversary Complaint
Generally, in his Adversary Complaint, Plaintiff alleges as follows. (Dkt. No. 2, Attach.
1.) On or about August 3, 2006, Plaintiff executed a Note and Mortgage for $131,250 with
Household Finance Realty Corporation of New York, regarding real property located at 11 New
York Avenue in Rensselaer, New York. (Id.) That same date, Household Finance Realty
Corporation of New York endorsed the Note to Decision One Mortgage Company, LLC. (Id.)
At some point in time, Decision One Mortgage Company, LLC twice endorsed the Note to
Countrywide Home Loans, Inc. (the second time in blank). (Id.) On October 3, 2011, Mortgage
Electronic Registration Systems, Inc., as nominee for Household Finance Realty Corporation of
New York, assigned the Mortgage to the Bank of New York Mellon, f/k/a The Bank of New
York, as Trustee for the Certificate Holders of the CWALT, Inc., Alternative Loan Trust
2006-OC10, Mortgage Pass-Through Certificates, Series 2006-OC10 (“CWALT Trust”). (Id.)
Upon information and belief, the CWALT Trust closed in 2006, approximately five years before
the assignment of the Mortgage to the CWALT Trust. (Id.) Based on these factual allegations,
Plaintiff claims that Defendant’s mortgage lien against his real property cannot be enforced
because Defendant is not the proper owner of the Note and/or Mortgage. (Id.)
B.
Proceedings in Bankruptcy Court
On July 1, 2014, Plaintiff filed his Adversary Complaint to determine the nature, extent
and validity of Defendant’s mortgage lien against real property owned by Plaintiff. (Dkt. No. 1.)
On August 27, 2014, Defendant filed a motion to dismiss Plaintiff’s Adversary
Complaint pursuant to Fed. R. Bankr. P. 7012. (Id.) Generally, Defendant’s motion asserted,
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inter alia, two arguments: (1) Defendant has the right to enforce the Mortgage because (a) as an
initial matter, Plaintiff’s verified Chapter 13 bankruptcy petition clearly acknowledges the
validity of the debt in question by listing, and not disputing, a debt identical to the loan owned to
Defendant (including the amount owed and address of the collateral), and (b) in any event, the
documents attached to Defendant’s motion (specifically, the Note, the Mortgage, the Pooling and
Servicing Agreement, and the Mortgage Loan Schedule) clearly establish that Defendant holds,
and was assigned, the Note and Mortgage; and (2) Plaintiff’s claim that the Mortgage is void is
meritless, because (a) the validity of the assignment (which was merely “confirmatory” in
nature) does not affect Defendant’s right to enforce the Mortgage, and (b) in any event, Plaintiff
lacks standing to claim that the transfer of the Note and Mortgage to Defendant was improper in
that he fails to allege that he is either a party to or a third party beneficiary of the Pooling and
Servicing Agreement, or that he suffered an actual injury. (Dkt. No. 2, Attach. 10.)
Attached to Defendant’s motion were, inter alia, the following four documents: (1) a
copy of the Note in the amount of $131,250, signed and dated August 3, 2006; (2) a copy of the
Mortgage in the amount of $131,250, signed and dated August 3, 2006; (3) a copy the Pooling
and Servicing Agreement (“PSA”) for the Alternative Loan Trust 2006-OC10, Mortgage
Pass-Through Certificates, Series 2006-OC10, dated November 1, 2006; and (4) a redacted
excerpt a Mortgage Loan Schedule regarding a secured loan in the amount of $131,250, which
was subject to a PSA that closed on November 1, 2006. (Dkt. No. 2, Attach. 6; Dkt. No. 2,
Attach. 7; Dkt. No. 2, Attach. 8; Dkt. No. 2, Attach. 9, at 1, 4, 5.)
On September 17, 2014, Plaintiff filed his opposition to Defendant’s motion. (Dkt. No.
3; Dkt. No. 3, Attach. 1.)
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On October 7, 2014, Defendant filed its reply memorandum of law. (Dkt. No. 3, Attach.
2.)
On October 9, 2014, Bankruptcy Judge Littlefield heard oral argument on Defendant’s
motion. (Dkt. No. 3, Attach. 3.)
On August 27, 2014, Bankruptcy Judge Littlefield entered an Order granting Defendant’s
motion to dismiss. (Dkt. No. 3, Attach. 4.)
On December 3, 2014, Plaintiff filed a motion to reconsider Bankruptcy Judge
Littlefield’s Order of Dismissal. (Dkt. No. 3, Attach. 5.)
On December 31, 2014, Defendant filed its opposition to Plaintiff’s motion to reconsider.
(Dkt. No. 3, Attach. 6; Dkt. No. 3, Attach. 7.)
On January 8, 2015, Bankruptcy Judge Littlefield heard oral argument on Plaintiff’s
motion to reconsider. (Dkt. No. 3, Attach. 9.)
On May 15, 2015, Bankruptcy Judge Littlefield entered an Order denying Plaintiff’s
motion to reconsider. (Dkt. No. 3, Attach. 8.)
On May 27, 2015, Plaintiff filed a Notice of Appeal. (Dkt. No. 1.)
C.
Parties’ Arguments on Appeal
1.
Plaintiff’s Brief-in-Chief
Generally, liberally construed, Plaintiff’s appellate brief asserts three arguments. (Dkt.
No. 5.) First, Plaintiff argues, Defendant’s motion to dismiss should have been denied for the
following reasons: (a) Defendant’s motion was impermissibly based on Fed. R. Bankr. P. 7012,
which does not contain an independent basis for granting a motion to dismiss, but relies on Fed.
R. Civ. P. 12(b)(6); (b) pursuant to the standard governing motions based on Fed. R. Civ. P.
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12(b)(6), while Bankruptcy Judge Littlefield could consider documents incorporated by
reference in Plaintiff’s Adversary Complaint, he could not consider the factual affidavit adduced
by Defendant without converting the motion into one for summary judgment; and (c) excluding
from consideration the factual affidavit, and considering only the factual allegations contained in
Plaintiff’s Adversary Complaint (which are to be accepted as true for purposes of Defendant’s
motion), Defendant is neither the holder of the Note nor the owner of the Mortgage, and thus
cannot enforce the Mortgage. (Id.)
Second, in any event, the factual affidavit considered by Bankruptcy Judge Littlefield did
not regard defense attorney’s possession of the original Note in this proceeding (i.e., Adversary
Proceeding 14-90028), but the original note in another proceeding (i.e., Adversary Proceeding
14-90021), and no record evidence exists establishing that Defendant has ever been in possession
of the original Note in this proceeding. (Id.)
Third, Plaintiff argues, even if established, possession of the original Note does not
necessarily equate to enforceability of the Mortgage for the following reasons: (a) Bankruptcy
Judge Littlefield reasoned that (i) because the Mortgage Servicer possessed the Note, Defendant
possessed the Note, (ii) because Defendant possessed the Note, Defendant possessed the
Mortgage, and (iii) because Defendant possessed the Mortgage, Defendant could enforce the
Mortgage; (b) however, under New York law, a party cannot prove standing to foreclose under a
“pay to the order” Note that was indorsed in blank (such as the Note in question) by claiming
mere possession of the Note (and especially not by claiming mere constructive possession of the
Note), but must show that it is the holder of the Note, which requires showing that there has been
(i) a negotiation of the Note by means of the lender’s endorsement and (ii) physical delivery of
the Note; and (c) here, Defendant’s factual affidavit makes no such showing. (Id.)
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2.
Defendant’s Response Brief
Generally, Defendant’s response brief asserts four arguments. (Dkt. No. 8.) First,
Defendant argues, Bankruptcy Judge Littlefield’s dismissal of the Adversary Complaint was
proper for the following reasons: (a) a court may consider a document outside the four corners of
the complaint on a motion to dismiss for failure to state a claim if the document was incorporated
by reference in the complaint and provided by the defendant as part of the motion to dismiss, and
here both requirements were met with regard to the Note, Mortgage and PSA; and (b) when
construed together with the aforementioned documents, the Adversary Complaint does not
present factual allegations of Defendant’s non-ownership of the Note and Mortgage that are
sufficient to raise a right to relief above the speculative level. (Id.)
Second, Defendant argues, indeed, based on the Adversary Complaint and documents
incorporated by reference in it, Defendant is clearly the holder and the owner of the Note and
Mortgage for the following reasons: (a) as an initial matter, it is irrelevant when Defendant
received physical possession of the Note and Mortgage because this is not a foreclosure action;
(b) in any event, based on the Note, Mortgage and PSA, Defendant became the holder and the
owner of the Note and Mortgage before the Trust closed in November of 2006; (c) indeed,
Plaintiff’s verified Chapter 13 bankruptcy petition acknowledges the validity of the debt owned
by Defendant by listing, and not disputing, a debt identical to the loan owned to Defendant
(including the amount owed and address of the collateral); (d) moreover, by failing to continue
his argument regarding the confirmatory assignment of the Mortgage during his appeal, Plaintiff
has abandoned that argument (and the claim on which it is based); and (e) Plaintiff’s argument
that the Note and Mortgage were “received . . . from the mortgage servicer, not from the Trustee
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or Document Custodian of the Trust” is nonsensical (because the servicer and entity serviced are
one and the same for purposes of foreclosure) and in any event the argument is unsupported by
the documents. (Id.)
Third, Defendant argues, Second Circuit precedent (specifically, Rajamin v. Deutsche
Bank Nat’l Tr. Co., 757 F.3d 79 [2d Cir. 2014]) bars Plaintiff from relying on an alleged
violation of the PSA to support his claim, because he does not allege facts plausibly suggesting
that (a) he is either a party to the PSA or a third-party beneficiary of the PSA (sufficient to
acquire Article III standing to claim noncompliance with the PSA), (b) he satisfied the Note and
Mortgage, or (c) some other entity is seeking payment from him on the same Note. (Id.)
Fourth, Defendant argues, Bankruptcy Judge Littlefield properly denied Plaintiff’s
motion for reconsideration for the following reasons: (a) in addition to neglecting to provide a
required memorandum of law, the motion failed to identify any controlling case law that was
misapprehended or any factual matters that were overlooked; (b) instead, the motion improperly
repackaged and relitigate arguments and issues that were already considered and rejected by
Bankruptcy Judge Littlefield; (c) in addition, through requesting a supplemental affidavit from
Defendant, Plaintiff’s motion for reconsideration improperly sought to cure its omission of that
request from his underlying motion papers; (d) in any event, Defendant has provided
uncontroverted evidence that it currently maintains physical possession of the original Note,
endorsed in blank, and the Mortgage; and (e) finally, Plaintiff has nonsensically argued that
defense counsel had to submit an affidavit attesting to counsel’s possession of the original Note
and Mortgage while also arguing that “Defendant’s attorneys’ current possession of the Note
(even if established) would not be dispositive as a matter of law to establish ownership of the
Note.” (Id.)
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3.
Plaintiff’s Reply Brief
Generally, Plaintiff’s reply brief asserts four arguments. (Dkt. No. 12.) First, Plaintiff
argues, Defendant’s motion to dismiss should not have been granted based on the evidence
properly before the Court for the following reasons: (a) Defendant’s possession of the original
Note cannot be gleaned from consideration of the documents referenced in Plaintiff’s Adversary
Complaint; and (b) in addition to relying on the those documents, Bankruptcy Judge Littlefield
improperly relied on testimony regarding Defendant’s alleged possession of the original Note.
(Id.)
Second, Plaintiff argues, because Defendant declined to supplement the record on
Plaintiff’s motion to reconsider, there is no record evidence that Defendant has ever been in
possession of the original Note. (Id.)
Third, Plaintiff argues, in any event, possession of the original Note does not necessarily
equate to enforceability of the Mortgage, because the case law is clear that an entity attempting
to enforce a mortgage must also show delivery of the original note, which has not occurred here.
(Id.)
Fourth, Plaintiff argues, Defendant seeks to distract the Court with the irrelevant issue of
whether Plaintiff may allege a violation of the PSA, an allegation Plaintiff has never sought to
make because the allegation is not necessary (for Plaintiff to state a claim). (Id.)
II.
GOVERNING LEGAL STANDARDS
A.
Legal Standard Governing Appeal from Bankruptcy Court Decision
This Court has jurisdiction to hear this appeal under 28 U.S.C. § 158(a). Rule 8013 of
the Federal Rules of Bankruptcy Procedure provides in pertinent part as follows:
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[o]n an appeal, the district court . . . may affirm, modify, or reverse
a bankruptcy judge's judgment, order, or decree, or remand with
instructions for further proceedings. Findings of fact, whether based
on oral or documentary evidence, shall not be set aside unless clearly
erroneous, and due regard shall be given to the opportunity of the
bankruptcy court to judge the credibility of witnesses.
Fed. R. Bankr. P. 8013. Thus, the district court must uphold the factual findings of a bankruptcy
court unless they are clearly erroneous. Hudson v. Harris, 09-CV-1417, 2011 WL 867024, at *9
(N.D.N.Y. Mar. 10, 2011) (Scullin, J.). A district court may find a bankruptcy court's
determination to be clearly erroneous when, on consideration of the record as a whole, the court
is left with the definite and firm conviction that a mistake has been committed. Zervos v.
Verizon N.Y., Inc., 252 F.3d 163, 168 (2d Cir. 2001) (quoting U.S. v. U.S. Gypsum Co., 333 U.S.
364 [1948]). “[P]articularly strong deference [must be given to] a [bankruptcy] court's findings
of fact based on credibility assessments of witnesses it has heard testify.” Pisculli v. T.S.
Haulers, Inc. (In re Pisculli), 426 B.R. 52, 59 (E.D.N.Y. 2010), aff'd, 408 F. App'x 477 (2d Cir.
2011) (quoting In re Boyer, 328 F. App’x 711, 716 [2d Cir. 2009]). Although the bankruptcy
court's findings of fact are not conclusive on appeal, the party that seeks to overturn them bears a
heavy burden. H & C Dev. Group, Inc. v. Miner (In re Miner), 229 B.R. 561, 565 (B.A.P. 2d
Cir. 1999) (citation omitted).
The bankruptcy court's legal conclusions, however, are subject to de novo review. See
Asbestosis Claimants v. U.S. Lines Reorganization Trust (In re U.S. Lines, Inc.), 318 F.3d 432,
435 (2d Cir. 2003). The court reviews mixed questions of law and fact either de novo or under
the clearly erroneous standard depending on whether the question is predominantly legal or
factual. Bay Harbour Mgmt., L.C. v. Lehman Bros. Holdings Inc. (In re Lehman Bros. Holdings,
Inc.), 415 B.R. 77, 83 (S.D.N.Y. 2009) (quoting Italian Colors Rest. v. Am. Express Travel
Related Servs. Co. (In re Am. Express Merchants' Litig.), 554 F.3d 300, 316 n.11 [2d Cir. 2009]).
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B.
Legal Standard Governing Motion to Dismiss for Failure to State a Claim
Rule 7012 of the Federal Rules of Bankruptcy Procedure permits, inter alia, the service
of a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to
Fed. R. Civ. P. 12(b)(6) in response to an Adversary Complaint. See Fed. R. Bankr. P. 7012(b)
(“Rule 12(b)-(i) F.R.Civ.P. applies in adversary proceedings.”).
It has long been understood that a dismissal for failure to state a claim upon which relief
can be granted, pursuant to Fed. R. Civ. P. 12(b)(6), can be based on one or both of two grounds:
(1) a challenge to the "sufficiency of the pleading" under Fed. R. Civ. P. 8(a)(2); or (2) a
challenge to the legal cognizability of the claim. Jackson v. Onondaga Cnty., 549 F. Supp.2d
204, 211, nn.15-16 (N.D.N.Y. 2008) (McAvoy, J., adopting Report-Recommendation on de novo
review).
Because such dismissals are often based on the first ground, a few words regarding that
ground are appropriate. Rule 8(a)(2) of the Federal Rules of Civil Procedure requires that a
pleading contain "a short and plain statement of the claim showing that the pleader is entitled to
relief." Fed. R. Civ. P. 8(a)(2) [emphasis added]. In the Court’s view, this tension between
permitting a “short and plain statement” and requiring that the statement “show[]” an entitlement
to relief is often at the heart of misunderstandings that occur regarding the pleading standard
established by Fed. R. Civ. P. 8(a)(2).
On the one hand, the Supreme Court has long characterized the “short and plain”
pleading standard under Fed. R. Civ. P. 8(a)(2) as "simplified" and "liberal." Jackson, 549 F.
Supp.2d at 212, n.20 (citing Supreme Court case). On the other hand, the Supreme Court has
held that, by requiring the above-described "showing," the pleading standard under Fed. R. Civ.
P. 8(a)(2) requires that the pleading contain a statement that "give[s] the defendant fair notice of
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what the plaintiff’s claim is and the grounds upon which it rests." Jackson, 549 F. Supp.2d at
212, n.17 (citing Supreme Court cases) (emphasis added).
The Supreme Court has explained that such fair notice has the important purpose of
“enabl[ing] the adverse party to answer and prepare for trial” and “facilitat[ing] a proper decision
on the merits” by the court. Jackson, 549 F. Supp.2d at 212, n.18 (citing Supreme Court cases);
Rusyniak v. Gensini, 629 F. Supp.2d 203, 213 & n.32 (N.D.N.Y. 2009) (Suddaby, J.) (citing
Second Circuit cases). For this reason, as one commentator has correctly observed, the “liberal”
notice pleading standard "has its limits." 2 Moore’s Federal Practice § 12.34[1][b] at 12-61 (3d
ed. 2003). For example, numerous Supreme Court and Second Circuit decisions exist holding
that a pleading has failed to meet the “liberal” notice pleading standard. Rusyniak, 629 F.
Supp.2d at 213, n.22 (citing Supreme Court and Second Circuit cases); see also Ashcroft v.
Iqbal, 129 S. Ct. 1937, 1949-52 (2009).
Most notably, in Bell Atlantic Corp. v. Twombly, the Supreme Court reversed an
appellate decision holding that a complaint had stated an actionable antitrust claim under 15
U.S.C. § 1. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007). In doing so, the Court
"retire[d]" the famous statement by the Court in Conley v. Gibson, 355 U.S. 41, 45-46 (1957),
that "a complaint should not be dismissed for failure to state a claim unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him
to relief." Twombly, 127 S. Ct. at 1968-69. Rather than turn on the conceivability of an
actionable claim, the Court clarified, the "fair notice" standard turns on the plausibility of an
actionable claim. Id. at 1965-74. The Court explained that, while this does not mean that a
pleading need "set out in detail the facts upon which [the claim is based]," it does mean that the
pleading must contain at least "some factual allegation[s]." Id. at 1965. More specifically, the
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"[f]actual allegations must be enough to raise a right to relief above the speculative level [to a
plausible level]," assuming (of course) that all the allegations in the complaint are true. Id.
As for the nature of what is “plausible,” the Supreme Court explained that “[a] claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal,
129 S.Ct. 1937, 1949 (2009). “[D]etermining whether a complaint states a plausible claim for
relief . . . [is] a context-specific task that requires the reviewing court to draw on its judicial
experience and common sense. . . . [W]here the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct, the complaint has alleged–but it has not
show[n]–that the pleader is entitled to relief.” Iqbal, 129 S.Ct. at 1950 [internal quotation marks
and citations omitted]. However, while the plausibility standard “asks for more than a sheer
possibility that a defendant has acted unlawfully,” id., it “does not impose a probability
requirement.” Twombly, 550 U.S. at 556.
Because of this requirement of factual allegations plausibly suggesting an entitlement to
relief, “the tenet that a court must accept as true all of the allegations contained in the complaint
is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action,
supported by merely conclusory statements, do not suffice.” Iqbal, 129 S. Ct. at 1949.
Similarly, a pleading that only “tenders naked assertions devoid of further factual enhancement”
will not suffice. Iqbal, 129 S.Ct. at 1949 (internal citations and alterations omitted). Rule 8
“demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Id.
(citations omitted).
Finally, a few words are appropriate regarding what documents are considered when a
dismissal for failure to state a claim is contemplated. Generally, when contemplating a dismissal
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pursuant to Fed. R. Civ. P. 12(b)(6) or Fed. R. Civ. P. 12(c), the following matters outside the
four corners of the complaint may be considered without triggering the standard governing a
motion for summary judgment: (1) documents attached as an exhibit to the complaint or answer,
(2) documents incorporated by reference in the complaint (and provided by the parties), (3)
documents that, although not incorporated by reference, are “integral” to the complaint, or (4)
any matter of which the court can take judicial notice for the factual background of the case.1
1
See Fed. R. Civ. P. 10(c) (“A copy of any written instrument which is an exhibit
to a pleading is a part thereof for all purposes.”); L-7 Designs, Inc. v. Old Navy, LLC, No. 10573, 2011 WL 2135734, at *1 (2d Cir. June 1, 2011) (explaining that conversion from a motion
to dismiss for failure to state a claim to a motion for summary judgment is not necessary under
Fed. R. Civ. P. 12[d] if the “matters outside the pleadings” in consist of [1] documents attached
to the complaint or answer, [2] documents incorporated by reference in the complaint (and
provided by the parties), [3] documents that, although not incorporated by reference, are
“integral” to the complaint, or [4] any matter of which the court can take judicial notice for the
factual background of the case); DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir.
2010) (explaining that a district court considering a dismissal pursuant to Fed. R. Civ. 12(b)(6)
“may consider the facts alleged in the complaint, documents attached to the complaint as
exhibits, and documents incorporated by reference in the complaint. . . . Where a document is
not incorporated by reference, the court may neverless consider it where the complaint relies
heavily upon its terms and effect, thereby rendering the document ‘integral’ to the complaint. . . .
However, even if a document is ‘integral’ to the complaint, it must be clear on the record that no
dispute exists regarding the authenticity or accuracy of the document. It must also be clear that
there exist no material disputed issues of fact regarding the relevance of the document.”)
(internal quotation marks and citations omitted); Chambers v. Time Warner, Inc., 282 F.3d 147,
152 (2d Cir. 2009) (“The complaint is deemed to include any written instrument attached to it as
an exhibit or any statements or documents incorporated in it by reference.”) (internal quotation
marks omitted); Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d
Cir.1995) (per curiam) (“[W]hen a plaintiff chooses not to attach to the complaint or incorporate
by reference a [document] upon which it solely relies and which is integral to the complaint, the
court may nevertheless take the document into consideration in deciding [a] defendant's motion
to dismiss, without converting the proceeding to one for summary judgment.”) (internal
quotation marks omitted).
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C.
Legal Standard Governing Motion to Dismiss for Lack of Subject-Matter
Jurisdiction
Rule 7012 of the Federal Rules of Bankruptcy Procedure permits, inter alia, the service
of a motion to dismiss for lack of subject-matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1)
in response to an Adversary Complaint. See Fed. R. Bankr. P. 7012(b) (“Rule 12(b)-(i)
F.R.Civ.P. applies in adversary proceedings.”).
Although sometimes raised on a motion to dismiss for failure to state a claim pursuant to
Fed. R. Civ. P. 12(b)(6), challenges to a litigant's standing are more-often properly raised on a
motion for lack of subject-matter jurisdiction. Compare Rent Stabilization Ass'n of City of N.Y. v.
Dinkins, 5 F.3d 591, 594 (2d Cir. 1993) (stating that “dismissals for lack of standing may be
made pursuant to Fed. R. Civ. P. 12(b)(6), rather than [as a defect in federal jurisdiction pursuant
to] Fed. R. Civ. P 12(b)(1)”) with Alliance for Envtl. Renewal, Inc. v. Pyramid Crossgates Co.,
436 F.3d 82, 88-89 & n.6 (2d Cir. 2006) (“Although we have noted that standing challenges have
sometimes been brought under Rule 12(b)(6), as well as Rule 12(b)(1), . . . the proper procedural
route is a motion under Rule 12(b)(1).”).
“It is a fundamental precept that federal courts are courts of limited jurisdiction.” Owen
Equipment & Erection Co. v. Kroger, 437 U.S. 365, 374 (1978). Generally, a claim may be
properly dismissed for lack of subject-matter jurisdiction where a district court lacks
constitutional or statutory power to adjudicate it. Makarova v. U.S., 201 F.3d 110, 113 (2d Cir.
2000). A district court may look to evidence outside of the pleadings when resolving a motion to
dismiss for lack of subject-matter jurisdiction. Makarova, 201 F.3d at 113. The plaintiff bears
the burden of proving subject-matter jurisdiction by a preponderance of the evidence.
Makarova, 201 F.3d at 113 (citing Malik v. Meissner, 82 F.3d 560, 562 [2d Cir. 1996]). When a
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court evaluates a motion to dismiss for lack of subject-matter jurisdiction, all ambiguities must
be resolved and inferences drawn in favor of the plaintiff. Aurecchione v. Schoolman Transp.
Sys., Inc., 426 F.3d 635, 638 (2d Cir. 2005) (citing Makarova, 201 F.3d at 113).
D.
Legal Standards Governing Plaintiff’s Claim and Defendant’s Defenses
Because the parties have demonstrated (in their briefs) an accurate understanding of the
legal standards governing Plaintiff’s claim and Defendant’s defenses, the Court will not recite
those legal standards in this Decision and Order, which is intended primarily for the review of
the parties.
III.
ANALYSIS
After carefully considering Plaintiff’s arguments on appeal, the Court rejects those
arguments for each of the reasons offered by Defendant in its response brief and the reasons
offered by Bankruptcy Judge Littlefield during the parties’ oral argument on Defendant’s
motion. (Dkt. No. 8; Dkt. No. 3, Attach. 3, at 16-61.) To those reasons, the Court adds five
points.
First, while Defendant’s motion before Bankruptcy Judge Littlefield did not expressly
state whether the motion was exclusively one to dismiss Plaintiff’s Adversary Complaint for
failure to state a claim upon which relief can be granted (i.e., one pursuant to Fed. R. Civ. P.
12[b][6]) or also one to dismiss Plaintiff’s Adversary Complaint for lack of subject-matter
jurisdiction (i.e., one pursuant to Fed. R. Civ. P. 12[b][1]), the Court finds that the motion was
the latter, based on the relief requested in it. As explained above in Part II.C. of this Decision
and Order, while a challenge to a litigant’s standing may sometimes be raised on a motion to
dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), such challenges are moreoften properly raised on a motion for lack of subject-matter jurisdiction pursuant to Fed. R. Civ.
P. 12(b)(1).
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Second, regardless of whether Defendant’s motion was brought pursuant to only Fed. R.
Civ. P. 12(b)(6) or also Fed. R. Civ. P. 12(b)(1), the Court may consider the Note, the Mortgage,
the PSA and the Mortgage Loan Schedule attached to Defendant’s motion to dismiss. This is
because, as explained above in Part II.C. of this Decision and Order, a motion to dismiss a
complaint for lack of subject-matter jurisdiction under Fed. R. Civ. P. 12(b)(1) may be based on
documents outside the four corners of the complaint. Moreover, as explained above in Part II.B.
of this Decision and Order, a motion to dismiss a complaint for failure to state a claim upon
which relief can be granted under Fed. R. Civ. P. 12(b)(6) may be based on documents
incorporated by reference in, or integral to, the complaint. Here, the Note, the Mortgage, the
PSA and the Mortgage Loan Schedule were incorporated by reference in, or at the very least
integral to, Plaintiff’s Adversary Complaint. (Dkt. No. 2, Attach. 1.) The Court notes that
Plaintiff does not sufficiently dispute the authenticity or accuracy of these three documents. (See
generally Dkt. No. 3; Dkt. No. 3, Attach. 1; Dkt. No. 3, Attach. 3; Dkt. No. 3, Attach. 5; Dkt.
No. 3, Attach. 9; Dkt. No. 5; Dkt. No. 12.) While consideration of the Mortgage Loan Schedule
presents a closer question (in that the Mortgage Loan Schedule was not expressly referenced in
the Adversary Complaint), the Court finds the Mortgage Loan Schedule to be integral to the
Adversary Complaint, because the Adversary Complaint’s theory of liability turns on the date on
which Defendant had been assigned the Note and Mortgage under the PSA (which date is
referenced in the schedule). (Dkt. No. 2, Attach. 9, at 1, 4, 5.)
Third, taken together, these four documents plausibly suggest that Defendant came to
hold, and be assigned, the Note and Mortgage before the Trust closed in November of 2006 (i.e.,
long before the formal assignment in 2011, which appears to be confirmatory in nature). In
short, Plaintiff has pled himself out of Court on his claim that Defendant is not the proper owner
of the Note and Mortgage.
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Fourth, regardless of the foregoing reasons, Plaintiff’s claim fails because his theory of
non-ownership hinges on an alleged break in the chain of title regarding the Mortgage (which
purportedly rendered the Mortgage unenforceable). (Dkt. No. 2, Attach. 1, at ¶¶ 13-15 [Plf.’s
Adv. Compl.].) However, Plaintiff does not have standing to rely on that alleged break due to a
lack of factual allegations plausibly suggesting that he suffered an injury resulting from it.
Rather, such standing is conferred on one or more third-parties, which have not complained of
the alleged break in the chain of title.
Fifth and finally, between the first date on which he learned of Defendant’s lack-ofstanding argument (on August 27, 2014) and the date on which Bankruptcy Judge Littlefield
issued his Order denying Plaintiff’s motion for reconsideration (on May 15, 2015), Plaintiff
failed to amend his Adversary Complaint to assert factual allegations plausibly suggesting that
he suffered such injury, leading the Court to find that sua sponte granting him leave to do so now
would be futile. His counsel certainly did not deny the fact, during oral argument, that he had
never been asked to pay the Mortgage by a third-party. (Dkt. No. 3, Attach. 3, at 29-32.)
Indeed, it is the position of Plaintiff’s counsel that “I don’t need injury . . . .” (Id. at 31.) This
position is not in accordance with the Court’s reading of Rajamin v. Deutsche Bank Nat’l Tr.
Co., 757 F.3d 79 (2d Cir. 2014), and its progeny. See, e.g., In re Lake Charles Retail Dev. LLC,
No. 13-44093, 2014 WL 4948234, at *8-9 (Bankr. E.D.N.Y., 2014) (dismissing an adversary
complaint because the plaintiff did not have standing to predicate its claims for relief on the
defendant’s alleged failure to comply with a PSA by transferring a loan package into a trust after
the closing date of the trust).
For all of these reasons, Bankruptcy Judge Littlefield’s decision is affirmed.
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ACCORDINGLY, it is
ORDERED that Plaintiff’s appeal is DENIED, and Bankruptcy Judge Littlefield’s
decision is AFFIRMED.
Dated: January 19, 2016
Syracuse, NY
________________________________
Hon. Glenn T. Suddaby
Chief U.S. District Judge
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