A lawsuit filed by Beaufort County and four other counties against a nationwide mortgage database can proceed, a judge has ruled.
The counties are suing Mortgage Electronic Registration Systems and its member banks, alleging the system hides who owns loans. That constitutes fraud and undermines the county’s property-ownership records, which state law requires to list the exact owner of a property’s title, county attorney Josh Gruber has said.
The counties are represented by the Bluffton law firm of Vaux, Marscher & Berglind PA.
MERS had filed to dismiss the suit, but Judge R. Lawton McIntosh of the S.C. Business Court has denied the request.
He was a champion to homeowners for standing up and also for one of the few AG’s that sued MERS. R.I.P
New York Times-
Joseph R. Biden III, the former attorney general of Delaware and the elder son of Vice President Joseph R. Biden Jr., died on Saturday in Washington. He was 46.
The cause was brain cancer, his father said.
Mr. Biden had spent more than a week receiving treatment at the Walter Reed National Military Medical Center in Washington, where he died.
NR 2015-74
FOR IMMEDIATE RELEASE
May 29, 2015Contact: Bryan Hubbard
(202) 649-6870
OCC Takes Action Against Bank of America to Protect Consumers and to Ensure Servicemembers Receive Credit Protections for Their Non-Home Loans
WASHINGTON – The Office of the Comptroller of the Currency (OCC) today assessed a $30 million civil money penalty against Bank of America, National Association, and ordered remediation to approximately 73,000 affected customer accounts.
The OCC took the actions against the bank for violations of law and unsafe or unsound practices in connection with the bank’s non-home loan compliance with the Servicemembers Civil Relief Act (SCRA), and unsafe or unsound practices in connection with non-home debt collection litigation practices.
The enforcement action is intended to correct deficiencies in the bank’s practices and procedures related to its SCRA-compliance program and to address the preparation and notarization of affidavits and other sworn documents used in the bank’s debt collection litigation.
The OCC’s enforcement action also directed the bank to improve its SCRA-compliance policies and procedures for determining whether military personnel are eligible for requested SCRA-related benefits, for ensuring that the bank calculates the SCRA benefits correctly, and for verifying the military service status of servicemembers prior to seeking or obtaining default judgments on non-home loans. The enforcement action also directed the bank to improve its enterprise-wide compliance risk management program.
Millions of consumers will have to absorb a major hit to their household budget in the coming months. About $265 billion in home equity lines of credit (HELOCs) will enter the repayment period in the next few years, according to a study from Experian, and consumers may see their monthly payments spike — in some cases, triple or quadruple what they previously paid.
HELOC originations soared from 2005 up until the start of the housing crisis, and because many HELOCs enter the repayment phase after 10 years, these billions of dollars in outstanding credit balances are just now coming due. This wave of HELOC resets is expected to significantly stress borrowers’ finances and the lending industry.
“This analysis is critical as we want to not only help lenders prepare and understand the payment stress of their borrowers, but also give consumers an opportunity to understand what the impact may be to their financial status and how to be better prepared for it,” said Michele Raneri, Experian’s vice president of analytics and business development, in a statement about the study.
You probably already know that when you apply for a loan, many lenders will get information about your credit history from one of the big three consumer reporting agencies (Equifax, Experian and TransUnion). This information can determine whether you are eligible for a loan and how much the loan will cost.
But did you know that there are other consumer reporting agencies that also collect and sell your personal data? Some of these companies, called specialty consumer reporting agencies, compile and sell reports with all kinds of personal data including, but not limited to, the history of your employment, rental, banking, lending, insurance, and criminal background. This includes other public record data such as tax liens, civil suits and bankruptcy data.
Why you should know what’s in your reports
If you’re applying for a job, planning to rent an apartment, or purchasing property or health insurance, you might want to check and see if one of these specialty consumer reporting agencies has a file with your information. It may also be useful if you’re applying for a checking account, or had problems with utility bills. For example, if you are applying for a lease, one of your “tenant screening” specialty reports might be reviewed by the landlord. Keep in mind that not every consumer reporting agency will have information on every consumer.
Check reports in advance
When it comes to your personal data, all consumer reporting agencies are required to follow reasonable procedures to ensure that the information in your report is accurate, but errors can happen. You should fact-check your report in advance, allowing sufficient time for companies to investigate and fix errors. Once you notify a consumer reporting agency of a potential error on your report, the agency generally has thirty days to investigate and fix the errors on your report. After completing the investigation, they generally have five business days to notify you of its results.
The last thing you want is an unpleasant surprise that may disqualify you from a loan, job or a new lease. You’re in the best position to know whether the information in your personal reports is accurate and complete.
How to request and dispute a report Here’s a list of consumer reporting agencies, complete with the contact information, (including the phone numbers and websites), for nearly fifty companies. By law, consumer reporting agencies must provide you a copy of your report upon request. Most of the companies in this list provide reports for free once every twelve months (as indicated on the list) though others may charge you a small fee. If you spot any errors, you have the right to dispute the report’s content with the consumer reporting agency and the company that provided the data. The companies are required to investigate your dispute for free.
Check out Ask CFPB for more information about specialty consumer reporting agencies. You can also download a printer-friendly version of this information to share with friends or clients. If you have a problem with credit reporting or any other financial product, you can submit a complaint to us online.
Freddie Mac auctioned off 1,052 delinquent nonperforming loans serviced by Ocwen on May 21 as part of its Standard Pool Offerings.
The loans’ aggregate unpaid principal balance is $201 million. LSF9 Mortgage Holdings was the winning bidder.
The sale is expected to close in July, subject to the Federal Housing Finance Agency NPL sale requirements. It is Freddie’s third sale of deeply delinquent loans from its mortgage investment portfolio this year.
These loans have been delinquent for three years on average. Those auctioned were offered as a single pool of mortgage loans. Previously modified mortgages that later became delinquent comprise 29% of the aggregate pool balance.
Sylvia Alvarez didn’t grasp the enormity of the crisis about to engulf her community until she returned to her office in Tampa, Florida, after a long weekend and found her voicemail filled with messages from distraught homeowners.
It was early 2008. The bottom had fallen out of both the housing market and the local economy, and record numbers of people had begun defaulting on their mortgages. Callers flooded the phone lines to the Housing & Education Alliance, Alvarez’s housing counseling agency — not realizing the same forces that had wrecked their finances were also threatening to sink the agency they were now turning to for help.
“I was overwhelmed,” Alvarez said recently, recalling the twin challenges of trying to help people save their homes and also keep afloat her nonprofit, which was largely dependent on vanishing support from the mortgage industry. “I remember saying, ‘How in the hell are we going to do this?’”
Efforts to Reform Wall Street and Fleet Street May be Faltering
NEW YORK (May 19, 2015)—Labaton Sucharow LLP, which established the nation’s first practice exclusively dedicated to representing SEC whistleblowers, today announced the results of its collaborative survey with the University of Notre Dame’s Mendoza College of Business: The Street, The Bull and The Crisis.
The survey, the most expansive of its kind, polled more than 1,200 U.S. and UK-based financial services professionals to examine views on workplace ethics, the nexus between principles and profits, the state of industry leadership and confidence in financial regulators. With findings pointing to a continued disregard for ethical engagement and alarming new tactics to silence potential whistleblowers, the industry appears to be faltering in its reform efforts.
Profits, Not Principles
In one of the most concerning findings, 47 percent of total respondents feel it is likely that their competitors have engaged in illegal or unethical behavior to gain an edge. While nearly one in five professionals feels it is at least sometimes necessary for financial services professionals to engage in illegal or unethical activity in order to succeed, a full 32 percent feel compensation structures or bonus plans pressure employees to compromise ethical standards or violate the law. Of those surveyed, 27 percent don’t agree that the industry puts the interests of clients first.
How severe is the ethical breakdown? An astonishing 22 percent of respondents say they have observed or have first-hand knowledge of actual wrongdoing in the workplace. On an individual level, a quarter of those surveyed say they would likely engage in insider trading to make $10 million if there was no chance of being arrested. Employees with less than 10 years of experience are more than two times as likely to use non public information than those with over 20 years of experience, reporting 32 percent and 14 percent respectively.
“Most disappointing is the lack of change in many of the results when compared to surveys from previous years. Despite significant energy and efforts, it appears we need to continue to think about how to improve the culture of ethics in the financial services industry and most likely, in other sectors as well,” said co-author Ann Tenbrunsel, Ph.D., David E. Gallo Professor of Business Ethics at the Mendoza College of Business and a co-author of Blind Spots: Why We Fail to Do What’s Right and What to Do about It.
Secrecy Agreements Mask a Corrupt Culture
Perhaps the most disturbing findings relate to efforts to stifle reports of misconduct. Despite the unwaivable right to report potential wrongdoing to law enforcement, and the federal government’s public effort to identify and punish organizations that illegally attempt to silence employees, a shocking 16 percent of those polled say their company’s confidentiality policies and procedures prohibit reporting potential illegal or unethical activities directly to law enforcement.
One out of every 10 respondents report they have signed or have been asked to sign a confidentiality agreement that specifically prohibits reporting potential illegal or unethical activities directly to law enforcement. For those who make over $500,000 annually, that number rises to 25 percent. Of the total sample, 19 percent feel it is likely that their employer would retaliate against them for reporting wrongdoing.
“When corporate whistleblowers are prohibited, discouraged or retaliated against for reporting crime to cops, we should all be scared—very scared,” said Jordan A. Thomas, Chair of the Whistleblower Representation Practice at Labaton Sucharow and co-author of the report. “The widespread, systematic and previously unknown scope of gag orders in Corporate America is a wake-up call for the SEC and other law enforcement authorities. These tactics are particularly insidious because they keep local, state and federal law enforcement organizations in the dark about all types of wrongdoing—everything from large-scale corporate frauds, environmental accidents and public safety concerns.”
Hope for the Future
According to both U.S. and UK survey respondents, financial regulators and law enforcement authorities play a critical role in detecting and deterring corruption. In fact, 61 percent of all respondents felt authorities in their country were at least somewhat effective at detecting, investigating and prosecuting securities violations.
Even more promising is the 89 percent of financial services professionals who indicate a willingness to report wrongdoing given protections and incentives such as those offered by the SEC Whistleblower Program. This result—coupled with the high percentage of individuals who report awareness of wrongdoing in the workplace—offers the industry’s best hope for reform. However, as 37 percent of respondents say they are still unaware of the program, it is imperative that regulatory and enforcement authorities and financial services firms step up efforts to educate employees and the public on the importance of reporting wrongdoing in the workplace, internally or externally.
“The SEC Whistleblower Program and other similar programs have effectively deputized all of us to report possible violations of law. As a result, the probability of detection has dramatically increased. Responsible organizations would be wise to redouble their efforts to establish and maintain a culture of integrity—where doing the right thing and speaking up are the norm,” Thomas said.
Survey Methodology
Between December 22, 2014, and January 23, 2015, 1,223 participants were surveyed using an email-based online panel. Respondents were employed in the financial services/banking industry in the U.S. and UK as account executives, financial/investment/wealth advisors, financial analysts, investment bankers, branch/operations management, and portfolio managers.
A U.S. regulator has granted a series of waivers to JPMorgan Chase & Co (JPM.N) and four other major banks allowing them to continue their usual securities business, after they agreed to plead guilty to criminal charges.
Four of the banks – Barclays Plc (BARC.L), JPMorgan, Citigroup Inc (C.N) and the Royal Bank of Scotland Plc (RBS.L) – pleaded guilty to manipulating foreign exchange rates, while UBS AG (UBSG.VX) pleaded guilty to rigging benchmark interest rates.
At the close of business on Wednesday, all of the various waivers the SEC granted were posted on the agency’s website.
Holder deadline for review of individual cases passes with no action
AND one doesn’t have to be a rocket scientist to understand that this was nothing more than corruption!!!
Center for Public Integrity-
Three months ago, then-Attorney General Eric Holder gave his prosecutors 90 days to determine whether they could charge individual Wall Street executives with crimes related to the 2008 financial crisis.
“I’ve asked the U.S. attorneys … over the next 90 days to look at their cases and to try to develop cases against individuals and to report back in at 90 days with regard to whether or not they think they’re going to be able to successfully bring criminal and or civil cases against those individuals,” Holder said in a Feb. 17 speech at the National Press Club.
Holder is gone now, and this week that deadline passed. The Justice Department, however, is dodging questions about the former attorney general’s pledge.
“It is our policy not to publicly discuss on-going investigations,” said Justice spokesman Patrick Rodenbush.
IN THE APPELLATE COURT OF ILLINOIS FIRST JUDICIAL DISTRICT
In re ESTATE OF DENNIS NARDONI, Deceased (Standard Bank and Trust Company, Petitioner-Appellant,
v.
Michael D. Hughes, Independent Executor of the Estate of Dennis Nardoni, deceased, Respondent-Appellee).
PRESIDING JUSTICE PALMER delivered the judgment of the court. Justices McBride and Gordon concurred in the judgment.
ORDER ¶ 1 Held: Trial court’s order granting summary judgment to guarantor’s estate and denying summary judgment to bank seeking payment from the estate under guaranties given for loans made by the bank is affirmed. The bank’s conduct in holding collateral for over three years and refusing to cooperate with the estate in using the collateral to settle one of the loans was commercially unreasonable. The bank’s issuance of a third loan after the guarantor’s death was a novation of two earlier loans and extinguished the estate’s liability under guaranties given for the earlier loans.
¶ 2 Petitioner Standard Bank and Trust Company (Standard Bank) filed two claims against Michael D. Hughes, as the independent executor of the estate of Dennis Nardoni, deceased, (the estate). Standard Bank sought to enforce two guaranties Nardoni had executed for loans Standard Bank made to Cap Estate Corp. (Cap) and Auster Acquisitions LLC (Auster). The trial court denied Standard Bank’s motions for summary judgment, granted the estate’s cross-motions for summary judgment and denied Standard Bank’s motions to reconsider. Standard Bank argues on appeal that the court erred in denying its motions for summary judgment and granting the estate’s cross-motions for summary judgment on (1) the Cap claim, asserting the court erred in (a) finding that Standard Bank had impaired collateral and discharging Nardoni as guarantor and (b) finding that Nardoni’s guaranty was dependant on other guarantors and limiting Nardoni’s liability under the guaranty based on a lost right of contribution; and (2) the Auster claim, asserting the court erred in (a) finding that the loan made to Auster after Nardoni’s death was a novation, a new loan not subject to Nardoni’s guaranties for two earlier loans to Auster and (b) finding that death revoked Nardoni’s guaranty and that no new liability could be created after his death. We affirm.
?Washington, DC – The Federal Housing Finance Agency (FHFA) today announced that Fannie Mae and Freddie Mac (the Enterprises) are issuing new operational and financial eligibility requirements for all current and potential single-family mortgage Seller/Servicers. The operational requirements become effective no later than September 1, 2015 and the financial requirements become effective December 31, 2015.
In response to changes taking place in the servicing industry, FHFA directed Fannie Mae and Freddie Mac, as part of their 2014 and 2015 Conservatorship Scorecards, to update their counterparty standards for mortgage servicers. The new requirements are intended to help ensure the safe and sound operation of the Enterprises and provide greater transparency, clarity and consistency to industry participants and other stakeholders and reflect feedback received over the past several months.
The Enterprises will communicate updated requirements to Seller/Servicers in their respective guides, bulletins and announcements and through best practices documents that provide servicers clarity about Enterprise expectations.
“These updated operational and financial requirements will help mitigate risks associated with changes in the servicing industry,” said FHFA Director Melvin L. Watt. “Strengthened Enterprise servicer counterparty standards should also improve access to credit and protect taxpayers by reducing market uncertainty about the Enterprises’ expectations for mortgage servicer counterparties.”
*FAQs are identical for Fannie Mae and Freddie Mac
###
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.6 trillion in funding for the U.S. mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on Twitter @FHFA, YouTube and LinkedIn.
Contacts:
Media: Stefanie Johnson (202) 649-3030 / Corinne Russell (202) 649-3032
Consumers: Consumer Communications or (202) 649-3811
Progress Residential’s third single-family rental securitization is getting ready to hit the market, which will be collateralized by a $438.7 million loan secured by first priority mortgages on 3,317 income-producing single-family homes.
The company announced its first single-family rental securitization in September 2014, and then a second in January of this year.
The company’s first offering was a $473.4 million deal secured by first priority of mortgages on 3,142 income-producing single-family rental properties, while the second one was collateralized by a $563 million loan secured by first priority mortgages on 4,028 income-producing single-family homes.
BENJAMIN M. LAWSKY TO DEPART NYDFS AFTER FOUR YEARS SERVING AS THE AGENCY’S FIRST SUPERINTENDENT
Benjamin M. Lawsky, Superintendent of Financial Services, announced today that he will depart the New York State Department of Financial Services (NYDFS) in late-June after four years serving as the newly created agency’s first superintendent. Superintendent Lawsky was unanimously confirmed to his position by the New York State Senate in May 2011.
A summary of NYDFS initiatives and enforcement actions is contained in its Annual Report, which can be viewed, here.
Superintendent Lawsky said: “I am deeply proud of the work our team has done building this new agency and helping strengthen oversight of the financial markets. We have assembled a great team at NYDFS and I have full confidence that the critical work of this agency will continue seamlessly moving forward. I also want to thank Governor Cuomo for the trust he showed in appointing me to this position and for providing us with the opportunity to serve the people of New York. On a personal level, I am deeply grateful to the Governor, who has been an incredible mentor and amazing friend to me over the past eight years.”
U.S. Bank, National Association, AS SUCCESSOR TRUSTEE TO BANK OF AMERICA, N.A. AS SUCCESSOR BY MERGER TO LASALLE BANK N.A., AS TRUSTEE FOR MERRILL LYNCH FIRST FRANKLIN MORTGAGE LOAN TRUST, MORTGAGE LOAN ASSET-BACKED CERTIFICATES, SERIES 2007-2, Plaintiff,
against
Roberto Rosario; JOSE LOPEZ; CAPITAL ONE BANK SUCC CAPITAL ONE FSB; KINGS SUPREME COURT; LZG REALTY LLC; MICHAEL OBERLANDER D/B/A/ BABYLON GAS STATION; MIDLAND FUNDING NCC-2 CORP.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR FIRST FRANKLIN FINANCIAL CORP. AN OP. SUB. OF MLB & T CO., FSB; NEW YORK CITY CRIMINAL COURT; NEW YORK CITY DEPARTMENT OF FINANCE; NEW YORK CITY ENVIRONMENTAL CONTROL BOARD; NEW YORK CITY PARKING VIOLATIONS BUREAU; NEW YORK CITY TRANSIT ADJUDICATION BUREAU; NEW YORK STATE DEPARTMENT OF TAXATION AND FINANCE; NEW YORK STATE WORKERS COMPENSATION BOARD; PEOPLE OF THE NEW YORK STATE; PORTFOLIO RECOVERY ASSOCIATES, LLC; PRIMUS AUTOMOTIVE FINANCIAL SVC. INC.; UNIFUND CCR PARTNERS A/A/O ASTA FUNDING; UNITED STATES OF AMERICA ACTING THROUGH IRS; YELLOW BOOK CO, INC.; and “JOHN DOE” and “MARY DOE” (said name being fictitious, it being the intention of Plaintiff to designate any and all occupants of premises being foreclosed herein, and any parties, corporations or entities, if any, having or claiming an interest or lien upon the premises being foreclosed herein), Defendants.
15956/09
Attorney for plaintiff
Davidson Fink LLP
28 East Main Street STE 1700
Rochester, New York 14614
585 760-8218
Attorney for defendant
Angelyn Johnson & Associates
Angelyn D. Johnson, Esq.
188 Montague Street, Suite 500
Brooklyn, new York 11201
718-875-2145 Francois A. Rivera, J.
Recitation in accordance with CPLR 2219 (a) of the papers considered on the ex parte motion of plaintiff U.S. Bank National Association, as Successor Trustee to Bank of America, N.A. as Successor by Merger to Lasalle Bank N.A., as Trustee for Merrill Lynch First Franklin Mortgage Loan Trust, Mortgage Loan Asset-backed Certificates, Series 2007-2 (hereinafter USBNA or the movant), filed on January 28, 2013 with the Kings County Foreclosure Department, for, among other things, an order appointing a referee to compute pursuant to the RPAPL 1321.
Ex parte motion
Affirmation in support
Affidavit of merit
Untabbed annexed exhibits
Proposed order of reference
[*2]BACKGROUND
On June 26, 2009, USBNA commenced the instant residential mortgage foreclosure action by filing a summons, complaint and a notice of pendency with the Kings County Clerk’s office (hereinafter the commencement papers).
The complaint alleges in pertinent part, that on March 20, 2007, defendants Jose Lopez and Roberto Rosario (hereinafter the mortgagors) executed a note (the subject note) promising to pay First Franklin Financial Corp, the lender, (hereinafter FFFC) the sum of $627,520.00. On that same date, the mortgagors executed a mortgage (the subject mortgage) in favor of MERS as nominee for FFFC on certain real property known as 210 Marcus Garvey Boulevard, Brooklyn, New York 11211, Block 1792 Lot 43 (hereinafter the subject property) to secure the debt.
The movant avers that it owns the subject note and mortgage. The movant also avers that the mortgagors have defaulted on making payments due and owing on the subject note from January 2009 and thereafter. Based on the mortgagors’ alleged default and the failure to cure same, the movant has accelerated the subject note and has commenced the instant mortgage foreclosure action.
No defendant has answered the complaint or submitted opposition to the instant motion.
LAW AND APPLICATION
A motion for an order of reference is a preliminary step toward obtaining a default judgment of foreclosure and sale (HSBC Bank USA, N.A. v Alexander, 124 AD3d 838 [2nd Dept 2015]; see also RPAPL 1321 [1].
CPLR 3215 (g) sets forth when and under what circumstances notice of an application or motion for leave to enter a default judgment must be given. It provides that any defendant who has appeared in an action but subsequently defaults “is entitled to at least five days’ notice of the time and place” of the motion for leave to enter a default judgment. It further provides, as relevant to the instant motion, that if more than one year has elapsed since the default any defendant who has not appeared is entitled to the same notice unless the court orders otherwise.
The failure of the plaintiff to give notice to the defendants of its motion for leave to enter a default judgment pursuant to CPLR 3215 (g) (1) deprives the Supreme Court of jurisdiction to entertain the motion (Paulus v Christopher Vacirca, Inc., —- NYS 3d —&mdash, 2015 WL 1542183 [2nd Dept 2015]).
The failure to provide a defendant with proper notice of a motion renders the resulting order and judgment entered upon that order nullities, warranting vacatur pursuant to CPLR 5015 (a) (4) (Id. citing Financial Services Vehicle Trust v Law Offices of Dustin J. Dente, 86 AD3d 532, 533 [2nd Dept 2011]). The failure to provide proper notice of a motion can readily be viewed as a fundamental defect because it deprives the opposing party of a fair opportunity to oppose the motion (Paulus v Christopher Vacirca, Inc., —- NYS 3d —&mdash, 2015 WL 1542183 [2nd Dept 2015]).
In a mortgage foreclosure action, a plaintiff that has initiated proceedings for entry of default judgment within one year of defendant’s default, by taking preliminary step of moving for order of reference, does not abandon its foreclosure action (Klein v St. Cyprian Properties, Inc., 100 AD3d 711 [2nd Dept 2012]).
CPLR 3215 (c) provides, with regard to default judgments, in pertinent part, that “[i]f the plaintiff fails to take proceedings for the entry of judgment within one year after the default, the court shall not enter judgment but shall dismiss the complaint as abandoned, without costs, upon its own initiative or on motion, unless sufficient cause is shown why the complaint should not be dismissed (Pipinias v J. Sackaris & Sons, Inc.,
116 AD3d 749, 750 [2nd Dept 2014]).
The movant commenced the instant foreclosure action on June 26, 2009 and made the instant motion on January 28, 2013. Assuming the movant properly served the commencement papers upon each defendant that it is seeking a default judgment against, then each of those defendants has defaulted more than three years prior to the filing date of the instant motion.
Despite this fact, the movants have offered no explanation for the over three year delay in making the instant motion or for making the motion ex parte. As a result, the motion for a default judgment must be denied; and the complaint is subject to dismissal pursuant to CPLR 3215(c). Moreover, pursuant to CPLR 3215 (g) (1) each defendant was entitled to notice of the instant motion. The movant’s determination to move ex parte under these circumstances has deprived the Court of jurisdiction to entertain the motion (Paulus v Christopher Vacirca, Inc., —- NYS 3d —&mdash, 2015 WL 1542183 [2nd Dept 2015]).
Based on the failure of the movant to move by notice of motion served upon all of the allegedly defaulting defendants, the Court is denying the motion in its entirety, including that branch which seeks an order to amend the caption. The motion, however, is denied without prejudice.
The movant’s papers contain the following additional problems. The affirmation of regularity by Alissa L. Wilson, the movant’s counsel, is unsigned. The affidavit of merit is by an individual who has described himself as an officer of an entity that is the servicing agent of the movant. However, the motion papers contain no evidence of the servicing agent’s authority to speak on behalf of the movant. Contrary to the requirements of Part A of the Kings County Supreme Court Uniform Civil Term Rules, the motion papers lack an index and protruding exhibit tabs for the numerous exhibits annexed to it.
In the interest of judicial economy, the Court stopped reviewing the instant motion papers after finding the above mentioned problems. In the event that the movant seeks the same relief in a subsequent motion it is directed to comply with the following directives. The movant is directed to annex the instant decision and order with its motion papers. The movant is directed to move by notice of motion in accordance with CPLR [*3]3215 (g). The movant is directed to submit with its motion papers sworn allegations of fact by someone with personal knowledge explaining the over three year delay in moving for a default judgment. The movant is directed to include an index and protruding tabs for all exhibits annexed to its motion. The movant is also directed not to attach any exhibit to its motion that is not accompanied by an explanation for its inclusion.
CONCLUSION
USBNA’s motion for an order of reference pursuant to RPAPL 1321 is denied without prejudice.
USBNA’s motion for a default judgment against all defendants pursuant to CPLR 3215 is denied without prejudice.
USBNA’s motion to amend the caption is denied without prejudice.
The foregoing constitutes the decision and order of this court.
Five of the world’s largest banks, including JPMorgan Chase & Co and Citigroup Inc, were fined roughly $5.7 billion, and four of them pleaded guilty to U.S. criminal charges over manipulation of foreign exchange rates, authorities said on Wednesday.
A fifth bank, UBS AG, will plead guilty to rigging benchmark interest rates, the U.S. Justice Department said.
U.S. banks JPMorgan Chase and Citigroup will pay $550 million and $925 million in criminal fines, respectively, as part of their guilty pleas.
A Royal Palm Beach attorney alleges an attorney for embattled mortgage servicer Ocwen Financial Corp. improperly spoon-fed questions and answers to unqualified witnesses testifying in foreclosure cases against Florida homeowners.
Foreclosure defense attorney Thomas Ice said he’s uncovered a script that was provided to Atlanta-based Ocwen witnesses to crush homeowner defenses and allegations of robo-witnesses by financial services sector employees who have no first-hand knowledge of mortgage details.
Ice represents St. Lucie County homeowner Thomas Rolle in foreclosure litigation brought by Deutsche Bank National Trust Co.
forged deeds,
void ab initio (meaning a legal nullity at its inception) vs. voidable,
effect upon real property of of encumbrances (ie. mortgages, etc.) based on a forged deed,
inapplicability of New York’s recording statute (NY Real Property Law § 291) to a forged deed,
inapplicability of the statute of limitations (CPLR 213 (8) [NY Law]) to foreclose a claim against parties (ie. title holders, mortgagees, other lien holders) claiming under a forged deed,
prevailing approach in other jurisdictions.
2015 NY Slip Op 04026
DOROTHY M. FAISON, & C., Appellant, v. TONYA LEWIS, & C., ET AL., Defendants, BANK OF AMERICA, N.A., Respondent.
Opinion by Judge Rivera. Judges Read, Pigott and Fahey concur. Chief Judge Lippman dissents in an opinion in which Judges Abdus-Salaam and Stein concur.
RIVERA, J.
The legal question raised in this appeal is whether plaintiff Dorothy Faison is time-barred under CPLR 213 (8) from seeking to set aside and cancel, as null and void, defendant Bank of America’s mortgage interest in real property conveyed on the authority of a forged deed. Under our prior case law it is well-settled that a forged deed is void ab initio, meaning a legal nullity at its inception. As such, any encumbrance upon real property based on a forged deed is null and void. Therefore, the statute of limitations set forth in CPLR 213 (8) does not foreclose plaintiff’s claim against defendant. As the Appellate Division affirmed the dismissal of plaintiff’s claims as time-barred, we now reverse.
I.
Plaintiff is the daughter and administrator of the estate of her father, Percy Lee Gogins, Jr. (“Gogins”). Gogins and his sister, defendant Dorothy Lewis (“Lewis”) inherited from their mother, as tenants in common, a three-family house in Brooklyn. A few years after the mother’s death, in May 2000, Lewis conveyed by quitclaim deed her half-interest in the property to her daughter Tonya Lewis (“Tonya”). In February 2001, Tonya recorded a deed claiming to correct the prior deed from Lewis. This corrected deed, dated December 14, 2000, allegedly conveyed Gogins’s half-interest in the real property to Tonya. Thus, if the corrected deed were valid, it would convey to Tonya a fee interest in the property. Gogins passed away in March 2001.
In September 2002, plaintiff filed an action on behalf of Gogins’s estate against Lewis and Tonya, claiming the corrected deed was void because her father’s signature was a forgery. In April 2003, Supreme Court dismissed the complaint on the ground that plaintiff lacked capacity to sue because she was not the estate’s administrator. At the time, Gogins’s widow was the administrator.
In December 2009, Tonya borrowed $269,332.00 from defendant Bank of America (BOA), which she secured with the mortgage, granted in favor of defendant Mortgage Electronic Registration Systems, Inc. (MERS). Several months later, in July 2010, Surrogate’s Court appointed plaintiff administrator of Gogins’s estate. In her supporting affidavit explaining her delay in seeking appointment, plaintiff asserted that her mother’s lawyer led her to believe that he had secured a judgment in favor of the estate, when in fact the lawyer, now disbarred, had failed to take action on her mother’s behalf.
The month following her appointment, in August 2010, plaintiff filed the underlying action against Lewis, Tonya, BOA and MERS to declare the deed and mortgage null and void based on the alleged forgery. Thereafter, BOA moved to dismiss the complaint under CPLR 3211 (a) (5) as untimely under CPLR 213 (8), and plaintiff cross-moved to dismiss the statute of limitations affirmative defense asserted in the BOA and MERS joint answer. Supreme Court granted the motion to dismiss the complaint in its entirety as time-barred, and denied plaintiff’s cross-motion as moot.
The Appellate Division modified the order, denying the motion to dismiss as against the individual defendants and MERS, on procedural grounds, leaving the action pending against those defendants (Faison v Lewis, 106 AD3d 1047 [2d Dept 2013]). On the merits, the Appellate Division concluded, in reliance on Second Department precedent, that plaintiff’s forgery-based claim against defendant BOA was subject to the six-year statute of limitations for fraud claims set forth in CPLR 213 (8) (id. at 1048). We granted plaintiff leave to appeal against defendant BOA.[1]
II.
As a preliminary matter, because this is an appeal from a dismissal under CPLR 3211 (a) (5), “[w]e accept the facts as alleged in the complaint as true, accord plaintiff[] the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory” (Leon v Martinez, 84 NY2d 83, 87-88 [1994] [citation omitted]). Accordingly, for purposes of this appeal, we must assume that the deed is forged.[2]
Plaintiff contends that a forged deed has long been treated as void ab initio, entirely without effect from inception. Therefore, the CPLR 213 (8) statute of limitations does not apply to her claims to vacate and declare the deed and defendant BOA’s mortgage-based interest in the property a legal nullity. We agree.
In Marden v Dorthy, this Court held that a forged deed was void at its inception, finding it to be a “spurious or fabricated paper” (160 NY 39, 47 [1899]), a forgery characterized by “the fraudulent making of a writing to the prejudice of another’s rights” (id. at 53). As Marden noted, a forged deed lacks the voluntariness of conveyance (see id. at 54). Therefore, it holds a unique position in the law; a legal nullity at its creation is never entitled to legal effect because “[v]oid things are as no things” (id. at 56).
A forged deed that contains a fraudulent signature is distinguished from a deed where the signature and authority for conveyance are acquired by fraudulent means. In such latter cases, the deed is voidable. The difference in the nature of the two justifies this different legal status. A deed containing the title holder’s actual signature reflects “the assent of the will to the use of the paper or the transfer,” although it is assent “induced by fraud, mistake or misplaced confidence” (Marden, 160 NY at 50; see also Rosen v Rosen, 243 AD2d 618, 619 [2d Dept 1997]; 26A C.J.S. Deeds § 153 [“where the grantor knowingly executes the very instrument intended, but is induced to do so by some fraud in the treaty or by some fraudulent representation or pretense, the deed is merely voidable”]). Unlike a forged deed, which is void initially, a voidable deed, “until set aside, . . . has the effect of transferring the title to the fraudulent grantee, and . . . being thus clothed with all the evidences of good title, may encumber the property to a party who becomes a purchaser in good faith” (Marden, 160 NY at 50).
A forged deed, however, cannot convey good title, and “[i]t is legally impossible for any one [sic] to become a bona fide purchaser of real estate, or a purchaser at all, from one who never had any title, and that is this case” (id. at 56; see also Yin Wu v Wu, 288 AD2d 104, 105 [1st Dept 2001] [“A forged deed is void and conveys no title”]; 2-15 Warren’s Weed New York Real Property § 15.01 [“A purchaser who takes title through a forged deed cannot be a bona fide purchaser, even if the purchaser did not have knowledge of the forgery”]). New York’s rule reflects a general well-established principle of real property law (see e.g. Harding v Ja Laur Corp., 20 Md App 209, 214 [Md Ct Spec App 1974] [“A forged deed . . . is void ab initio”]; Scott D. Erler, D.D.S. Profit Sharing Plan v Creative Fin. & Investments, L.L.C., 349 Mont 207, 214 [2009] [“forged conveyances are void ab initio and do not transfer title”]; Brock v Yale Mortg. Corp., 287 Ga 849, 852 [2010] [“we have also long recognized that a forged deed is a nullity and vests no title in a grantee”]; Akins v Vermast, 150 Or App 236 n 7 [Or Ct App 1997] “If fraud is `in factum,’ such as a forged deed or a situation analogous to forgery, the deed is void ab initio and will not support subsequent title in any person”]; First Nat. Bank in Albuquerque v Enriquez, 96 NM 714, 716 [1981] [“a forged deed is a void deed and transfers no interest”]; Williams v Warren, 214 Ark 506, 511 [1949] [“No one can claim that an estate in land should be divested by forgery”]).
It is similarly true that no property shall be encumbered, including by a mortgagee, in reliance on a forged deed (see Marden, 160 NY at 51; see also Cruz v Cruz, 37 AD3d 754, 754 [2d Dept 2007][“A deed based on forgery or obtained by false pretenses is void ab initio, and a mortgage based on such a deed is likewise invalid”]; Jiles v Archer, 116 AD3d 664, 666 [2d Dept 2014] [“If a document purportedly conveying a property interest is void, it conveys nothing, and a subsequent bona fide purchaser or bona fide encumbrancer for value receives nothing”]; 2-15 Warren’s Weed New York Real Property § 15.09 [“If the conveyance is void, the purchaser or encumbrancer will not enjoy any of the rights of a bona fide purchaser”]; 43A NY Jur 2d Deeds § 218 [“a forged deed is null and void, and conveys nothing, and a purchaser or mortgagee from the grantee, even for value and without notice of the forgery, will not be protected”]).
Moreover, New York’s recording statute (Real Property Law § 291) does not apply to a forged deed (see Albany County Sav. Bank v McCarty, 149 NY 71, 74 [1896]; Grosch v Kessler, 231 AD 870, 870 [2d Dept 1930]). Neither can recording a forged deed transform it into a document with legal authority to establish a valid property interest, for it “does not change the legal rights of anyone” (Marden, 160 NY at 56). “The fact that a false and fabricated writing of this character is deposited in a public office for record, and is actually recorded, can add nothing to its legal efficacy. The recording statute applies to “genuine instruments and not to forged ones” (id. at 56, citing Albany County Sav. Bank, 149 NY at 74).
Given the clarity of our law that a forged deed is void ab initio, and that it is a document without legal capacity to have any effect on ownership rights, the question remains whether a claim challenging a conveyance or encumbrance of real property based on such deed is subject to a time bar. Our case law permits only one answer: a claim against a forged deed is not subject to a statute of limitations defense.
As this Court held in Marden, a forged deed is void, not merely voidable. That legal status cannot be changed, regardless of how long it may take for the forgery to be uncovered. As this Court made clear in Riverside Syndicate, Inc v Munroe, a statute of limitations “does not make an agreement that was void at its inception valid by the mere passage of time” (10 NY3d 18, 24 [2008], citing Pacchiana v Pacchiana, 94 AD2d 721 [2d Dept 1983]). Consequently, plaintiff may seek to vacate the deed and defendant’s encumbrance upon the property. If, as plaintiff claims, the deed is a forgery, then it was never valid and Tonya lacks title to Gogins’s half-interest in the property based on the “corrected” deed.
Indeed, this is the prevailing approach in other jurisdictions (see e.g. Moore v Smith-Snagg, 793 So 2d 1000, 1001 [Fla Dist Ct App 5th Dist 2001][“(o)f course, there is no statute of limitations in respect to the challenge of a forged deed, which is void ab initio”]; see also Wright v Blocker, 198 So 88, 90-91 [Fla 1940]). The high court of West Virginia, for example, has observed that “there is no statute of limitations regarding void deeds” (MZRP, LLC v Huntington Realty Corp., 2011 W Va LEXIS 240, 2011 WL 12455342 [W Va 2011] [void tax deed]), while the high court of Idaho held that “[b]ecause [a] lease agreement was void ab initio, it could be challenged at any time” (Thompson v Ebbert, 160 P3d 754, 757 [Idaho 2007] [attempted lease void based on a lack of authority to lease only a portion of the property]).
III.
Defendant BOA contends that plaintiff’s claim is time-barred because forgery is a category of fraud, and, like any other claim based on fraud, an action challenging a forged deed is subject to the limitations period of CPLR 213 (8). That conclusion cannot be squared with our decisions in Marden and Riverside Syndicate, nor with general principles of real property law. Nor is it supported by compelling policy reasons. On the contrary, our long-standing commitment to the protection of ownership interests and the integrity of our real property system favors the continued treatment of challenges to forged deeds as distinct from other claims, and exempt from a statute of limitations defense.[3]
Most notably, defendant wholly fails to address Marden and the well-established authority distinguishing forged deeds as void ab initio from instruments that are merely voidable. Instead, defendant, and our dissenting colleagues, seek to distinguish Riverside as a case about illegal contracts, not deeds, and thus should be limited to its subject matter, namely instruments void at inception due to illegality. We are unpersuaded. The fact that Riverside involved an illegal agreement is no basis to limit its analysis as regards the statute of limitations. Instead, the language and analysis employed in Riverside make clear that the holding was based on a rule that is generally applicable to claims involving void documents, including, obviously, forged deeds.
First, Riverside relied on “the nature of a statute of limitations” (10 NY3d at 24). That, of course, refers to the statute’s function as barring stale claims. In contrast, a statute of limitations cannot grant legal significance to a document expressly rejected under the law; it cannot be deployed to validate what the law has never recognized.
Second, Riverside cited Pacchiana, a case that exempted a void document from the application of the statute of limitations, and in doing so distinguished between void and voidable documents, highlighting the significance of that legal distinction. In Pacchiana, the Appellate Division held that where a prenuptial agreement fails to comply with real property rules regarding the proper recording of a conveyance, the agreement is void at its inception and cannot be subject to the statute of limitations (Pacchiana, 94 AD2d at 722). Although the case involved a contract and not a forged deed, the court nevertheless relied on statutory rules of real property conveyance, not general public policy against illegal contracts, in finding the prenuptial agreement to be void (id. at 721). Given this Court’s reliance on Pacchiana, the Riverside decision clearly applied a rule of general applicability regarding void documents to the specific facts of that case. There is, then, no reason to limit Riverside‘s reach, or forgo application of the same general rule — a document void at its inception has no effect and cannot be subject to a statute of limitations — to cases involving a forged deed.
The defendant notes that the agreement in Riverside violated the Rent Stabilization Law, and because of its illegal nature violated public policy. However, defendant ignores the significant public policies underlying our real property system, which have animated the previously discussed real property rules that treat forged deeds as a legal nullity. The public policy concerns that underlie prohibitions on enforcement of illegal contracts are surely no more consequential than those applicable to forged deeds, and a forged deed is no less offensive to our legal system than an illegal contract. As the Court stated in Marden, a forged deed is essentially “a false making, with an evil design” (160 NY at 55). Indeed, New York has determined that forgery is sufficiently morally unacceptable and dangerous to society that our State has criminalized forgery, subjecting wrongdoers to potential criminal prosecution with the attendant risk of incarceration (see Penal Law §§ 170.05, 170.10, and 170.15). Therefore, we will not impose statutes of limitations on forged deeds because the resulting prejudice to the “rights of the true owner of real estate” only “open[s] the door for the destruction of all titles, and makes[s] it much easier for the criminal to purloin real than personal property” (see Marden, 160 NY at 57-58).
Having failed to persuade based on our caselaw, the defendant argues that a statute of limitations is necessary to protect the sanctity of real property titles. However, section 213 (8) contains a two-year discovery rule, which potentially extends the life of a claim years beyond the six-year statutory term. As a consequence, land titles already are subject to challenge, based on a forged deed, far into the future.[4]
“an owner in possession has a right to invoke the aid of a court of equity at any time while he is so the owner and in possession, to have an apparent, though in fact not a real incumbrance discharged from the record and such a right is never barred by the statute of limitations. It is a continuing right which exists as long as there is an occasion for its exercise”
(215 NY at 16; see also Orange and Rockland Util., Inc., 52 NY2d at 261, citing Ford). Similarly, this Court held in Cameron Estates v Deering that the statute of limitations did not bar plaintiff’s action challenging the forced sale of property where plaintiff paid all required taxes, rendering the underlying tax deed void ab initio (308 NY 24, 31 [1954]). Thus, contrary to defendant’s argument, there are property claims that cannot be extinguished by the passage of time.
Our dissenting colleagues argue that a statute of limitations is necessary in order to avoid litigation over claims which are difficult to defend because of the mere passage of time (see dissenting op at 6). As we have stated, the discovery provision in the statute allows for this possibility (see CPLR 213 [8]). In any case, the stale claims alluded to are just as likely to be difficult to prove, reducing the number of claims that will be filed when evidence has been destroyed and memories have faded[5] . Moreover, the argument for bringing finality to potentially stale claims fails to make the case for why the desire for repose is any more significant than the need to ferret out forged deeds and purge them from our real property system. As the law makes clear, a forged deed has no legal significance and cannot convey title, therefore there is no reason to impose barriers to those who seek to vacate such deed as null and void.[6]
IV.
For over a century, since this Court’s decision in Marden, a forged deed has been treated in New York as void ab initio. As the Court recognized in Riverside, a statute of limitations cannot validate what is void at its inception. Therefore, a void deed is not subject to a statutory time bar. The defendant’s arguments are in contravention of Marden and Riverside, and would subject a claim of deed forgery to a six-year statute of limitations under CPLR 213 (8), with the result that a forged deed may be relied upon to convey title and for purposes of encumbering real property. However, under well-established real property principles, because only a holder of legal title may convey an interest in real property, no property interest can be conveyed by a forged deed, and no person may be a bona fide purchaser of real estate on the force of such deed. Moreover, our recording statute does not apply to a forged deed, with the consequence that recording a forged deed cannot transfer title. We, thus, decline the defendant’s invitation to unsettle this established doctrine to the detriment of our state’s real property recording system.
To adopt defendant’s position is to permit a forged deed to accomplish, by the mere passage of time, what has always been forbidden — the encumbrance and transfer of title. Neither law nor public policy nor common sense dictates such outcome. Defendant fails to present a compelling reason to overturn or ignore our prior case law in the area of real property because as we have recognized, “parties in business transactions depend on the certainty of settled rules, `in real property more than any other area of the law, where established precedents are not lightly to be set aside'” (172 Van Duzer Realty Corp. v Globe Alumni Student Assistance Ass’n, Inc., 24 NY3d 528, 535 [2014], citing Holy Properties Ltd., L.P. v Kenneth Cole Productions, Inc., 87 NY2d 130, 134 [1995]). No less so with respect to forged deeds, because landowners, banks, mortgagees, insurers, and a myriad of others depend on the simple rule that a forged deed is a legal nullity that cannot divest ownership or serve to encumber real property.
Accordingly, the order of the Appellate Division, insofar as appealed from, should be reversed and defendant Bank of America, N.A.’s motion to dismiss the complaint against it pursuant to CPLR 3211 (a) (5) denied.
LIPPMAN, Chief Judge (dissenting):
I believe that plaintiff’s action against defendant Bank of America, seeking to invalidate the Bank’s mortgage interest in real property conveyed by an allegedly forged deed, is subject to the six-year statute of limitations under CPLR 213 (8). Because plaintiff did not commence this action within either the applicable six-year limitation period, or two-year discovery window provided by the statute, I would find that the claim is time-barred.
In 1996, defendant Dorothy Lewis and her brother, Percy Lee Gogins, Jr., inherited property located at 1900 Bergen Street in Brooklyn. They took title to the property as tenants in common, each with an undivided one-half interest. Dorothy Lewis subsequently conveyed her interest in the property to her daughter, defendant Tonya Lewis, by quitclaim deed dated May 21, 2000. On February 14, 2001, Tonya Lewis recorded a “correction deed” dated December 14, 2000. That document, which plaintiff alleges is a forgery, purported to correct the earlier quitclaim deed by adding Percy Gogins as an additional grantor, thereby conveying the entire property to Tonya Lewis. Percy Gogins died in March 2001.
Plaintiff Dorothy Faison, Percy Gogins’ daughter, commenced a pro se action in Supreme Court in September 2002, alleging that the Lewis defendants had engaged in a scheme to defraud by forging and filing a false deed. The complaint was dismissed under CPLR 3211 (a) because plaintiff lacked capacity to maintain it, as she had not been appointed the executor of her father’s estate, and for failure to state a cause of action upon which relief could be granted.
Years passed, during which plaintiff took no further action. In December 2009, defendant Tonya Lewis obtained a mortgage on the property from defendant Bank of America in the amount of $269,332. Soon thereafter, plaintiff petitioned Surrogate’s Court for a decree appointing her the administrator of Percy Gogins’ estate. In connection with that proceeding, plaintiff submitted an affidavit of delay, in which she represented that she had discovered the existence of the forged deed “[a]t some time in or around 2003.” Plaintiff was appointed the administrator of her father’s estate in July 2010.
The following month, plaintiff commenced this action, in her capacity as administrator of Gogins’ estate, against the Lewis defendants, Bank of America and defendant Mortgage Electronic Registration Systems, Inc. (as nominee for Bank of America). According to the complaint, plaintiff is a resident of the State of Georgia. Plaintiff alleged that Gogins had never authorized the transfer of his ownership interest in the property and that the December 2000 correction deed was a forgery. She sought a judgment declaring the deed null and void, directing defendant Tonya Lewis to disgorge half of all rents and profits generated by the premises, and setting aside and canceling the mortgage. The courts below granted Bank of America’s motion to dismiss the action under CPLR 3211 (a)(5) on statute of limitations grounds.
The majority finds that plaintiff’s action should not have been dismissed as untimely — indeed, that it is not subject to any statute of limitations whatsoever — because the allegedly forged deed was void and therefore incapable of conveying any property interest. Since the void deed is a nullity, the majority finds that a property owner has no obligation to take prompt legal action to enforce her rights. The majority correctly relies on Marden v Dorthy (160 NY 39 [1899]) for the proposition that a forged deed is void at its inception (see majority op. at 5). We agree with this long-held position. However, Marden is not a statute of limitations case and, therefore, reliance on its authority is inappropriate at this procedural juncture.
While a deed proven to have been a forgery cannot operate to affect ownership rights, this does not compel the result that the opportunity to challenge such conveyance is without limit. “Statutes of limitation are essentially arbitrary time limitations barring the commencement of an action, and they reflect the legislative judgment that individuals should be protected from stale claims” (McCarthy v Volkswagen of Am., 55 NY2d 543, 548 [1982]). While statutes of limitation foreclose a party’s claim, they do not extinguish a party’s underlying right (see Hulbert v Clark, 128 NY 295, 298 [1891]; see also Siegel, NY Prac § 34, at 44 [5th ed 2011] [“The theory of the statute of limitations generally followed in New York is that the passing of the applicable period does not wipe out the substantive right; it merely suspends the remedy”]).
“In examining the policies underlying Statutes of Limitation, this Court has emphasized both a defendant’s interest in repose and `in defending a claim before [the] ability to do so has deteriorated through passage of time.’ We have also taken note of considerations of judicial economy and possible plaintiff fraud where excessive factual inquiries would be necessary. Balanced against these considerations is the injured person’s interest in having a reasonable opportunity to assert a claim”
I would conclude that an action to invalidate a forged deed is subject to a statute of limitations defense. Forgery is closely related to and essentially a type of fraud. We have previously observed that forgery was “defined by the common law to be the fraudulent making of a writing to the prejudice of another’s rights, or the making malo animo of any written instrument for the purpose of fraud and deceit” (Marden, 160 NY at 53 [citations omitted]). It is therefore logical and reasonable to apply the statute of limitations for fraud to forgery claims (see e.g. Piedra v Vanover, 174 AD2d 191, 194 [2d Dept 1992]). Under CPLR 213 (8), such a cause of action must be commenced within “the greater of six years from the date the cause of action accrued or two years from the time the plaintiff . . . discover[s] the fraud, or could with reasonable diligence have discovered it.” The application of the statute of limitations here has the benefit of imposing some limit on the time in which claims can be brought, while also leaving a discovery window for forgery claims which, like fraud, can be concealed from the plaintiff.
Indeed, the absence of any limitations period could result in the commencement of actions that the passage of time makes exceedingly difficult, or impossible, to defend; a plaintiff could, for instance, bring the claim long after the relevant events, but just after the death of the crucial defense witness. Notably, although the majority observes that Florida technically imposes no statute of limitations in this context, that state has the “Marketable Record Title Act,” which, with certain exceptions, essentially deems properly recorded deeds to be valid after a 30-year period (see Fla Stat 712.02; H & F Land v Panama City-Bay County Airport & Indus. Dist., 736 So 2d 1167, 1172 [1999] [“a root of title based upon a forged deed would prevail even over an otherwise entirely valid deed recorded earlier in the chain of title”]; Marshall v Hollywood, Inc., 236 So 2d 114, 120 [1970]).
In analogous circumstances to those presented here, we have required individuals to abide by applicable limitations periods (see e.g. Ford v Clendenin, 215 NY 10, 17 [1915] [applying a 10-year statute of limitations to an action in equity to quiet title by one who was out of possession]; 8-87 Warren’s Weed, New York Real Property § 87.45; Hechter v New York Life Ins. Co., 46 NY2d 34, 39 [1978] [applying a six-year statute of limitations to a UCC claim “against a bank for collecting an instrument over a forged indorsement”]). And, while forgery is subject to criminal liability, there is also a statute of limitations applicable to those crimes (see CPL 30.10 [2] [b], [c]; Penal Law §§ 170.05; 170.10; 170.15 [five years for the felony offenses of first and second-degree forgery and two years for the misdemeanor offense of third-degree forgery]).
Plaintiff asserts that the decision below conflicts with our holding in Riverside Syndicate, Inc. v Munroe (10 NY3d 18 [2008]), wherein we determined that an agreement to pay illegal rent for a rent-stabilized apartment was void and unenforceable by either party. The agreement, under which the tenants agreed to waive the benefit of rent stabilization in exchange for the ability to use the apartment as a second home, was deemed to be violative of public policy and contrary to the express terms of the Rent Stabilization Code (see Riverside Syndicate, 10 NY3d at 22). We rejected the argument that the landlord’s action, seeking a declaration that the agreement was void, was barred by the six-year statute of limitations pertaining to contractual obligations or liability (see Riverside Syndicate, 10 NY3d at 24; CPLR 213 [2]). We noted that “[t]his action [was] not one `upon a contractual obligation or liability'” for which the six-year limitations period was set forth in CPLR 213 (2), but was “to declare that no valid contractual obligations ever existed” (Riverside Syndicate, 10 NY3d at 24).
Riverside is unlike the situation presented here. It is well settled that “illegal contracts, or those contrary to public policy, are unenforceable and that the courts will not recognize rights arising from them” (Szerdahelyi v Harris, 67 NY2d 42, 48 [1986]). “[T]he law ‘will not extend its aid to either of the parties [to an illegal contract]’ or `listen to their complaints against each other, but will leave them where their own acts have placed them'” (Stone v Freeman, 298 NY 268, 271 [1948], quoting Schermerhorn v Tallman, 14 NY 93, 141 [1856]). Plaintiff’s claim, seeking to invalidate an allegedly forged deed, does not involve the same public policy concerns. In contrast with the situation presented by parties attempting to enforce an illegal contract — which only involves those parties — in a dispute over real property ownership rights, the rights of an unlimited number of innocent purchasers who rely on the transfer documents in a chain of title can be affected by a forged deed.[1]
Plaintiff also relies upon Cameron Estates, Inc. v Deering (308 NY 24 [1954]), in which we held that the statute of limitations could not be invoked to prevent a taxpayer from challenging a void tax deed. That case, however, is also inapt. The plaintiff in Cameron Estates had paid the taxes on the property and brought the action to remove a cloud on his title.
“When void tax deeds are attempted to be made prima facie evidence of the regularity of the proceedings, equity will interfere to permit removal as a cloud on title which right may be invoked by the owner in possession at any time as `such a right is never barred by the Statute of Limitations'”
(Cameron Estates, 308 NY at 31 [citations omitted]). Plaintiff does not claim to be in possession of the property and it is therefore unnecessary to address the consequences of what would flow from such fact.
The stability of the State’s real property system is plainly important and the idea of losing one’s property because of a forged deed is, of course, offensive. But it is no more so than the plight of any innocent plaintiff being barred from attempting to obtain relief from an injury by failing to commence an action within the time limits set by the legislature. Indeed, it is the prospect of no repose, particularly where the property may have changed hands since the allegedly forged deed, that would appear to endanger the stability of real property transactions. The majority’s rule permits a person who discovers a forged deed to sit on his or her rights and commence an action at any time. Thus, a plaintiff could do nothing until it became impossible to defend a claim of forgery, thereby making title to real property subject to reversal indefinitely. Contrary to the majority’s position that its rule will foster security, in fact, the absence of a statute of limitations will result in just the opposite because, under the majority’s holding, every deed is subject to attack at any time. Limitation periods can sometimes work a hardship, but they are set for a reason and particularly where, as here, a discovery window applies, there is no compelling reason to exempt an entire cause of action from any time limit at all.
Here, the deed was allegedly forged in December 2000. In addition, according to her Surrogate’s Court submission, plaintiff had been aware of the deed no later than 2003 (indeed, a prior action was commenced in September 2002). Since, in this circumstance, the two years afforded by the discovery rule would not have extended the six-year statute of limitations, I would find that this action as against the Bank, which was not commenced until August 2010, was untimely and was properly dismissed by the courts below.
Order, insofar as appealed from, reversed, with costs, and defendant Bank of America, N.A.’s motion to dismiss the complaint against it pursuant to CPLR 3211(a)(5) denied.
[1] We note that the Appellate Division order is final only as to defendant BOA.
[2] In their answer, Lewis and Tonya assert that the deed is valid because “Percy Lee Gogins . . . authorize[d] and consented to the transfer and conveyance of his ownership interest in the Premises to Tonya Lewis.”
[3] Our dissenting colleagues contend that innocent purchasers who rely on the chain of title will be adversely affected if no statute of limitations applies to forged deed claims (see dissenting op. at 8). However, many individuals rely on the validity of the recording system. The dissenters fail to recognize the great harm done if forged deeds may be permitted to obtain legal effect simply through the passage of time. Moreover, even under the dissenters’ approach, a forged deed claim may still be timely after six years, if filed pursuant to the discovery rule of CPLR 213 (8).
[4] Our dissenting colleagues find the discovery rule advantageous because it allows a victim of fraud to pursue a claim beyond the six-year statute of limitations prescribed by the CPLR (see dissenting op at 5). That possibility of filing a claim years, if not decades, after the deed is forged is the very reason why the defendant and dissenters’ arguments for a statute of limitations are underwhelming.
[5] In her reply brief, plaintiff concedes, and indeed affirmatively asserts, that forged deed claims are subject to a laches defense. This is generally the case in states that consider forged deeds void and thus apply no statute of limitations to bar actions to invalidate such deeds (see e.g. Robinson v Estate of Harris, 391 SC 114, 131, 705 SE2d 41, 50 [2011]). On this appeal, however, we need not consider laches because we must accept as true plaintiff’s claims that she diligently sought to vacate the deed on forgery grounds (see Martinez, 84 NY2d at 87-88).
[6] Our dissenting colleagues argue that the loss of property suffered by a plaintiff whose forged deed claim is time-barred is no more offensive than the loss experienced by any other plaintiff whose claim is foreclosed as untimely (see dissenting op at 9). This is no point at all because it ignores the fact that forged deeds not only harm the true owner, but also undermine the integrity of our real property system. It is a harm so substantial that we have determined to avoid the effects of a forged deed by denying it any legal significance. It is, in the words of Marden, “no thing[]” (Marden, 160 NY at 56).
[1] The majority’s reliance on Riverside‘s reference to Pacchiana v Pacchiana (94 AD2d 721 [2d Dept 1983]) appears to be misplaced. That case did not rely on statutory rules of real property conveyance to find the prenuptial agreement void. Rather, the opinion merely referenced real property rules in addressing the plaintiff’s claim that the agreement had not been executed in conformity with the acknowledgment requirements for such agreements contained in Domestic Relations Law § 236 (B) (3) (see Pacchiana, 94 AD2d at 721-722; see also EPTL 5-1.1 [f][2]; Domestic Relations Law § 236 [B][3]).
Calling his state’s foreclosure process “badly broken and in need of change,” New York banking regulator Benjamin Lawsky wants new policies enacted to fast-track vacant property foreclosures and reform the state’s mandatory foreclosure mediation requirements.
Foreclosures in the Empire State take an average of 900 days to complete, creating a backlog in court dockets, a financial burden on municipalities that must maintain vacant properties, and a critical impediment to the recovery of the state’s housing market, the superintendent of the New York Department of Financial Services said Tuesday during a speech at the Mortgage Bankers Association’s Secondary Market Conference in Manhattan.
“This is a problem long in the making, and I doubt it is one that we will definitively solve this legislative session,” Lawsky said.
Two years ago, a Kansas City woman learned she was being sued for not paying a credit card debt of $1,130.14.
The debt was not hers, she said. Yet the debt collection firm kept demanding that she pay.
A Kansas City law firm filed a counterclaim on the woman’s behalf, alleging malicious prosecution and violation of a federal fair debt collection act by the national debt collection firm.
This week, a Jackson County jury awarded $251,000 in damages to Maria Guadalupe Mejia Alcantara and assessed $82 million in punitive damages against the debt collection firm, Portfolio Recovery Associates LLC.
Eric Mains is fulfilling a dream many Americans have had since the onset of the financial crisis seven years ago: He’s attacking fraud in the banking industry as aggressively as he can, using every possible tool under the law to achieve justice —and win some money back for himself.
Mains, a former team leader with the Federal Deposit Insurance Corporation (FDIC), has become so bitterly embroiled in a six-year dispute with his mortgage lender that he left the regulatory agency, fearing that he might have to eventually name it as a defendant in a federal lawsuit. He’s one of a small yet determined band of people still fighting foreclosure (the seizure of property) cases with obscure and sometimes arcane arguments, built on a simple yet mind-blowing premise: The true ownership of millions of mortgages issued during the housing bubble was fatally corrupted, and now it’s impossible to prove who actually legally controls those mortgages.
Recent Supreme Court precedent suggests that by rescinding his mortgage—canceling it, basically—Mains and people like him can put the onus on banks to prove they have the right to assets like his house in the first place. If Mains or his allies succeed, they would rip open a wound that virtually everyone in power has tried to stitch up and forget. But such a long-awaited victory wouldn’t make up for the years of stress and personal hardship Mains has suffered, including a failed marriage and now the end of his career in public service.
DEBORAH BURKE and SEAN K. BURKE, Plaintiffs, v. JPMORGAN CHASE BANK, N.A; WELLS FARGO BANK, N.A. AS TRUSTEE FOR JPMORGAN MORTGAGE TRUST MORTGAGE PASS-THROUGH CERTIFICATE SERIES Defendants.
ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS
SAMUEL CONTI, District Judge.
I. INTRODUCTION
Plaintiffs Deborah Burke and Sean Burke (collectively, “Plaintiffs”) bring this action in connection with the threatened foreclosure of their home in Livermore, California (“the Property”). On January 14, 2014, the Court granted Defendants’ motion to dismiss and gave Plaintiffs the opportunity to amend their complaint to “set forth specific and plausible allegations explaining why Defendants lack sufficient interest to foreclose on the Property.” ECF No. 25 (“MTD Order”) at 6. Defendants JPMorgan Chase Bank, N.A. (“JPMorgan”) and Wells Fargo Bank, N.A. (“Wells Fargo”) now move to dismiss Plaintiffs’ first amended complaint (“FAC”) for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 43 (“Mot.”). The motion is fully briefed, ECF Nos. 47 (“Opp’n”), 51 (“Reply”), and appropriate for determination without oral argument pursuant to Civil Local Rule 7-1(b). Accordingly, the motion hearing set for May 15, 2015 is hereby VACATED. For the reasons set for below, the Motion is GRANTED in part and DENIED in part.
II. BACKGROUND
On August 7, 2007, Plaintiffs refinanced their existing mortgage on the Property, obtaining a $1,256,250 loan (the “Loan”). ECF No. 29 (“FAC”) ¶ 5, Ex. A. The deed of trust securing the mortgage identifies Washington Mutual Bank, FA (“WaMu“) as the lender. Id. Ex. A (“DOT”). Plaintiffs allege that on or before August 22, 2008, their mortgage loan was contributed to a mortgage backed security (“MBS”) identified as JPMorgan Mortgage Trust 2008 R-2 Pass-through Certificates Series 2008-R2 (“JPMMT 2008-R2″), of which Wells Fargo is the trustee. Id. ¶ 12. Plaintiffs allege that WaMu sold their mortgage loan temporarily to the depositor of the JPMMT 2008-R2, but that the sale failed to assign the DOT. Id. ¶ 16. As Plaintiffs, put it, “[t] his was the first sale of the Plaintiff’s mortgage loan, but without effectively assigning the [DOT] and indorsing the underlying original Promissory Note to the interim loan purchaser. . . .” Id. Next, JP Morgan Acceptance Corporation “sold and securitized the pooled mortgages (including Plaintiffs’ mortgage loan) into the JPMMT 2008-R2 Trust” on or before the trust’s “closing date” on August 22, 2008. Id. Plaintiffs allege that this sale, too, failed to properly assign the DOT or original note. Id.
On September 25, 2008, WaMu was closed by the Office of Thrift Supervision, and the Federal Deposit Insurance Corporation (“FDIC”) was named Receiver. On September 25, 2008, JPMorgan acquired certain assets and liabilities of WaMu through an asset purchase agreement with the FDIC. ECF No. 17 (“RJN I”) Ex. 2. Though Plaintiffs now allege that JPMorgan does not have any legal or equitable interests in their loan, they applied for a loan modification with JPMorgan sometime in 2010. FAC ¶ 21. JPMorgan rejected the application in May 2010, stating that Plaintiffs’ income was insufficient. Id. Plaintiffs then reapplied for a loan modification. That application was also rejected, this time on the ground that Plaintiffs had the ability to pay their existing mortgage using cash reserves or other assets. Id. ¶ 22.
On October 28, 2010, a notice of default and election to sell (“NOD”) was recorded with Alameda County, stating that Plaintiffs were $28,024.95 in arrears. Id. ¶ 24, Ex. E.
Plaintiffs allege that the NOD’s statement that Plaintiffs could contact JPMorgan about the foreclosure proceedings was false because JPMorgan had no right to collect mortgage payments, and that there is no evidence that JPMorgan is a valid loan servicer or beneficiary of Plaintiffs’ mortgage. Id. ¶ 24. Plaintiffs reason that because their loan was sold to the MBS trust before JPMorgan acquired the assets of WaMu, JPMorgan did not succeed to the servicing rights of WaMu. Id. The NOD contained a statement certifying that JPMorgan had complied with California law by contacting the borrower to discuss the borrower’s financial situation and to explore options for the borrower to avoid foreclosure. Id. Ex. E. Plaintiffs allege that they were never contacted by a “valid mortgagee” because Defendants JPMorgan and Wells Fargo were not mortgagees or authorized agents.
In April 2011 and April 2012, notices of trustee sales were recorded with Alameda County. Id. ¶¶ 28, 30. The first notice of trustee’s sale indicates that the unpaid balance on the loan was $1,395,095.88. Id. Ex. F. Plaintiffs allege that these instruments, like the NOD, are null and void. Id. ¶ 28-31. It is unclear from the pleadings whether the foreclosure sale has yet taken place.
III. LEGAL STANDARD
A. Motion to Dismiss
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) “tests the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). However, “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
B. Rule 9(b)
Claims sounding in fraud are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b), which requires that a plaintiff alleging fraud “must state with particularity the circumstances constituting fraud.” See Kearns v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009). “To satisfy Rule 9(b), a pleading must identify the who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about [the purportedly fraudulent] statement, and why it is false.” United States ex rel. Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1055 (9th Cir. 2011) (internal quotation marks and citations omitted).
IV. DISCUSSION
The gravamen of all seven of Plaintiffs’ claims is that Defendants do not have a beneficial interest in Plaintiffs’ mortgage either because (1) the securitization of the mortgage failed, or (2) Plaintiffs’ mortgage was not transferred as part JPMorgan’s purchase of WaMu’s assets because the mortgage was securitized and sold before the agreement took effect.
The Court already rejected Plaintiffs’ first theory as legally unsound. As the Court explained, “Plaintiffs lack standing to challenge the securitization process because they were not parties to the agreement that securitized the note.” See MTD Order at 4. Plaintiffs have pleaded those claims again, despite the Court’s clear holding that they fail as a matter of law. See FAC ¶ 33; Opp’n at 7-10. To the extent that any of Plaintiffs’ claims are premised on the failed securitization of their mortgage alone, those claims are DISMISSED with prejudice.
The Court previously rejected Plaintiffs’ second theory because it found that the original complaint did not plausibly allege WaMu had transferred its interest in the DOT when it sold the loan. This Court has held that a plaintiff may state a claim for wrongful foreclosure based on allegations that sale of the DOT precluded Defendants from retaining a beneficial interest in that DOT. See Subramani v. Wells Fargo Bank N.A., C 13-1605 SC, 2013 WL 5913789, at *4 (N.D. Cal. Oct. 31, 2013). Though Plaintiffs’ FAC is verbose, unclear, and at times appears internally inconsistent, Plaintiffs now allege, at the very least, that:
WAMU irrevocably sold all right, title and interest in Plaintiffs’ mortgage loan, for value received, to the JPMorgan Mortgage Trust 2008-R2 Mortgage Pass-through Certificates Series 2008-R2 (“JPMMT 2008-R2″), a private label mortgage-backed securities trust with a Real Estate Mortgage Investment Conduit election and continuing qualification.
FAC ¶ 12. Plaintiffs provide significant detail regarding the process through which WaMu allegedly sold their loan. See id. ¶¶ 12-19.
It is true that “[t]here is no stated requirement in California’s non-judicial foreclosure scheme that requires a beneficial interest in the Note to foreclose. Rather, the statute broadly allows a trustee, mortgagee, beneficiary, or any of their agents to initiate non-judicial foreclosure.” Lane v. Vitek Real Estate Indus. Grp., 713 F. Supp. 2d 1092, 1099 (E.D. Cal. 2010). However, Plaintiffs now sufficiently allege that WaMu not only had no beneficial interest in the Loan, but that it was no longer the mortgagee when JPMorgan purchased its assets. Because Plaintiffs now allege that WaMu sold its entire interest in the Loan, the facts render plausible the possibility that Defendants lack standing to foreclose on the mortgage. See, e.g., Subramani, 2013 WL 5913789, at *4; Javaheri v. JPMorgan Chase Bank, N.A., No. CV10-08185 ODW FFMX, 2011 WL 2173786, at *5 (C.D. Cal. June 2, 2011) (“the abovementioned [similar] facts regarding the transfer of Plaintiff’s Note prior to JPMorgan’s acquisition of WaMu’s assets raise Plaintiff’s right to relief above a speculative level”). The Court proceeds to discuss the effect of this finding on each of Plaintiffs’ claims in turn.
A. Wrongful Foreclosure
Defendants argue that Plaintiffs’ first cause of action must be dismissed because Plaintiffs do not allege any irregularity or illegality in the foreclosure process. As discussed above, however, the Court finds that Plaintiffs now sufficiently allege that WaMu ceded any interest upon which it might foreclose when it sold the Loan in 2008. To the extent that Plaintiffs allege wrongful foreclosure because Defendants were not the “trustee, mortgagee or beneficiary or any of their authorized agents,” Plaintiffs state a claim and Defendants’ motion is DENIED. See Cal. Civ. Code § 2924(a)(1).
B. Quiet Title
Defendants argue that Plaintiffs’ claim for wrongful foreclosure must be dismissed because “the allegations concerning the `holder of the note’ have been invalidated.” Mot at 5. Because the Court finds that Plaintiffs have sufficiently alleged that Defendants are not the holders of the note, this argument fails. The motion is DENIED as to Plaintiffs’ second claim, to the extent that claim is premised on the allegations that Defendants do not have any interest in the note as a result of WaMu’s sale of the Loan.
C. Slander of Title
“The elements of a cause of action for slander of title are (1) a publication, (2) which is without privilege or justification, (3) which is false, and (4) which causes direct and immediate pecuniary loss.” Alpha & Omega Dev., LP v. Whillock Contracting, Inc., 200 Cal. App. 4th 656, 664 (Cal. Ct. App. 2011) (internal quotation marks omitted) (emphasis in original). California Civil Code Section 47 sets out the general definition of a privileged publication, which includes a publication made “[i]n any (1) legislative proceeding, (2) judicial proceeding, (3) in any other official proceeding authorized by law, or (4) in the initiation or course of any other proceeding authorized by law and reviewable pursuant to Chapter 2 (commencing with Section 1084) of Title 1 of Part 3 of the Code of Civil Procedure. . . .” Cal. Civ. Code § 47(b). Section 47 also protects statements made “[i]n a communication, without malice, to a person interested therein, (1) by one who is also interested. . . .”
Plaintiffs allege that Defendants slandered their title in several documents, including letters regarding the loan modification. FAC ¶ 47. As Defendants point out — and Plaintiffs do not contest — statements regarding the loan modification do not slander Plaintiffs’ title. See Mot. at 6, Opp’n at 12-13. Plaintiffs also allege that Defendants slandered their title through the foreclosure documents. FAC ¶ 47. Under California law, “the filing of a notice of default is privileged, except when published with malice.” Barrionuevo v. Chase Bank, N.A., No. C-12-0572 EMC, 2013 WL 4103606, at *5 (N.D. Cal. Aug. 12, 2013). Malice requires that the publication was motivated by hatred or ill will or that defendants lacked reasonable grounds for belief in truth of publication and therefore acted with reckless disregard for plaintiff’s rights.” Id. (internal quotation marks omitted).
Plaintiffs allege that the statements in the foreclosure documents “were made with malicious intent.” FAC ¶ 48. That statement alone is a conclusory assertion not entitled to an assumption of truth. Plaintiffs briefly make more specific allegations that Defendants knew the statements in the foreclosure documents to be false. See id. ¶¶ 25 (the statements were “knowingly false”), 29 (“CHASE and WELLS FARGO knew that they are not valid beneficiaries or servicers”).[1] However, Plaintiffs’ allegations make clear that WaMu attempted to sell, and Defendants attempted to buy, a large portion of WaMu’s assets, which purported to include Plaintiffs’ mortgage. Id. at p.2. There are no allegations that Defendants did not act in good faith in purchasing WaMu’s assets, and there are no facts explaining why JPMorgan should have known that WaMu lacked an interest in Plaintiffs’ loan. The Court therefore finds implausible Plaintiffs’ bare assertions that Defendants knew that the statements in the foreclosure documents were false. The Court cannot find that Plaintiffs’ allegations render plausible the possibility that Defendants lacked reasonable grounds for belief in the truth of the statements included in the foreclosure documents. Therefore, Defendants’ statements in those documents were privileged as a matter of law, and Plaintiffs’ claim fails. Defendants’ motion is GRANTED as to Plaintiffs’ slander of title claim, and the claim is DISMISSED with leave to amend.
D. Fraud
“The elements which must be pleaded to plead a fraud claim are (a) misrepresentation (false representation, concealment or nondisclosure); (b) knowledge of falsity (or `scienter’); (c) intent to defraud, i.e., to induce reliance; (d) justifiable reliance; and (e) resulting damage.” Philipson & Simon v. Gulsvig, 154 Cal. App. 4th 347, 363 (Cal. Ct. App. 2007). Fraud claims are governed by the stricter pleading standards of Federal Rule of Civil Procedure 9(b).
Plaintiffs allege that the notice of default and election to sell under deed of trust contained false statements. Plaintiffs claim those statements are false because Defendants knew that they were not valid beneficiaries of Plaintiffs’ loan or owners of Plaintiffs’ debt. For the reasons discussed above, Plaintiffs’ FAC does not contain sufficient factual allegations to plausibly establish that Defendants had knowledge of WaMu’s alleged sale of the mortgage. Instead, Plaintiffs provide only bare assertions that Defendants had knowledge of the sale. Plaintiffs do not explain when or how Defendants obtained that knowledge, nor do they explain why Defendants should have known that WaMu’s attempt to sell Plaintiffs’ debt to JPMorgan was null and void. Thus Plaintiffs have failed to plead scienter with the requisite particularity. Defendants’ motion is GRANTED as to Plaintiffs’ fraud claim, and the claim is DISMISSED with leave to amend.
E. Cancellation of Instruments
Defendants’ argument that Plaintiffs’ cancellation of instruments claim should be dismissed is again premised on the assumption that Plaintiffs fail to allege WaMu’s sale of the loan. See Opp’n at 8-9. Because the Court finds that Plaintiffs now adequately allege that their loan was sold, this argument fails. Defendants’ motion is DENIED as to the cancellation of instruments claim.
F. Violation of Section 2923.5
California Civil Code Section 2923.5 requires that a “mortgage servicer shall contact the borrower in person or by telephone in order to assess the borrower’s financial situation and explore options for the borrower to avoid foreclosure” before recording a notice of default. Cal. Civ. Code § 2923.5(a)(2). Plaintiffs allege that, because no defendant was a legitimate mortgagee, beneficiary, trustee, or authorized agent, Plaintiffs were never contacted by a legitimate mortgage servicer. FAC ¶¶ 68-71.
Defendants first argue that Plaintiffs’ claim fails because JPMorgan was the mortgagee and Wells Fargo was its authorized agent. That argument is insufficient because Plaintiffs have pleaded that WaMu sold all of its interest in the loan before JPMorgan purchased WaMu’s assets.
Next, Defendants argue that Plaintiffs are required to allege that they are willing and able to tender the amount due on the Loan. Defendants argue that Plaintiffs’ claim fails because the FAC does not allege tender. According to Defendants, “[w]ithout an allegation of such tender in the complaint that attacks the validity of the sale, the complaint does not state a cause of action.”[2] Opp’n at 8. The California Court of Appeal has explained why the tender requirement does not apply to Section 2923.5 claims: “the whole point of section 2923.5 is to create a new, even if limited, right to be contacted about the possibility of alternatives to full payment of arrearages. It would be contradictory to thwart the very operation of the statute if enforcement were predicated on full tender.” Mabry v. Superior Court, 185 Cal. App. 4th 208, 225 (2010). Moreover, “if the borrower’s action attacks the validity of the underlying debt, a tender is not required since it would constitute an affirmation of the debt.” Lona v. Citibank, N.A., 202 Cal. App. 4th 89, 112 (Cal. Ct. App. 2011). Thus the tender rule does not apply here, because Plaintiffs’ claims allege that Defendants do not own any of Plaintiffs’ debt. Additionally, “several courts have refused to apply the tender requirement where plaintiff alleges that the defendant lacks authority to foreclose on the property and, thus, that any foreclosure sale would be void rather than merely voidable.” Rockridge Trust v. Wells Fargo, N.A., 985 F. Supp. 2d 1110, 1147 (N.D. Cal. 2013) (collecting cases). Defendants’ motion to dismiss Plaintiffs’ Section 2923.5 claim is DENIED.
G. Unfair Competition
California’s Unfair Competition Law (“UCL”) prohibits unfair competition, which is defined as “any unlawful, unfair or fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. Each one of these prongs is a different cause of action. Cel-Tech Comm’cns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180. Plaintiffs bring claim under the “fraudulent” prong of the UCL. See FAC ¶¶ 74-75. The Rule 9(b) heightened pleading requirements apply to claims under the UCL’s fraudulent prong. See Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009).
As described above, the Court finds that Plaintiffs have failed to plead fraud with the specificity required by Rule 9(b). Consequently, Plaintiffs fail to state a UCL claim as well. Defendants’ motion is GRANTED as to Plaintiffs’ UCL claim, and this claim is DISMISSED with leave to amend.
H. Unjust Enrichment
Defendants’ arguments in favor of dismissal of the unjust enrichment claim are again premised on the Court’s rejection of Plaintiffs’ allegations that WaMu sold the Loan. Defendants’ motion is DENIED as to Plaintiffs’ unjust enrichment claim.
I. Breach of Contract, Equal Opportunity Act, and Fair Credit Reporting Act
Plaintiffs’ breach of contract, equal opportunity act, and fair credit reporting act claims were not brought in the original complaint. The Court granted Plaintiffs leave to amend their complaint only to add facts alleging that Defendants’ lack sufficient interest to foreclose on the Property, not to add additional claims. Accordingly, Plaintiffs’ breach of contract and equal opportunity act claims are dismissed without prejudice. Plaintiffs may make a proper motion for leave to amend if they wish to add new claims. Plaintiffs have agreed to withdraw their Fair Credit Reporting Act claim. See Opp’n at 19. That claim is therefore DISMISSED with prejudice.
V. CONCLUSION
For the foregoing reasons, Defendants JPMorgan Chase Bank, N.A and Wells Fargo Bank, N.A.’s Motion to Dismiss is GRANTED in part and DENIED in part. All of Plaintiffs’ claims are DISMISSED with prejudice to the extent they are premised on deficiencies in the securitization process. Plaintiffs’ claim for violation of the Fair Credit Reporting Act is DISMISSED with prejudice. Plaintiffs’ claims for breach of contract and violation of the Equal Credit Opportunity Act are DISMISSED without prejudice. Plaintiffs’ claims for wrongful foreclosure, quiet title, cancelation of instruments, violation of Section 2923.5, and unjust enrichment survive to the extent that they are premised on the theory that WaMu sold its entire interest in the Loan in 2008.
Plaintiffs’ claims for slander of title, fraud, and unfair competition are DISMISSED with leave to amend. Plaintiffs may amend those claims to add allegations sufficient to allege fraud under the standards set out by Federal Rule of Civil Procedure 9(b). If plaintiffs choose to amend their complaint to add such allegations, they must do so within thirty (30) days of the signature date of this Order. Failure to amend within thirty days may result in dismissal of those claims with prejudice.
IT IS SO ORDERED.
[1] Plaintiffs also allege that Washington Mutual Bank, FA changed its name to Washington Mutual Bank in April of 2005. See id. Plaintiffs apparently assert that WaMu therefore ceased to exist as a legal entity and that JPMorgan knew it could not buy any assets (including Plaintiffs’ loan) from WaMu. Plaintiffs in foreclosure cases like this one have repeatedly advanced that theory, and courts have repeatedly rejected it. See, e.g., Lanini v. JPMorgan Chase Bank, No. 2:13-CV-00027 KJM, 2014 WL 1347365, at *3 (E.D. Cal. Apr. 4, 2014) (“Plaintiffs have cited nothing to support their claim that the bank’s change of name means the bank itself ceased to exist.”). The Court agrees with the numerous other judges who have rejected this theory and holds that Plaintiffs’ claims regarding JPMorgan’s chain of title to the mortgage and Defendants’ knowledge of their lack of interest in the Loan may not be premised on WaMu’s name change in 2005.
[2] It is unclear why Defendants make this argument only in opposition to Plaintiffs’ Section 2923.5 claim and not all of Plaintiffs’ claims. Regardless, some of the Court’s reasons for rejecting Defendants’ argument apply to all of Plaintiffs’ claims.
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