Miyamoto v. Bank of Am., N.A.

KIMIE MIYAMOTO, Plaintiff, v. BANK OF AMERICA, N.A., MR. COOPER f/k/a NATIONSTAR MORTGAGE, LLCd/b/a CHAMPION MORTGAGE, REVERSE MORTGAGE SOLUTIONS, INC.,and DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Defendants.

Case No. 19-CV-445 (FB) (ST)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

September 17, 2020

MEMORANDUM AND ORDER

Appearances:

For the Plaintiff:

CHARLES A. HIGGS

450 Lexington Avenue, 4th Floor

New York, New York 10010

For Defendant Mr. Cooper f/k/a

Nationstar Mortgage, LLC d/b/a

Champion Mortgage

MICHAEL T. MADAIO

Sandelands Eyet LLP

112 West 34th Street, 18th Floor

New York, New York 10120

BLOCK, Senior District Judge:

Kimie Miyamoto lost her home in foreclosure. The question in this diversity case is whether that foreclosure occurred because of the actions or omissions of Mr. Cooper f/k/a Nationstar Mortgage, LLC d/b/a Champion Mortgage ("Champion").¹ Arguing that it did not, Champion moves to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the motion is granted in part and denied in part.

I

The following facts are taken from the allegations of the complaint. For purposes of this motion, they are accepted as true, with all inferences drawn in the plaintiff's favor. See Biro v. Condé Nast, 807 F.3d 541, 544 (2d Cir. 2015).

In 2000, Miyamoto and her husband obtained a loan of $110,000 from Lincoln Equities Credit Corp. ("Lincoln"). The loan was secured by a mortgage ("the Lincoln Mortgage") on Miyamoto's home in Forest Hills, Queens. Within a few months, Lincoln filed a state-court foreclosure action alleging that Miyamoto had defaulted on the loan.

In 2009, Miyamoto obtained a "reverse mortgage" from Bank of America, N.A. ("BOA"). As is typical of such arrangements, BOA advanced Miyamoto a loan (in this case, up to $915,000) without any monthly repayment obligation. Instead, BOA expected to be repaid from the proceeds of a sale of the property, or by taking title to the property upon Miyamoto's death.

BOA was aware of the Lincoln Mortgage and, in preparing to close the reverse mortgage, received what purported to be a copy of a satisfaction of the Lincoln Mortgage. It is not clear from the complaint or the parties' submissions, but apparently the Lincoln Mortgage was not, in fact, properly satisfied during the reverse mortgage closing.

As a result, the foreclosure proceeding continued. The state court entered a judgment of foreclosure in 2014 and the property was sold at auction in June 2016; Miyamoto was evicted in 2018.

BOA assigned the note and mortgage to Champion in October 2012. In May 2016, Champion reconveyed the note and mortgage to BOA, which retained Reverse Mortgage Solutions, Inc. ("RMS"), to service the loan. Because the foreclosure action predated the reverse mortgage by more than nine years, BOA, Champion and RMS were not named as defendants in that action.

The complaint alleges that, despite knowledge of the foreclosure proceeding, "Defendants assured Plaintiff both in writing and verbally that Plaintiff's Reverse Mortgage was in good standing and that she could remain at her home." Compl. ¶ 50. The complaint does not distinguish among the three defendants or provide any details about the alleged reassurances.

II

Miyamoto's allegations, if proven, may well be sufficient to establishBOA's liability for the foreclosure. Cf. Podesta v. Assumable Homes Dev. II Corp., 31 N.Y.S.2d 74, 77 (2d Dep't 2016) (title agent liable for incorrect property description in partial mortgage release). Indeed, she concedes that "Bank of America is the Defendant that is likely most responsible for the damages to Plaintiff." Pl.'s Mem. of Law 4.

But this is Champion's motion to dismiss, not BOA's. Miyamoto's theory of Champion's liability is harder to discern, but it appears to be based on misrepresentations and omissions during the time Champion serviced the reverse mortgage. Miyamoto argues that she was harmed, not only by BOA's failure to obtain a proper satisfaction of the Lincoln Mortgage, but also by Champion's "continued misrepresentations" that "everything was fine" despite knowledge of the foreclosure proceeding. Id. at 2. She further argues Champion "took no steps to correct the issues with the loan, took no steps to mitigate damages to the Plaintiff, or to alert Plaintiff to the issues with the Reverse Mortgage." Id. at 3.

That theory of liability is asserted in six of the eight causes of action in the complaint.² The Court addresses each, though not in the order they are presented in the complaint.

A. Breach of Contract

Champion argues that is was not in contractual privity with Miyamoto because it merely "serviced" BOA's loan. The complaint, however, alleges an assignment of the reverse mortgage. At this stage, the Court must accept that allegation as true.

Even assuming contractual privity, the complaint "must identify the specific provision of the contract that was breached as a result of the acts at issue." Wolff v. Rare Medium, Inc., 210 F. Supp. 2d 490, 494 (S.D.N.Y. 2002), aff'd, 65 F. App'x 736 (2d Cir. 2003). Miyamoto has not identified a specific provision or even attached a copy of the reverse mortgage agreement to the complaint. Thus, she has failed to allege that Champion was under any contractual duty to apprise her of or correct any problems with the closing.

B. Fraud

Federal Rule of Civil Procedure 9(b) requires a plaintiff to state allegations of fraud to "with particularity." That means the plaintiff must "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent." Rombach v. Chang, 355 F.3d 164, 170 (2d Cir. 2004) (internal quotation marks omitted).

Miyamoto's alleges that "Defendants . . . knowingly misrepresented . . . thestatus of her loan," Compl. ¶ 2, and that "Defendants . . . assured Plaintiff both in writing and verbally that Plaintiff's Reverse Mortgage was in good standing," id. ¶ 50. Those allegations do not identify any specific statements by Champion or explain how they were false. Any statements regarding the status or good standing of the loan were not false because the problem was with the Lincoln Mortgage, not the reverse mortgage.

Miyamoto alleges that "Bank of America, its successor and assigns, have continually represented to Plaintiff that the Reverse Mortgage is the first lien on the Property." Id. ¶ 43. That allegation provides some particularly—assuming that Champion is one of BOA's assigns and knew that the Lincoln Mortgage had not been satisfied—yet it does not specify the timing, content or format of the statements attributable to Champion.

In sum, Miyamoto's allegations of fraud fall short of the standard required by Rule 9(b).

C. Intentional Infliction of Emotional Distress

The elements of intentional infliction of emotional distress are: "(i) extreme and outrageous conduct; (ii) intent to cause, or disregard of a substantial probability of causing, severe emotional distress; (iii) a causal connection between the conduct and injury; and (iv) severe emotional distress." Howell v. New York Post Co., 81 N.Y.2d 115, 121 (1993). The conduct must be "intentionallydirected at the plaintiff and lack any reasonable justification." Martin v. Citibank, N.A., 762 F.2d 212, 220 (2d Cir. 1985).

Champion's actions probably do not qualify as "extreme and outrageous." See Howell, 81 N.Y.2d at 122 ("[O]f the intentional infliction of emotional distress claims considered by this Court, every one has failed because the alleged conduct was not sufficiently outrageous."). But even if they did, there is no plausible inference that they were motivated by a specific intent to cause Miyamoto emotional distress.

Moreover, the statute of limitations for intentional infliction of emotional distress is one year. See Jemison v. Crichlow, 531 N.Y.S.2d 919, 922 (2d Dep't 1988) (citing N.Y.C.P.L.R. § 215(3)). The complaint was filed almost three years after Champion reconveyed the reverse mortgage to BOA.

D. Unjust Enrichment

Miyamoto alleges that all defendants, including Champion, were unjustly enriched "because Plaintiff paid taxes and insurance on the Property pursuant to the terms of the Reverse Mortgage for purposes of benefiting the Defendants by protecting the Defendants' lien interest in the Property." Compl. ¶ 114. Those payments did not enrich Champion, however, because they were remitted to others and would have been required in any event as long as Miyamoto owned theproperty.³

Nor did Miyamoto's tax and insurance payments protect Champion's lien during the time it held the reverse mortgage. The lien was impaired from its inception by the improperly satisfied Lincoln Mortgage, and was eventually foreclosed despite Miyamoto's compliance with her obligations.

E. Negligence and Negligent Infliction of Emotional Distress

The cornerstone of a negligence cause of action is a duty of care, and Miyamoto concedes that "a mortgage servicer generally does not owe a duty of care to a borrower." Pl.'s Mem. of Law 1. Neither party mentions the duties of a mortgage holder—as Champion was alleged to be—but it is "well settled under New York law that a lender is not in a fiduciary relationship with a borrower, and thus a lender does not owe a borrower any special duties." Abraham v. Am. Home Mortg. Servicing, Inc., 947 F. Supp. 2d. 222, 236 (E.D.N.Y. 2013).

Thus, Miyamoto does not premise her negligence claim on a general tort duty. Instead, she argues that Champion voluntarily assumed a duty of care to her.

The assumption-of-duty doctrine has a venerable pedigree in New York. In 1922, Judge Cardozo said, "It is ancient learning that one who assumes to act, eventhough gratuitously, may thereby become subject to the duty of acting carefully, if he acts at all." Glanzer v. Shepard, 233 N.Y. 236 (1922). He later explained that "[t]he query always is whether the putative wrongdoer has advanced to such a point as...