White v. First Franklin Fin. Corp.

WILLIAM WHITE and YVES R. BAPTISTE, Plaintiffs, v. FIRST FRANKLIN FINANCIAL CORPORATION,DEUTSCHE BANK NATIONAL TRUST COMPANY,AS TRUSTEE FOR FFMLT 2006-FF7 MORTGAGE PASSTHROUGH CERTIFICATES, SERIES 2006-FF7,BANK OF AMERICA, SELECT PORTFOLIO SERVICING, INC.and MORTGAGE ELECTRONIC REGISTRATION SERVICES, INC., Defendants.

18-CV-3518 (DRH)(AKT)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

April 4, 2019

MEMORANDUM & ORDER

APPEARANCES:

For Plaintiff

Cophen E. Sears III, Esq.

105 Maxess Road - Suite 124

Melville, New York 11766

For Defendants Deutsche Bank National Trust Company, Select Portfolio Servicing, Inc. and Mortgage Electronic Registration Services, Inc.:

McCarter & English LLP

One Canterbury Green

201 Broad Street

Stamford Connecticut 06901

By: Adam M. Swanson, Esq.

For Defendants Bank of America and First Franklin Financial Corporation

Winston & Strawn, LLP

200 Park Avenue

New York, New York 10166-4193

HURLEY, Senior District Judge:

Plaintiffs William White ("White") and Yves R. Baptiste ("Baptiste") (collectively "Plaintiffs") commenced this action against First Franklin Financial Corporation ("FFFC"), Bank of America ("BANA")¹, Deutsche Bank National Trust Company (DBNTC"), Select Portfolio Servicing, Inc. ("SPS") and Mortgage Electronic Registration Services, Inc.("MERS") asserting claims for "lack of standing/wrongful foreclosure," breach of contract, breach of fiduciary duty, quiet title, slander of title and a declaratory judgment that title of the real property at issue is vested in "Plaintiff," that "Defendants" have no interest, right to title to the subject property.² Presently before the Court are (1) a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), (12(b)(5), and 12(b)(6) by FFFC and BANA, and (2) a motion to dismiss pursuant to Rule 12(b)(6) by DBNTC, SPS, and MERS. For the reasons set forth below, both motions are granted.

BACKGROUND

This action revolves around real property located at 79 Wildwood Drive, Dix Hills, New York (the "Property"). (Complaint ("Comp.") ¶¶ 9, 22.) Before setting forth the allegations of the complaint and in order to give some context to those allegations, something missing from the complaint itself, the Court will set forth certain factual background information, supplied by the defendants and based on documents which, as discussed later in this Memorandum, are appropriately considered by the Court on the instant motions.

I. The Mortgage Loan and Baptiste's Acquisition of the Collateral Property

On or about February 22, 2006, White executed a mortgage in favor of MERS, as nominee for First Franklin, a Division of Nat. City Bank of IN, and its successors and assigns (the "Mortgage"), which Mortgage was recorded with the Suffolk County Clerk on March 14, 2006. (Swanson Decl. ¶ 6, Ex. 2.) The Mortgage secures a $839,520.00 acquisition loan ("Mortgage Loan") with a lien against the Property. Baptiste acquired the Property from White by deed dated February 22, 2006 and filed with the Suffolk county Clerk on March 14, 2016. (Swanson Dec. ¶ 7, Ex. 3.)

The Mortgage was assigned from MERS, as nominee for First Franklin, a Division of Nat. City Bank of IN, and its successors and assigns, to defendant FF by assignment of mortgage dated December 8, 2006, and recorded with the Suffolk County Clerk on January 23, 2007. (Swanson Dec. ¶ 8, Ex. 4.) The Mortgage was further assigned from FF to DBNTC, the current owner of the Mortgage Loan, by assignment of mortgage dated December 8, 2006, and recorded with the Suffolk County Clerk on January 23, 2007. BANA and/or one or more of its predecessors serviced the Loan from October 2010 until December 16, 2013 when servicing of the Loan was transferred to SPS. (Lipkin Aff., Ex. E)

II. DBNTC's Foreclosure Action

DBNTC commenced a foreclosure action in the New York Supreme Court, County of Suffolk on November 14, 2007 (the "Foreclosure Action"). (Swanson Decl. ¶ 10, Ex. 6.) A Judgment of Foreclosure and Sale was entered in the Foreclosure Action on August 18, 2010. (Swanson Decl. ¶ 11, Ex. 7.) Both White and Baptiste were named as defendants in the Foreclosure Action and both defaulted. White filed a motion for leave to file a late answer, which was denied. (Swanson Decl. ¶¶ 13-14, Exs. 9-10.) Baptiste filed three motions to vacate both herdefault and the Judgment of Foreclosure and Sale, all of which were denied. (Swanson Decl. ¶¶ 15-20, Exs. 11-16.) In the Order denying Baptiste's last motion to vacate his default and the Judgment of Foreclosure and Sale, the court (Arthur G. Pitts, J.S.C.) prohibited Baptiste from filing any further motions in the Foreclosure Action without leave of court. (Swanson Decl., Ex. 16.) A sale of the Property was noticed for March 9, 2018 ("Foreclosure Sale"). (Swanson Decl., Ex. 17.)

III. Baptiste's 2018 Bankruptcy Action

On March 8, 2018, just one day prior to the Foreclosure Sale, Baptiste filed a Chapter 13 Bankruptcy Petition in the United Stated Bankruptcy Court for the Eastern District of New York ("2018 Bankruptcy"). The 2018 Bankruptcy was the fifth bankruptcy, under Chapter 13, filed by Baptiste, dating back to August 21, 2013. (Swanson Decl. ¶ 22, Ex. 18.) All four prior bankruptcies were dismissed and, as with the 2018 Bankruptcy, each bankruptcy was filed just prior to a scheduled sale in the Foreclosure Action. (Swanson Decl. ¶¶ 21-22, Exs. 17-18.) On June 14, 2018, the United State Bankruptcy Court for the Eastern District of New York (Robert E. Grossman, J.) entered an order dismissing the 2018 Bankruptcy with prejudice and precluding Baptiste from filing any further petitions under Chapter 13 or converting a Chapter 7 to Chapter 13 for one hundred eighty days without the prior consent of the bankruptcy court. (Swanson Decl. ¶ 23, Ex. 19.)

Plaintiffs commenced the instant action in the Supreme Court, Suffolk County on January 30, 2018 (DE 7 at 3). Defendants thereafter removed the action to this Court.

IV. The Allegations of the Complaint

Preliminarily, the Court is constrained to make several observations. First, although there are two named plaintiffs, the complaint consistently uses the term "Plaintiff" but does notidentify which of the two named plaintiffs that term refers to. Second, the complaint also consistently uses the term "Defendants" but does not distinguish between the five named defendants. Thus, in summarizing the allegations of the complaint the Court will also use the terms "Plaintiff" and "Defendants."

Plaintiff "disputes Defendants' superior colorable claim to legal title and equitable of'" real property located at 79 Wildwood Drive, Dix Hills, New York (the "Property"). (Comp. ¶ 9.) The complaint makes various "general" assertions attacking the securitization of the mortgage loan on the Property, DBNTC's standing and ability to foreclose, and MERS role as mortgagee of record. For example, it is asserted that: (1) "defendant(s) unlawfully purported to assign, transfer or convey its interest in Plaintiff's Note" as it was not negotiated for full value (Comp. ¶ 14); that "MERS cannot transfer the beneficial right to the Tangible Accommodated Note instrument [as] a legitimate "True Sale" of a Tangible Note instrument can only be transferred in the ordinary course of business by proper negotiation for full value, transfer and delivery by operation of all applicable law" (id. ¶ 15); Defendants cannot produce any documents "that demonstrate that prior to the closing date, the Tangible Note was duly endorsed, transferred and delivered to Defendant(s) in the ordinary course of business" or that the "Deed of Trust" was duly assigned, transferred and delivered to Defendant(s)" id. ¶ 16); "that any documents i.e. MERS Assignment of Deed of Trust that purport to transfer a hypothecated beneficial interest over the Payment Intangible underlying collateral of the Tangible Note or Bill of Exchange to Defendant(s) after the Closing Date are void as a matter of law; no security interest in the Real Property was perfected in the name of any of the successor Defendants" (id. ¶ 17); that "any assignment of a Deed of Trust without proper transfer in an ordinary course of business of the Tangible Note that it secures is a legal nullity by operation of law" (id.); that "Defendant(s) hadno officers or directors and no continuing duties other than to hold assets and to issue the certificates" (id.); "Defendants, and each of them, cannot establish possession, show proper receipt, transfer, negotiations, assignment and ownership of the Tangible Note and Deed of Trust, resulting in imperfect security interest and claims . . . [and]¶therefore none of the Defendants have perfected any colorable claim of title or security in the Property" (id. ¶ 18). "Plaintiff desires a judicial determination an [sic] declaration of its rights about the Real Property and the corresponding Tangible Note and Deed of Trust. (Id. ¶ 19.)

The complaint further alleges MERS lacks the authority under its corporate charter to foreclose a deed of trust, failed to obtain documents authorizing it to assign the Deed of Trust, and that as there was no proper negotiation and physical transfer, the "'true sale' of the Tangible Note is invalid as a fraudulent conveyance, or as an unsecured Tangible Note stripped of the Real Property collateral. (Comp. ¶¶ 24- 32.) It is also alleged that Defendant(s) breached paragraph 23 of the Deed of Trust by failing to satisfy, release and reconvey the security instrument as "Defendant(s) and specifically MERS, their electronics agent, was obligated to satisfy, release and reconvey the beneficial security interest in Plaintiff pledged Deed of Trust upon payment of all sums associated with the release premium to Defendants" and "Defendants were paid in full . . . when it sold and relinquished its interest in [the Property]." (Id. ¶¶45-48.) Moreover, "Defendant's [sic] [,] not acting in the best interest of the grantor of the Deed of Trust[,] failed to adhere to their Fiduciary...