United States District Court, E.D. New York
[Copyrighted Material Omitted]
Ruthleona Clement, Far Rockaway, NY, pro se.
Jason P. Sultzer, Littleton Joyce Ughetta Park & Kelly LLP, Purchase, NY, Robert P. Johnson, Naidich Wurman Birnbaum & Maday LLP, Great Neck, NY, Jeffrey Fleischmann, Allison J. Schoenthal, Andrew Jaan Sein, Christian Adrian Fletcher, Hogan Lovells US LLP, New York, NY, for Defendants.
MEMORANDUM AND ORDER
ROSLYNN R. MAUSKOPF, District Judge.
Plaintiff pro se brings this action for monetary and equitable relief against three affiliated real estate entities, United Homes, LLC (" United Homes" ), United Property Group, LLC, and Galit Network, LLC; the principal and officer of those entities, Yaron Herscho; First United Mortgage Banking Corporation (" First United" ), a mortgage lender; real estate appraisers Maya and Albert Benshabat (the " Benshabats" ); and two mortgage servicing companies, American Servicing Corporation and Ocwen Loan Servicing, LLC (" Ocwen" ). Plaintiff's claims— arising out of the financing and purchase of her home in 2005— sound in fraud under the Fair Housing Act, 42 U.S.C. §§ 3604, 3605, the Civil Rights Act, 42 U.S.C. §§ 1981, 1982, 1985, and the Truth in Lending Act, 15 U.S.C. § 1601 et seq., as well as city and state law. (Compl. (Doc. No. 1) ¶ 3.)
Presently before the Court is the Benshabats' motion to dismiss all claims against them for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons set forth below, the Benshabats' motion is GRANTED in part and DENIED in part.
Plaintiff is a 31-year-old African-American woman who at all relevant times lived in Far Rockaway, Queens, and worked for a pharmaceutical company where she earned approximately $3,000 per month. ( Id. at ¶¶ 110, 114.) During the summer of 2005, plaintiff became interested in buying her first house. ( Id. at ¶¶ 110-11.) Plaintiff noticed an advertisement for United Homes, a realty company, on the number 2 subway line. ( Id. at ¶ 111.) She called the phone number on the advertisement and made an appointment to tour homes that were for sale. ( Id. ) The United Homes representative on the phone instructed plaintiff to come to the United Homes office for a meeting. ( Id. ) Several days later, plaintiff attended a meeting at the Brooklyn office of United Homes, where she was assured by a sales representative that United Homes would take care of every aspect of the home-buying process. ( Id. at ¶ 112.) The sales representative then took plaintiff to see two homes in a predominantly minority neighborhood in Queens. ( Id. at ¶ 113.) Plaintiff was interested in one property at 2920 Lewmay Road. ( Id. ) The sales representative assured her that the new construction was high quality, and that the structure and roof were guaranteed up to 20 years. ( Id. at ¶ 113.) The representative also assured plaintiff that she would be able to afford the house, in part through renting out the top two floors for $1,800. ( Id. at ¶ 114.)
" A couple of days later," plaintiff attended another appointment at the United Homes' office, where she met with a mortgage banker named David Unger (" Unger" )
from First United. ( Id. at ¶ 115.) During the meeting, plaintiff filled out loan application forms, and Unger then told her she qualified for a loan for an amount up to the selling price of the home at $614,000. ( Id. at ¶ 116.) He also told her that she would be able to rent out the two upstairs units for $1,800, as well as refinance the mortgage in five years to a lower, fixed rate. ( Id. at ¶ 117.)
On the following Monday, plaintiff received a call from the United Homes sales representatives informing her that the closing for the house was scheduled for the following day. ( Id. at ¶ 118.) Later that day, plaintiff contacted United Homes to ask for a later closing date, to allow her to obtain a lawyer and an appraisal report. ( Id. at ¶ 121.) The United Homes representative told plaintiff that an appraisal report had already been prepared, and it would be delivered at the closing. ( Id. at ¶ 122.) The representative also said that if plaintiff was unable to find a lawyer, one would be provided for her by United Homes at the closing, at no cost to plaintiff. ( Id. ) When plaintiff reminded the representative that she had not received a copy of either the mortgage note or the sales agreement to show to a lawyer, the United Homes representative convinced her that given the short amount of time, it would be best to review the documents with the lawyer to be provided by United Homes at the closing. ( Id. at ¶ 57123-24.)
At the closing on August 5, 2005, plaintiff was provided with a lawyer, Jay Sanchez (" Sanchez" ). ( Id. at ¶ 126.) She was then given a number of documents to sign. ( Id. at ¶ 127.) Although she expected Sanchez to review and interpret the legal language for her, Sanchez asked plaintiff to first review the documents, and then she could ask him any questions she may have. ( Id. at ¶ 128.) As plaintiff began to ask questions, everyone present pressured her to sign the documents, as it was " getting late" and there was another party who needed to use the office for a closing. ( Id. at ¶ 129.)
Plaintiff ended up signing two mortgages. ( Id. at ¶ 130.) Although she was told that the first mortgage was going to have a monthly payment of $2,558.35, it instead required a monthly payment of $3,590.32. ( Id. ) As this was over $1,000 more than the monthly payment she anticipated, plaintiff assumed that the two mortgages had been combined into one. ( Id. ) The mortgage was for $491,200 with an adjustable interest rate up to 11.25%. After signing the first note, she was presented with the second mortgage note with a monthly payment of $944.23. ( Id. at ¶ 131.) The second mortgage was for $122,800.00, at a fixed 9.04% interest rate with payments over 180 months, with an unspecified " balloon payment" at the end of the 15-year loan period. ( Id. at ¶ 131.) The monthly payments ($4,824.23) on plaintiff's two mortgages were 160% of her approximately $3,000 monthly salary. ( Id. at ¶ 133.) Also, despite the earlier claims made by United Homes and Unger, insisting that plaintiff would be able to rent part of the house for $1, 800 a month, she alleged that she has only been able to find a tenant willing to pay $1,300 a month. ( Id. at ¶ 145.)
Upon moving into the house, plaintiff noticed a number of problems, including leaks in the roof and skylight, as well as water damage to the lower floor of the house. ( Id. at ¶ 143.) Plaintiff complained to United Homes on a number of occasions about the defects in the house. ( Id. at ¶ 144.) Although United Homes sent contractors to work on the house, plaintiff was forced to hire additional contractors to fix the incomplete and shoddy work. ( Id. ) As a result of the problems with her house, plaintiff has organized with other homeowners on her block facing similar issues.
( Id. at ¶ 46.) She has also contacted elected officials, attorneys, and organizations, including the Congress of Racial Equality (CORE). ( Id. )
Plaintiff also became suspicious that her house had been improperly appraised, and that she had paid more for the house than it was worth. ( Id. at ¶ 47.) She hired an independent appraiser to review the appraisal given by United Homes, the review of which was pending at the time the complaint was filed. ( Id. )
II. Procedural Background
On May 10, 2010, plaintiff filed a complaint against United Homes and related people and companies, First United, and Maya and Albert Benshabat (" the Benshabats" ), who were responsible for the appraisal of plaintiff's home. ( Id. at ¶¶ 2, 8.) In her complaint, plaintiff alleges numerous violations of federal, state, and local laws. ( Id. at ¶ 3.) Plaintiff argues that defendants engaged in a conspiracy to defraud minority home-buyers, including herself, through a predatory " property flipping" scheme, whereby United Homes bought houses and— in collusion with appraisers, mortgage brokers, and lawyers— sold the houses at artificially high prices to unwitting minority buyers, a process known as " reverse redlining." ( Id. at ¶¶ 1-2, 36); see Barkley v. Olympia Mortg. Co., No. 04-CV-875 (RJD)(KAM), 2007 WL 2437810, at *1-8 (E.D.N.Y. Aug. 22, 2007) (outlining a similar alleged scheme).
On September 3, 2010, plaintiff filed a motion for default judgment as to many of defendants. (Doc. No. 15.) This Court referred that motion to Magistrate Judge Mann, who, due to concerns as to actual notice, granted defendants additional time to enter appearances and respond to the complaint. (Memorandum & Order (Doc. No. 16).) Defendants United Homes, United Property Group, Hershco, and Galit Network filed an answer to the complaint alleging counter-claims against all other defendants. (Doc. No. 17.) The Benshabats filed a motion to dismiss. (Doc. No. 25.) Thereafter, Judge Mann issued an order on plaintiff's original motion for default, denying the motion with respect to all defendants except for First United, who had yet to appear. (Doc. No. 30.) Judge Mann found that plaintiff would be entitled to an entry of default against First United, that First United had waived any timeliness defense by failing to appear and raise the defense, and that First United had admitted all well-pleaded allegations as to liability. ( Id. at 2-3.) However, Judge Mann deferred an inquest on damages until after disposition of the claims against the other defendants. ( Id. at 4.) The Clerk of Court never made an entry of default, and this Court has not adopted Judge Mann's order as to default. Plaintiff also ultimately withdrew the action as against defendant Ocwen Loan Servicing, LLC. (Stip. Of Dismissal (Doc. No. 36).)
Turning to the defendants bringing the present motion, plaintiff accuses the Benshabats of providing a " made-to-order" appraisal that intentionally overstated the value of her home. ( Id. at ¶ 2.) The Benshabats allegedly arrived at the inflated appraisal figure by only including sales made by United Homes (not the value of all surrounding neighborhood homes) without including the sales history. ( Id. at ¶ 73-74.) The Benshabats also allegedly
included the value of anticipated construction and new features, without devaluing the property for existing problems. ( Id. at ¶ 5.) The appraisal, in turn, furthered United Home's ability to charge higher prices for faulty houses, and enabled First United to provide large, unfavorable mortgages to minority homebuyers. ( Id. at ¶ 2.)
On November 12, 2010, the Benshabats filed a motion to dismiss. (Doc. No. 25.) The Benshabats argue, among other things, that according to 12(b)(6) of the Federal Rules of Civil Procedure, many of plaintiff's claims against the Benshabats failed to state a claim for which relief could be granted, as the claims are time-barred by the relevant statutes of limitations. Plaintiff failed to file any opposition the present motion to dismiss. ( See Ltr. from Counsel for Moving Defs. (Doc. No. 26).) Discovery has been ongoing, and the Benshabats, in addition to all other remaining defendants, recently filed a ...