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Zutel v. Wells Fargo Bank, N.A.

United States District Court, E.D. New York

September 22, 2014

WELLS FARGO BANK, N.A., and U.S. BANK, NATIONAL ASSOCIATION, as Trustee for Banc of America Funding Corporation Mortgage Pass-Through Certificates, Series 2006-G, Defendants.


ROSLYNN R. MAUSKOPF, District Judge.

Plaintiffs Dario Zutel and Irina Orechkina commenced this action on July 23, 2012, against Wells Fargo Bank, N.A. ("Wells Fargo"). ( See Compl. (Doc. No. 1).) On January 9, 2013, plaintiffs filed an amended complaint also naming as defendants U.S. Bank, National Association (the "Trustee"), as Trustee for Banc of America Funding Corporation Mortgage Pass-Through Certificates, Series 2006-G (the "Trust").[1] ( See Am. Compl. (Doc. No. 13).) Plaintiffs seek to quiet title to their residence, and they allege fraud and unjust enrichment in connection with the mortgage on their property. ( See generally id. )

Now before the Court is a motion to dismiss for failure to state a claim filed by Wells Fargo pursuant to Federal Rule of Civil Procedure 12(b)(6). ( See Doc. No. 28.) For the reasons that follow, the motion is granted, and this action is dismissed.


On or about August 15, 2005, plaintiffs executed a $472, 000 mortgage agreement with Cambridge Home Capital, LLC. (Am. Compl. ¶ 6.) Later that same day, the mortgage was assigned to Wells Fargo. ( Id. ¶ 7; see also Decl. of David M. Schlachter ("Schlachter Decl."), Ex C. (the "Assignment Agreement") (Doc. No. 28-12).) This Assignment Agreement was executed by Seth Kramer, the President of Cambridge Home Capital.[3] (Am. Compl. ¶ 6.) Despite the assignment, however, the original mortgage note was neither delivered nor indorsed to Wells Fargo.[4] ( Id. ¶ 10.) Plaintiffs thus claim that the assignment of their mortgage and promissory note to Wells Fargo is invalid.

Moreover, at some point subsequent to the assignment, plaintiffs sought to research the validity of their mortgage debt obligations after receiving notices of changes in their mortgage servicer. ( Id. ¶ 15.) Between 2010 and 2012, pursuant to the Real Estate Settlement Procedures Act ("RESPA"), plaintiffs filed a series of three Qualified Written Requests ("QWRs") with Wells Fargo, which purported to be the servicer of their mortgage loan.[5] ( Id. ¶ 16.) Plaintiffs claim that Wells Fargo's responses to these QWRs contained fraudulent misrepresentations.

In particular, in its first response dated December 27, 2010, Wells Fargo stated that the investor in plaintiffs' mortgage was Bank of America. ( Id. ¶ 18.) Plaintiffs allege, however, that there is no publicly-recorded assignment of the mortgage to Bank of America, and that a copy of the original promissory note - included by Wells Fargo with its QWR response - contains no indorsement to Bank of America, any other party, or in blank.[6] ( Id. ¶¶ 19-20.) According to plaintiffs, Wells Fargo's representation was designed to induce plaintiffs to believe that Bank of America owned their loan. ( Id. ¶ 21.) Relying on Wells Fargo's QWR response, plaintiffs continued to make payments on their mortgage to Bank of America - an allegedly "fraudulent party." ( Id. ¶ 22.)

In a second QWR response dated April 8, 2011, Wells Fargo did not state the identity of the investor in plaintiffs' mortgage, allegedly "continuing the ongoing fraud begun in the [first] QWR response." ( Id. ¶ 23.) And in a third response dated March 1, 2012, Wells Fargo again allegedly continued the fraud by stating:

There is no one particular investor on the loan; this loan has a group of investors; which is managed by a Trustee. The Trustee for the loan is U.S. Bank, N.A. and their address is: U.S. Bank N.A.[, ] 209 S. LaSalle Street, 3rd Floor, Suite 300[, ] Chicago, IL XXXXX-XXXX.

( Id. ¶ 24.) Plaintiffs contend that this response omitted the name of the Trust that purports to own their mortgage, and falsely represented that no single party owned the loan. ( Id. ¶ 26.) According to plaintiffs, Wells Fargo never identified the Trust as the purported owner of the mortgage until October 24, 2012, when it submitted a letter to the Court in connection with this litigation. ( Id. ¶¶ 31-32; see also Doc. No. 10.)

In addition to the alleged misrepresentations in Wells Fargo's QWR responses, plaintiffs also allege that Wells Fargo fraudulently induced them to execute a loan modification agreement ("LMA") on or about March 23, 2011. ( Id. ¶ 27.) The LMA identified Wells Fargo as the lender, increased the principal amount of the loan, and lengthened the loan's payment term to forty years.[7] ( Id. ¶ 28.) Plaintiffs claim that this agreement caused them to "assume additional debt obligations to a party it did not owe money to." ( Id. ) Plaintiffs also allege that the LMA contains an Errors and Omissions Compliance Agreement ("EOCA"), which obligates plaintiffs to "correct, or cooperate in the correction of, any clerical errors made in any document entered into in connection with the modification of th[e] Loan, if deemed necessary or desirable in the reasonable discretion of the Lender." ( Id. ¶ 29.) According to plaintiffs, the EOCA violates New York State Banking Department Regulations, 3 N.Y.C.R.R. § 419.11(h), because it requires plaintiffs to waive rights or remedies as borrowers and to execute documents correcting chain of title issues. (Am. Compl. ¶ 30.)

Finally, plaintiffs also challenge the conveyance of their mortgage and note to the Trust. They allege that the Trust is a securitized trust treated as a Real Estate Mortgage Investment Conduit ("REMIC") for tax purposes, and governed by its Pooling and Service Agreement ("PSA").[8] ( Id. ¶¶ 32-37.) Plaintiffs also maintain that, pursuant to the PSA, the Trust is governed by the laws of New York State. ( Id. ¶ 38.) They further assert that under New York law, any act by a trustee that contravenes the trust documents is void, ( id. ¶¶ 47-48), and any property imperfectly delivered to the trust fails to become trust property. ( Id. ¶ 36.) That is exactly what plaintiffs allege happened here.

According to plaintiffs, the PSA requires that the "Depositor" (defined as Bank of America Funding Corporation) deliver or cause to be delivered to the Trustee, with respect to each assigned loan, "[t]he original Mortgage Note, endorsed by manual or facsimile signature" in a precise manner "without recourse, " and "with all necessary intervening endorsements showing a complete chain of endorsement from the originator to the Trustee...." ( Id. ¶ 40 (quoting PSA § 2.01(b)(i).) Plaintiffs allege that defendants have never produced a copy of the original note containing such an endorsement, and therefore that the original note could not have been conveyed to the Trust. ( Id. ¶¶ 41-42). Additionally, the PSA requires that the Trustee, within ninety days of the PSA's execution and delivery, "review the Mortgage Files in its possession and... deliver to the Depositor, [and] the Servicer... a certification... to the effect that, as to each Mortgage Loan..., such Mortgage File contains all of the items required to be delivered pursuant to Section 2.01." (PSA § 2.02; see also Am. Compl. ¶ 45.) Thus plaintiffs allege that even if the Trust is in possession of the original note, that possession is in violation of the PSA and New York law because acceptance of the note violated the terms of the PSA. (Am. Compl. ¶¶ 46-51.) As such, plaintiffs contend that the Trust's assertions of ...

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