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Garcia v. Lasalle Bank, N.A.

United States District Court, S.D. New York

January 19, 2017

LASALLE BANK NA., as trustee for Merrill Lynch Mortgage Investors Trust, Series 2006-FM1, BANK OF AMERICA, N.A., and DOES 1-100, Defendants.

          OPINION & ORDER

          PAUL A. ENGELMAYER, District Judge:

         Plaintiffs Esteban Garcia and Martha Yanet Suarez de Garcia, proceeding pro se, bring this action under the Truth in Lending Act, 15 U.S.C. § 1601, et seq. ("TILA"), the Real Estate Settlement Procedures Act, 12 U.S.C. § 2601, et seq. ("RESPA"), other federal statutes, and state law. They claim that defendants violated various statutes and committed forms of fraud in connection with the Garcias' mortgage and the subsequent foreclosure of their house at 167 Pelham Road in New Rochelle, New York (the "Property"). The Garcias seek actual, statutory, and punitive damages, as well as an injunction quieting title, stopping foreclosure, and awarding ownership of the Property to them, and a declaratory judgment that they own the Property free and clear of all encumbrances and that defendants do not have any enforceable interest in the Property.

         Defendants now move to dismiss. They argue, first, that the Court lacks subject matter jurisdiction, requiring dismissal under Federal Rule of Civil Procedure 12(b)(1), because the Garcias' suit is substantively an attack on a state-court judgment after foreclosure proceedings for which there is no federal district court jurisdiction. They separately argue that the Garcias' Complaint fails to state a claim upon which relief may be granted, requiring dismissal under Rule 12(b)(6). For the reasons that follow, the Court grants the motion to dismiss.

         I. Background

         A. Procedural History

         On May 10, 2016, the Garcias filed a complaint. Dkt. 1 (“Complaint”). On July 8, 2016, defendants filed a motion to dismiss, Dkt. 7, which included, in support, a memorandum of law, Dkt. 9, and a Declaration of Natsayi Mawere, Dkt. 8 (“Mawere Declaration”), which attached various exhibits.

         On July 26, 2016, the Court issued an order setting a schedule for the Garcias to either amend their complaint under Federal Rule of Civil Procedure 15(a)(1)(B) or file an opposition to the motion to dismiss, and gave the Garcias, as pro se litigants, extended time to do so. Dkt. 12. The Court ordered that any amended complaint or opposition to the motion to dismiss would be due on August 19, 2016. Id. On August 23, 2016, the Garcias moved for an extension to that deadline, stating that they wished to amend the complaint. Dkt. 13. On August 25, 2016, the Court extended the deadline to amend or oppose to September 9, 2016. Dkt. 14. The Garcias did not, however, at any point file an amended complaint or an opposition to the motion to dismiss.

         B. Factual Background

         1. The Garcias' Allegations

         The Garcias' Complaint is difficult to decipher and contains conclusory allegations. Treating the factual allegations as true in deciding a motion to dismiss, and reading the Complaint with solicitude to the Garcias' pro se status, the Garcias appear to allege the following.

         On February 21, 2006, the Garcias obtained a loan, secured by a mortgage on the Property. Complaint ¶ 10. The loan was originated by non-party Fremont Investment & Loan (“Fremont”). Id. This loan was underwritten without proper due diligence by Fremont. Id. ¶ 11. This lack of due diligence contributed to Fremont qualifying the Garcias for a loan which Fremont knew or should have known that the Garcias could not have afforded or for which they did not qualify. Id. ¶ 18. Fremont used the Garcias' credit scores and their stated income in evaluating them for the loan. Id. Instead, Fremont should have used the Garcias' tax forms and properly analyzed their debt to income ratio. Id. ¶¶ 11, 18. Thus, “Fremont ignored longstanding economic principals [sic] of underwriting and instead, knowingly, liberally, greedily and without any regard for Plaintiff's rights sold Plaintiff a deceptive loan product.” Id. ¶ 18.

         The Garcias allege that defendant LaSalle Bank, N.A. (“LaSalle”), was the successor in interest to Fremont and responsible for its actions and knew of and participated in Fremont's actions. Id. ¶¶ 19-20. The Garcias allege various errors in the assignment of their loan and deficiencies in various notices they allege were entitled to receive. For example, they allege that there were no recorded assignments of their mortgage, id. ¶ 15, and that Fremont cannot show that it has a proper security interest in the original note and mortgage, id. ¶ 24. And, they allege, the securitization of the mortgage was improperly conducted, “render[ing] invalid any security interest in the said mortgage, ” including because there was a “splitting or separation of title, ownership and interest in Plaintiff's Note and Mortgage, ” and a failure to assign and transfer the Garcia's beneficial interest in the mortgage in accordance with the Pooling and Servicing Agreement. Id. ¶ 32.

         The Garcias bring the following claims: (1) a violation of RESPA, on the ground that Fremont's payment of “yield spread premiums” was a proscribed “kickback” or “referral fee” under the statute, id. ¶¶ 39-43; (2) a violation of RESPA's fee splitting provision, on the ground that Fremont split charges between it, other defendants, and “un-named brokers, ” and that these “yield spread premiums” were illegal kickbacks, id. ¶¶ 44-48; (3) a violation of TILA, on the ground that Fremont and LaSalle did not provide required disclosures to the Garcias, and that their loan is therefore subject to a right of rescission under TILA, id. ¶¶ 49-58; (4) for breach of contract, on the ground that defendants breached the covenant of good faith when they “inaccurately and intentionally completed the Federal Loan Application for the Plaintiffs” because “the Plaintiff's earned income was overstated on the Federal Loan Application, ” improperly qualifying them for a loan they could not afford, id. ¶¶ 59-62; (5) for breach of fiduciary duty, on the ground that defendants “conceal[ed], receiv[ed] and/or actually pa[id], the illegal and improper ‘kickbacks' and ‘referral fees, '” and “fail[ed] to properly disclose other material facts as required, ” id. ¶¶ 63-68; (6) for conspiracy, on the ground that defendants “agreed amongst themselves to take illegal and improper actions, ” id. ¶¶ 69-72; (7) to quiet title, on the ground that defendants “by fraud received an [unequitable] deed of trust to secure debt to the property for a loan that Plaintiff should not have given or been allowed to take, ” and requesting “that the Court invalidate the deed of trust on the property, ” id. ¶¶ 73-78; and (8) for declaratory relief, on the ground that the defendants did “not have a valid secured interest in the Property sufficient to foreclose against the Property” and “do not have the right to foreclose on the Property” because they “did not properly comply with the terms of Defendants' own securitization requirements (contained in the [Pooling and Servicing Agreement]) and falsely or fraudulently prepared documents required for Defendants . . . to foreclose as a calculated and fraudulent business practice, ” and requesting that “this Court find that Defendants had/have no right to foreclosure against the Property, ” id. ¶¶ 79-86.

         The Garcias seek damages, statutory damages, punitive damages, attorney's fees and costs, and ask the Court to “award [them] exclusive possession of the Property, ” “[d]etermine that Defendants, and all persons claiming under them, have no estate, right, title, lien, or interest in or to the Property, ” “[d]eclare that Defendants do[] not have an enforceable secured or unsecured claim against the Property, ” and “[d]eclare that [they] own[] the Property free and clear of all encumbrances of the Defendants or anyone claiming by or through the Defendant[s].”[1] Id. ¶¶ a-dd. And, they seek “injunctive relief to stop the foreclosure.” Id. ¶ 9.

         2. Cognizable Evidence as to the ...

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